The Definitive Guide for Incoterms 2010

Knowing responsibilities, risks, and obligations is important in international commercial shipping.

Thanks to Incoterms 2010 – they simplify all international trade rules.

This guide is the go-to resource for all 11 Incoterms 2010 you are looking for.

Let’s dive right in.

International Commercial Terms 2010 For Any Mode Of Transport

In this category, there are seven international commercial terms. They include EXW, DDP, FCA, DAP, CPT, DAT, and CIP.

You can use these Incoterms in any mode of transport. It does not matter whether you are using one or more transportation methods.

The modes of transport may be sea/ocean, road, rail, or air.

Now, let’s discuss these trade terms:

1. EX Works (EXW Incoterm)

In EXW, you will choose a specific location where your seller delivers the goods. It can be a warehouse, factory, or any premise you own.

As a result, the trade rule exposes you (as the buyer) to more liabilities.

Apart from ensuring you (as the buyer) receive goods, the seller does not have any other responsibility. As a buyer, you will have to pay for the transportation costs.

Additionally, you will be responsible for other risks or processes after receiving goods. These may include loading, handling customs, or transferring goods from one mode of transport to another.

More Resources EXW Incoterm:

2. Free Carrier (FCA Incoterm)

Here, your seller will deliver goods to the destination you specify.

Remember, the carrier can be a truck, warehouse, or vehicle on the seller’s premises.

When you choose FCA Incoterm, it is important to note the following:

Seller will pay for loading, insurance, and transport until you receive the goods at a specified location.
You (as the buyer) will assume all responsibilities after the seller delivers goods to your carrier
Seller has no obligation to unload your goods – their responsibility ends with the goods’ delivery
Seller will handle all formalities involving the export process
You (as the buyer) will handle all formalities involving the importation process

Ideally, FCA Incoterm is an improvement of EXW Incoterm.

More Resources On FCA Incoterm:

3. Carriage Paid To (CPT Incoterm)

In CPT Incoterm 2010, you will specify where the seller delivers goods. During this period, the seller incurs costs and all risks.

At times, you may use multiple carriers. In such situations, your seller will transfer costs and risks after delivering goods to the first carrier.

Remember, export fees and taxes also form part of the carriage paid to fees.

More Resources On CPT Incoterm:

4. Carriage And Insurance Paid To (CIP Incoterm)

Under CIP rules, it is the seller’s responsibility to pay both insurance and freight costs. The insurance should cover up to 110% of the contract value.

It implies the seller takes care of costs and risks until they deliver goods to the first carrier or specified location. After delivery, you will be responsible for all risks.

Again, under CIP Incoterm 2010, the seller only obtains insurance on minimum cover.

More Resources On CIP Incoterm:

5. Delivery At Terminal (DAT Incoterm)

In DAT Incoterm, the seller will deliver your goods at a designated terminal. Your seller will take care of costs and risks before the goods arrive at the terminal/destination.

It also includes the unloading process at the terminal.

After delivery, you (as the buyer) will pay all charges.

More Resources On DAT Incoterm:

6. Delivered At Place (DAP Incoterm)

DAP Incoterm 2010 requires the seller to deliver your goods to an agreed location. However, you (as the buyer) will unload the goods.

At this point of delivery, the seller transfers all obligations and responsibilities to you (the buyer).

More Resources On DAP Incoterm:

7. Delivered Duty Paid (DDP Incoterm)

Under the delivered duty paid Incoterms 2010 agreement, your seller is responsible for transporting goods to the agreed destination.

In DDP Incoterm, your seller incurs a range of risks/obligations, including:

Export clearance costs
Customs documentation costs
VAT charges
Bribery
Storage charges, etc.

DDP 2010 Incoterms tends to benefit the buyer. Remember, your seller is responsible for most costs and liabilities.

More Resources On DDP Incoterm:

Incoterms 2010 For Sea And Inland Waterway Transport

The four main Incoterms 2010 rules for sea and inland waterway transport are FAS, CIF, FOB, and CFR.

1. Free Alongside Ship (FAS Incoterm)

In FAS Incoterm 2010, the seller delivers goods next to your ship ready for reloading. As a result, their costs and risks end at this point.

Of course, this happens at a designated port. And, the seller will not load your goods.

As a buyer, you will bear the risks and costs.

FAS Incoterm rule is suitable for non-containerized goods.

More Resources On FAS Incoterm:

2. Free On Board (FOB Incoterm)

FOB Incoterm specifies when risks and costs transfer from seller to buyer. Normally, this happens when goods cross the ship’s broadside.

The seller is responsible for the loading costs in free on board shipping.

Additionally, the seller will deliver goods on board a ship you nominate. Of course, this happens at a specific port.

There are two types of FOB shipping terms:

i. FOB Origin – Once the seller ships goods, you (as the buyer) will assume all risks.

ii. FOB Destination – Your seller will be responsible for any loss or damage until you receive the goods.

More Resources On FOB Incoterm:

3. Cost And Freight (CFR Incoterm)

In CFR Incoterm, the seller does not pay for insurance after loading goods onto the ship. As a buyer, you will pay for the insurance.

Under CFR Incoterms 2010, delivery is complete once goods are on the carrier’s ship.

More Resources On CFR Incoterm:

4. Cost Insurance And Freight (CIF Incoterm)

In CIF Incoterm 2010, the seller will pay for the insurance in your favor (the buyer). The insurance is usually on minimum cover.

The buyer assumes responsibility for the cost once the goods arrive at the destination port. Also, the risk transfer shifts to the buyer after loading goods on the vessels.

So, in case of any damages during shipping, the seller’s insurance company will be liable.

More Resources On CIF Incoterm:

Conclusion

As you can see, Incoterms 2010 play an integral role during shipping.

They outline the roles and responsibilities of sellers and buyers in any international trade.

In any instance, nobody wishes to bear the highest risk.

So, before choosing any 2010 Incoterms for shipping, consult an expert.

A reason BanSar is always here to help – contact us now

Where can I get a copy of the Incoterms 2010?

You can buy a copy of the Incoterms 2010 from the ICC website, or you may as well consult Bansar for in-depth advice.

Where can I get more details on the latest revision of Incoterms?

Do not search anywhere further because you are at the home of Incoterms; I’m here to provide you with all the relevant information on Incoterms.

However, there exist several government organizations that provide seminars, webinars, and workshops related to the latest revision of Incoterms.

Which Incoterms come with insurance?

You would realize that from the definition, CIF terms come with insurance by default.

However, this should not be of much concern since you can always get insurance cover regardless of the Incoterms used.

That said, if it is not CIF, you should always instruct your carrier or forwarding agent to book insurance.

If not directed to do so, they will fail to insure your cargo.

How do I select the best incoterm for shipping from China?

I advise that you choose an incoterm that transports the goods as close to you as possible.

This excludes FOB and EXW because, with the two, the seller is responsible for the goods when they are still in China.

Incoterms 2010: The Definitive Guide