Guide To Incoterms 2010 PDF Version PDF

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A Guide to Incoterms 2010

By Chris Hart: February 2011

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A Guide to Incoterms 2010

Introduction:
When considering Incoterms, it must be borne in mind that whilst they have an
important role in international trading transactions, they are only one of the twelve
key points to be considered in the overall Contract of Sale and are therefore not
paramount.
Their real significance however lies in the fact that they impact not only on the basic
Contract of Sale but also on the three supporting contracts of Payment, Transport
and Insurance.
It goes without saying that even if one describes the Incoterms perfectly in the main
contract, there are a host of other issues that must also be addressed in order to
minimise trade related risks and costs.
Many of these factors are ignored and end up costing South African Importers and
Exporters a fortune, largely through ignorance of sound freight management
practice, and through a lack of the ability to determine whether the correct charges
have in fact been raised in any given freighting transaction.
In this document we consider mainly Incoterms and their impact on key factors in
the Contract of Sale and not all of the other important issues that a prudent trader
will manage.

Key Concepts
1: An important concept to grasp is that in theory the total risks and costs in any
given international door to door transaction should remain unchanged irrespective
of the Incoterm used. What Incoterms do is simply to determine where the risks and
costs are divided between the parties under each of the terms. However, because in
practice not all parties in the transport chain share the same motives, sometimes
adding unrealistic margins to cover their own perceived risks, the final delivered cost
may vary depending on the knowledge and competitiveness of the parties involved in
the costing exercise. It is therefore wise to get detailed costs for all links in the
transport chain from EXW to DDP.

2: The Incoterms publication simply defines the terms and does not give advice on
how best to proceed in setting up a trading relationship. At first reading the terms
are often difficult for traders to understand from the point of view of establishing a
sound risk/cost policy.
A further complication is that most traders have little in-depth knowledge of the
terms or why they have changed so much over the last 25 years.
As a result many importers and exporters continue to use totally outmoded terms
such as FOB and CFR (C+F to most people) when much more appropriate terms
FCA and CPT are available.

3: Traders dealing with the USA must note that the Americans have their own
Foreign Trade Definitions contained in their Uniform Commercial Code. Many of their
terms whilst appearing to be Incoterms are very different in meaning. It is
therefore important to clarify the definition that is being used when dealing in this
market. It should be noted that there is a growing trend for USA traders to accept
Incoterms when dealing internationally.

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4: In order to be binding under South African and many other legal systems,
Incoterms must be incorporated into the Contract of Sale. That means there needs to
be a paragraph in the contract including the wording that (1) Describes the 3 letter
Incoterms correctly, (2) States the Port or Place of Loading or Unloading (as
applicable to the term used) (3) States the words Incoterms 2010 and (4), may
include an amendment to cover a special agreement between the parties. e.g.

Quote:
Clause X: Commercial Terms
The prices quoted in this contract are quoted based on the following Incoterms in
terms of the ICC publication no: 715E
(1): FCA
(2): Unit 3 Gateway Park, Airport Industria, Western Cape, RSA
(3): Incoterms 2010
(4): Amendment: Including Delivery to Cape Town Terminal and THC

(This example allows a seller to transfer risks on loading at the factory/warehouse
whilst choosing to retain an FOB price structure)

4: As already stated, Incoterms have limited scope, dealing with the transport
related factors in an international trade transaction. Incoterms specifically deal only
with the following:

Who clears the goods for Export and Import
Who pays for loading and discharging the goods
Who pays the freight
How risks of loss or damage to the cargo divide
Who should insure
Any other specific transport related agreements made between the parties

They do not cover:

The contract of Sale in respect of the Goods (Quantity, Quality, Style or Price)
Property rights i.e. when/where ownership transfers
Common sense commercial practices
Handling after the delivery point has been reached
The transport alternatives available to the parties
Breach of Contract

5: Incoterms deal primarily with the Sellers and Buyers obligations in transport
related issues. Each of the 11 Incoterms published in 2010 has 10 mirrored
obligations. (See detailed Incoterms below). The left side of the page describes the
Sellers and right side the Buyers obligations)

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The 10 Obligations covered in each term are:

