Incoterms (International Commercial Terms) is a set of international trade rules which are recognized and widely used all over the world. Incoterms set the terms of goods delivery and party responsibility: Who will pay the transport fee, who will be in charged of customs clearance, insurance, who will be responsible for the risk and damage of commodities in transport process.
Incoterms 2010 is the latest version of Incoterms, approved by ICC (International Chamber of Commerce) and is effective since 1/1/2011. In Incoterms 2010, there are 11 terms divided into 4 groups: E(Ex), F(Free), C (Cost), D(Deliver)
1/Group E- Exworks: Delivery at the factory
The buyer will bear all the cost and risk in transport from buyer’s place to the final point. The seller will be responsible for placing order under control of the buyer at the place of delivery (factory, workshop, warehouse). With this clause, the seller is almost free from the goods responsibility.
2/Group F-Free
In group F, there are 3 smaller groups
FCA- Free Carrier- Delivery for the carrier
The seller will place order to the vehicle which was pointed by the buyer. After delivery handover, the seller will not be responsible for the process of transport.
FAS-Free alongside:
The seller will hire the vehicle for the shipment to the port and be responsible for the shipment until it arrives to the port. The responsibility of the seller will end when the goods are alongside the ship.
FOB- Free On Board:
The buyer will be in charged for the cost and risk after the shipment is on the board and the vessel leaves the port, the seller will be responsible for the customs clearance and other related documents.
Therefore, for Group F, seller’s responsibility will increase from: FCA<FAS<FOB
3/Group C/Cost
For Group C-Cost, the seller will be in charged of other responsibilities after the ship is anchored, such as freight and insurance,…In Group C, the charges are divided to:
CFR -Cost and Freight;
The seller must bear additional charge of ocean freight. The moment for risk handover from the buyer to the seller is right after placing the order across the ship’s rail at the export port.
CIF -Cost, Insurance and Freight:
This is one of the popular clauses in import-export. Besides cost, ocean freight, the seller will be responsible for the insurance of the goods in transporting process.
CPT- Cost paid to:
The seller will bear the transportation fee until the order reach to the destination place.
CIP-Carrier and Insurance Paid to:
The seller will bear the transportation fee and insurance until the order reach to the destination place.
4/ Group D- Deliver
In Group D, we will have these cases:
DAT- Delivered at Terminal:
This is newly added condition in Incoterms 2010. The seller is considered to deliver when the order is unloaded from the vehicles to the port or the place which is pointed under control of the buyer
DAP- Delivered at Place:
This is also newly added condition in Incoterms 2010. The seller will deliver the order at the place is pointed by the buyer. The seller will bear the risk until finishing delivery to the required place of the buyer.
DDP: Delivered Duty Paid
The seller will be responsible for the negotiated place in the imported country, including bearing the cost and risk until the order reach the destination, include the customs clearance and duties.
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