The Sellers Obligations The Buyers Obligations
A1: Provide the goods and commercial
invoice in conformity with the contract
B1: Pay the price
A2: Licences, Authorisations , Security
Clearances and Other Formalities (Note: this
means dealing with customs related issues at origin
(A2) and arrival (B2)
B2: Same
A3: Contract of Carriage and Insurance
(Note: In only 2 Terms is insurance mandatory
(CIF/CIP)
B3: Same
A4: Delivery B4: Taking Delivery
A5: Transfer of Risks B5: Same
A:6 Allocation of Costs B6: Same
A7: Notice B7: Notice
A8: Delivery Documents B8: Taking Delivery
A9: Checking, Packing, Marking B9: Inspection of Goods
A10: Assistance with Information and
Related Costs
B10: Same

6: Before considering the best Incoterm to use for Imports and Exports to and from
South Africa it needs to be emphasised that a lot depends on the relationship
between the Buyer and Seller. In a perceived high risk situation (unknown Buyer or
Seller), the Contract of Sale needs to incorporate not only Incoterms but also other
key contractual arrangements (Payment/Carriage/Insurance) that minimise the
Sellers exposure to unforeseen risks and costs. This would include specifying
Confirmed Letters of Credit support by Credit Insurance as one example.
Similarly the Buyer will seek protection by calling for clauses in the Contract that
guarantee shipment, arrival time, quality etc.
However, where there is a close association with a mutually high level of trust and a
low level of financial risk, completely different Incoterms and other contractual
arrangements will normally be appropriate.

8: Incoterms were traditionally divided into two main categories namely Buyers and
Sellers Terms. Buyers terms include the E and F contracts (EXW, FAS, FOB and
FCA) and are given this name because the Buyer or Importer is in control of the
Contract of Carriage. In the case of the C and D terms (CFR, CIF, CPT, CIP, DAT,
DAP and DDP, they are Sellers terms because the seller enters into the contract of
carriage and has control of the factors such as departure date, routing and arrival
date.
The term to be used is normally determined by the strength of the Buyer versus the
Seller in a given transaction. So for example the German chemical industry invariably
uses C terms for their exports because they want the benefits derived from being
in control of the shipping (rates, carrier selection, rebates and price manipulation).

9: Incoterms have two distinct contract types which refer directly to the control of
the shipment in terms of both risks and costs.
The two contract types are: Contracts of Despatch or Shipment Contracts (E,
F and C terms) and Contracts of Arrival or Delivery Contracts, (D terms).
The significance is that under Despatch contracts, the cargo simply has to be handed
to the first carrier for the Sellers obligation to Deliver to be fulfilled whereas under
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Arrival contracts, the Seller carries the risks and costs until Delivery has been
effected at the Named Place in the country of destination.

10: The ideal way of handling risk and cost transfer in todays world of logistics
needs consideration. Informed traders preferences that are often not in conflict
between seller and buyer can frequently be defined as:

The Seller Prefers:

The transfer of risks and costs to take place at handover to or by a carrier at
a defined point. (on loading: E,F and C or unloading D)
The term should preferably cater for Multimodal shipment to allow flexibility in
the mode of transport
That there is a guarantee that the export will take place
In some cases they want protection from control under the Contract of
Carriage (Do not want to be party to it (E and F)

The Buyer Prefers:
Risks to pass on loading/unloading
Multimodal terms
To hold the Seller responsible for stowage into the container
The goods to be Cleared for Export at origin
May want to control the contract of carriage (E and F)

This means that traders moving their cargo in any form of seafreight container or by
air should call for one of the multimodal Incoterms generally other than EXW*. That
means: FCA, CPT, CIP, DAT, DAP, DDP, ignoring the remaining 5 terms except in
special circumstances.
*EXW is in fact a multimodal term, but because amongst other things it does not
require either party to effect customs formalities, it has risks attached to it for
anything other than relationships with the highest level of trust.

The Major Changes in Incoterms2010

Four redundant terms go:

DAF Delivered At Frontier
DES Delivered Ex Ship
DEQ Delivered Ex Quay
DDU Delivered Duty Unpaid

Two more appropriate terms replace them:

DAT Delivered At Terminal
DAP Delivered at Place

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Summary of the 11 Incoterms 2010

Incoterms were traditionally grouped in four basic categories:
E- term (EXW) EX Works which provides for the seller to simply make the goods
available to the buyer at the sellers own premises
The second group, the F-terms (FCA, FAS and FOB) provide for the seller to deliver
the goods to a carrier nominated by the buyer
C-terms (CFR, CIF, CPT, CIP) provide for the seller to contract the carriage at the
buyers risk
D-terms (DAT, DAP, DDP) cater for the seller to bear risks and costs to bring the
goods to the place of destination agreed between the parties.

However in 2010 the grouping has been changed to reflect the 7 Multimodal terms
and the 4 Sea / Inland Waterway terms.

INCOTERMS 2010

Rules for any Mode/Modes of Transport
EXW Ex Works (insert named place of delivery)
FCA Free Carrier (insert named place of delivery)
CPT Carriage Paid To (insert named place of destination)
CIP Carriage and Insurance Paid To insert named place of
destination)
DAT Delivered at Terminal (insert named terminal at port or place of
destination)
DAP Delivered at Place (insert named place of destination)
DDP Delivered Duty Paid (insert named place of destination)
Rules for Sea and Inland Waterway Transport
FAS Free Alongside Ship (Insert named port of shipment)
FOB Free on Board (insert named port of shipment)
CFR Cost and Freight (insert named port of destination)
CIF Cost, Insurance and Freight (insert named port of destination)

Note 1: Certain of the terms are designated under Incoterms to be applicable
only to seafreight transit. Even if the term is correctly written, if it is applied to
the incorrect form of transport/mode of shipment, it will deemed to have been
misused and could compromise protection in the event of an international
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dispute. e.g. FOB is not for air and FCA is better than FOB for containers even
though FOB has been modified in 2010 to apply to containerisation.

Note 2: The naming of the place is important. There must be as much detail as
possible when stipulating the place. As an example, historically the term Ex
Works Germany was used. This however is too vague and a full physical address
is required.

Why the changes in Incoterms 2010?

Incoterms 2010 focus on the Sellers and Buyers Tasks, Costs and Risks
Their objectives are:

o To simplify, clarify and better explain the terms application
o To relate Incoterms to the Contract of Sale
o To put the definitions in the preamble for each term
o To cater for the increase in Customs Free Zones/Cross Border
Trade/USA International Trade and Domestic Sales
o To better define the Delivery Points
o To recognise Customs of the Trade
o To further adapt to electronic communication
o To adapt to changes in transport practices e.g. FOB redefined
o To replace redundant terms: DAF/DES/DEQ/DDU
o To clarify who pays for Terminal Handling Charges (THC)
o To cater for the major emphasis on security compliance
o To provide greater clarity on insurance
o To provide for string sales or sales at sea
o To amend the text to make it gender neutral

Tips on Incoterms:

o Remember, Incoterms are not the complete Contract of Sale
o Consider what term is appropriate to the type of transaction you plan
o Consider the right transport method for your circumstances
o Decide who will organise the transport
o Decide how you will handle insurance
o Consider Customs practices
o Consult the guideline notes
o Choose the appropriate Incoterm rule and incorporate it in the contract
o Clearly define the port of shipment/arrival and the place of
handover/final receipt

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Incoterms 2010 in Synopsis

Note: Permission to print the text from the ICC publication could not be obtained and the
following is therefore only a prcis of the contents of their publication 715E. It is recommended
that you obtain this publication that is available from the ICC in Johannesburg.
The writer accepts no responsibility for errors/omissions or recommendations made in the
Synopsis or elsewhere in these notes.

EXW: Detailed Summary

EX WORKS (insert named place of delivery) Incoterms 2010

Guidance Notes:

o It is a Multimodal Term

o Recommended for Domestic Sales rather than International where FCA is
preferable.

o Delivery is at Sellers Premises or another Named Place

o Not cleared for Export

o Represents the minimum obligation for the seller

o Buyer bears all costs and risks involved ex the seller's premises

o It recommended that the parties define the delivery point clearly as the seller
carries risks and costs to that point

o If loading is required terms to be agreed. Risks/Costs are for the buyer

o Not for use if Buyer cant clear for Export

o Limited obligation to provide trade information

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EXW
A THE SELLER'S OBLIGATIONS B THE BUYER'S OBLIGATIONS
A1
General obligations of the seller
Provide the goods/invoice/Electronic
equivalent if agreed/customary

(This clause repeats throughout the range and is
simply a reminder of the basic obligations of the
seller and the buyer)
B1
General obligations of the buyer
The buyer must pay the price per
contract and accept electronic docs if
agreed/customary

A2 Licences, authorizations security
clearances and formalities

No obligation other than assistance at
buyers risk/cost

(Buyers should be aware of the dangers of
accepting responsibility for the export
process in a foreign country. These include
having to check export permit requirements,
government pre shipment inspections,
customs regulations and how best to
remove the cargo.
If the Seller is unable to assist, provided the
delivery obligation has been met, the Buyer
would be liable to accept the goods )

B2 Licences, authorizations and formalities

The buyer must arrange the export
clearance if applicable at his own risk
and expense.

A3
Contracts of carriage and insurance

Contract of carriage
No obligation.

Contract of insurance
No obligation except to provide
information to get cover

(The implication of this clause is that neither
the seller nor the buyer are required to
export the goods
Exporters must be aware of the risk of the
goods remaining in the country and may
want to include an amendment "EXW
Cleared'
Common sense dictates that the parties
should attend to the carriage and insurance
issues by mutual agreement)
B3

No obligation

No obligation

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EXW
A4
Delivery
Deliver at agreed or usual point and
within agreed time (not loaded)

(The seller literally places the cargo at a
point he determines (unless otherwise
agreed with the buyer), normally at his
premises. The buyer must then arrange
pick up and pay all costs including
loading)
B4
Taking delivery
The buyer obligated to take delivery
once available as agreed and notice
received

A5
Transfer of risks
The seller takes the risk prior to
delivery

(This means that until they have been set aside
as an export order they are at the seller's risk.
Once they have been identified as being placed
ready for collection, they are at the buyer's risk.
This includes fire, theft, water damage, and
damage on loading. The only relief would be if the
seller failed to give notice)
A5
Transfer of risks
The buyer bears the risk after delivery,
or from when they were identifiable as
the order if the buyer does not notify
seller re pick up point (if applicable)

A6
Allocation of costs
The seller pays costs to delivery

(The seller literally has to pay only for
the packing, basic quality check,
labelling and preparation of an invoice.
The buyer pays all other costs including
"seller's assistance", loading, export
clearance, wharfage, international
freight and domestic clearing and
forwarding costs)
B6
Allocation of costs
The buyer pays all subsequent costs,
penalties, assistance etc., provided that
the goods can be identified as the
contracted goods.

A7
Notices to the buyer
The seller must give the buyer adequate
notice to enable him to take delivery

(This is a key clause throughout the
Incoterms. Both parties are required to
communicate clearly regarding
delivery/pick up. Failure to do so
extends the risk and liability for costs if
something goes wrong and results in
unplanned costs)
B7
Notices to the seller
If entitled to do so the buyer must
stipulate the place/time of delivery,
giving sufficient time to the seller

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EXW
A8
Delivery Document
No obligation

(This clause highlights the need for the
contracts of Sale, Carriage, Payment
and insurance to work in harmony.
If a document of title is needed to
secure payment, clearly EXW is not an
appropriate term to use)
B8
Proof of Delivery
The buyer must supply proof of delivery
being taken

A9
Checking - packaging - marking
o The seller pays for checking quality,
measuring, weighing, counting as
required to comply with the contract

o Packing to be provided unless
agreed otherwise.

o Packing to meet usual standards for
the mode of transport unless
otherwise agreed.

o Packaging is to be marked
appropriately.

(The seller's obligations are the same as
for a domestic sale. The buyer must be
fully aware of any government
regulations regarding pre shipment
inspections)
B9
Inspection of goods
The buyer pays for all types of pre-
shipment inspection, mandated or not.

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EXW
A10
Assistance with information and related
costs
The seller is required to assist the buyer
to obtain
documents/information/security
information required for the export
and/or import of the goods and, where
necessary, for their transit to
destination.

(The seller is required to give
assistance, in obtaining the
information/documents needed to
secure the export, but is entitled to full
compensation.
Incoterms do not make insurance a
requirement for either party although
common business sense means it must
be addressed particularly by the buyer
who is at total risk)
B10
costs
The buyer must pay all costs and
charges incurred in obtaining the
documents or equivalent electronic
messages mentioned in A10 and
reimburse those incurred by the seller
in rendering his assistance in
accordance therewith

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synopsis or elsewhere in these notes.

FCA: Detailed Summary

FREE CARRIER (insert named place of delivery) Incoterms 2010

Guidance Notes:

o It is a Multimodal term, good for more than 1 transport mode

o The Seller clears for Export

o Delivery is at Sellers Premises (loaded) or another Named Place (not
unloaded)

o It recommended that the parties define the delivery point (sellers
place/other) clearly as the buyer carries risks and costs from that point

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FCA
A1 Provide the goods/invoice/electronic
equivalent - if agreed/customary

B1 The buyer must pay the price per
agreed/customary


The seller clears for export

(The seller under Inco 2010 is required
to clear for export. In SA this involves
the Customs Bill of Entry, Cargo Dues,
Bank forms and meeting any other Dept
of Trade and Industry needs. If a
statutory inspection is needed, this is
now arranged and paid by the seller)

The buyer clears for transit clearances/
import formalities.

A3

A: No obligation.
If requested by the buyer/ or it is
commercial practice and the buyer
agrees, the seller may contract for
carriage on usual terms at the buyer's
risk and expense. Either way the seller
may decline but then must notify the
buyer

B: Contract of insurance
No obligation but must provide info to
obtain cover if requested

(Incoterms other than CIF/CIP do not
make insurance a requirement for
either party although common business
sense means it must be addressed
particularly by the buyer who is at total
risk)
B3

A: The buyer must contract at his own
expense for the carriage of the goods
from the named place, except when the
contract of carriage is made by the
seller

No obligation to the seller

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FCA
A4
Delivery
Delivery is to the carrier/nominee
appointed by buyer at the agreed
place/time.
Delivery is completed;
o Named place: seller's premises,
when the goods have been loaded
on the transport provided by the
buyer.
o Anywhere else, when the goods are
available to the carrier/nominee of
the buyer, on the seller's means of
transport but not unloaded.
If the buyer does not nominate the
place, the seller can select it.
o Unless otherwise agreed, the seller
selects the manner in which the
goods will be delivered for on-
carriage

(In practice in the South African
situation, two main systems operate.
Either a carrier arrives at the seller's
premises with a container for loading or
to pick up cargo for subsequent loading
at a depot or at the port/airport.
Under this "F" term, the buyer should
appoint that carrier. Delivery takes
place when the cargo is "on" or "in" the
truck. Thus the seller is responsible for
loading.
If the seller takes the cargo to the
depot/port/airport on his own vehicle or
one used by a pre carrier appointed by
it, then delivery takes place on the
truck at the nominated receiving point
and the buyer is responsible for
offloading and receipt into the facility.
It is important that the parties agree
the manner of shipment)
B4
Taking delivery
The buyer takes delivery once available
to carrier/nominee as agreed in A4

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FCA
A5
Transfer of risks
delivery

(The seller is on risk until the cargo is
"on/in" the truck when loading at his
premises, and just prior to the cargo
being lifted off the truck when delivery
is to the buyer's nominated carrier's
premises)
A5
Transfer of risks
The buyer bears the risk after delivery
However, if the buyer fails to perform re
notice/collection, then the buyer is
responsible for all risks and costs
provided the order can be identified as
the contract goods
The date that risks/costs transfer
depends on the agreement, notice
given/not given or if no clarity, the
expiry date of delivery period

Subject to B6 the seller pays costs until
delivered under A4

If applicable, seller pays all export
processing costs including duties, taxes,
and other charges payable upon export.

(The seller pays all costs including the
customs formalities and loading charges
for cargo collected from his premises
and the pre carriage when delivery is to
the buyer's nominated carrier. The
buyer pays all other charges)
B6
Allocation of costs
The buyer pays all costs after delivery
under A4
Additional costs incurred, either
because the buyer does not nominate
the carrier/nominee or because the
carrier/nominee fails to take the goods
into his charge at the agreed time, or
because notice has not been given

The proviso is that the goods have been
contract goods

The buyer pays all costs of import and if
applicable transit formalities.

A7
At buyers risk/cost the seller must give
the buyer adequate notice that:

o Delivery has been effected per A4
or:
o That the carrier/nominee has not
collected the goods in time

(This is a key clause throughout
unplanned costs)
B7
The buyer must notify the buyer of:
o The carrier/nominated agent, giving
sufficient time to the seller to
perform
o If required nominate the delivery
date
o State the transport mode
o Nominate the point of delivery

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FCA
A8
Delivery Document
The seller provides the delivery
document at the buyers risk/cost

The seller must assist the buyer to
obtain a transport document at buyers
risk/cost
B8
Proof of Delivery
The buyer must accept proof of delivery

A9

agreed otherwise.

otherwise agreed.

appropriately.
regulations regarding pre-shipment
inspections)
B9
Inspection of goods
shipment inspection, except when
mandated by the authorities.

A10
costs
o The seller is required to assist the
buyer to obtain documents /
information /security info required
for the import of the goods and,
where necessary, for their transit to
destination.

o If required, the seller must
reimburse the buyer for costs
incurred under B10 B
B10
costs
o The buyer must advise the seller of
any security information required
and pay all costs incurred in
obtaining such information.

o If required the buyer must assist the
seller with any
complete the export. This at the
sellers cost

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CPT: Detailed Summary

CARRIAGE PAID TO (insert named place of destination) Incoterms 2010

Guidance Notes:


o Delivery is at Sellers Premises or another agreed Place

o Seller pays costs to named place at destination

o Risk transfers at the point of delivery, not destination

o Unless otherwise agreed risks transfer when handed to first carrier

o Cleared for Export by Seller who has no Import obligations

o It recommended that the parties clearly define both the nominated delivery
point at origin and the named place at destination clearly as the seller carries
the costs to that point

o If unloading is required at destination, the seller pays unless otherwise agreed

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CPT
A1 Provide the goods/invoice/Electronic

agreed/customary
2 Licences, authorizations security

The seller clears for export and for any
transit through any country

(The seller under Inco 2010 is required to clear
for export/transit. In SA this involves the Customs
Bill of Entry, Cargo Dues, Bank forms and meeting
any other Dept of Trade and Industry needs. If a
statutory inspection is needed, this is arranged
and paid by the seller)

The buyer must arrange the import
clearance at his own risk and expense
and for any transit cost to another
country.

A3

o Seller arranges the contract to the
named point at destination on:
o Usual terms
o At Sellers expense
o Customary route
o If not pre agreed the seller has
discretion
(This leaves the buyer wide open to abuse and it
is essential the place/point as well as the
carrier/routing are defined)
B3

No obligation

information for the buyer to get cover

(South African exporters will find CPT a favourable
term as, in the example of a full container being
loaded at their factory or warehouse, they will
achieve ex works risks and yet be in control of the
cargo potentially right up to final destination)

A4
Delivery
Seller delivers by handing to the carrier
under A3 and within the agreed time
B4
Taking delivery
under A4 and must receive them at the
named place at destination

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CPT
A5
Transfer of risks
The seller takes the risks until delivered
to the carrier unless B5 applies

B5
Transfer of risks
or if the buyer fails to give notice under
B7, then risks may transfer on the
agreed date/end of period agreed,
provided the goods are identifiable as
the order.
A6
Allocation of costs
o The seller pays all costs up to
delivery (except as defined under
B6)
o All freight related charges to the
place at destination including
unloading unless excluded from the
C o C
o Customs related charges at origin/in
transit
B6
Allocation of costs
The buyer pays:
o Costs after delivery to the carrier if
not covered by the contract of
carriage
o Transit charges if not covered by the
C o C
o Unloading charges if not covered by
the C o C
o Cost arising from failure to give
notice under B7 provided the goods
have been identified as the contract
goods

A7
o The seller must give the buyer
notice of delivery under A4
o The seller must give the buyer any
notice required to receive the goods

unplanned costs)
B7
When entitled to do so the buyer must
stipulate the place/time of delivery at
destination, giving sufficient time to the
seller

A8
Delivery Document
If it is practice or the buyer requests it:
o The seller must provide the
transport document
o The document must be dated within
the agreed period and cover the
goods shipped. It must enable the
buyer to claim the goods at
destination and to sell in transit
o When in negotiable form a full set of
originals must be given to the buyer
B8
Proof of Delivery
The buyer must accept the transport
document if it conforms to the contract

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CPT
A9

o Mandatory pre-shipment inspections
are for the account of the seller

agreed otherwise

otherwise agreed

appropriately

B9
Inspection of goods
The buyer pays for pre-shipment
inspections, not mandated by the
authorities in the country of export

A10
costs
information / security info required
destination


B10
costs

o If required, the buyer must assist
the seller with any information /
documents needed to conclude the
export. This at the sellers cost

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CIP: Detailed Summary

CARRIAGE AND INSURANCE PAID TO (insert named place of destination)
Incoterms 2010

Guidance Notes:


o Delivery is at Sellers Premises or another agreed Place

o Seller pays costs to named place at destination

o The seller provides minimum insurance unless otherwise agreed




o It recommended that the parties clearly define both the nominated delivery
point at origin and the named place at destination clearly as the seller carries
the costs to that point


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CIP

(This clause repeats throughout the
range and is simply a reminder of the
basic obligations of the seller and the
buyer)
agreed/customary


to clear for export/transit. In SA this
involves the Customs Bill of Entry,
Cargo Dues, Bank forms and meeting
any other Dept of Trade and Industry
needs. If a statutory inspection is
needed, this is arranged and paid by
the seller)

country.

24

CIP
A3

A: Contract of carriage
named point at destination on:
o Usual terms
o Customary route
discretion to select the
carrier/routing
o Seller to provide minimum cover
(Clauses C) with an insurer of good
repute and must allow buyer/others
with insurable interest to process
claims
o On request and at buyers cost,
seller is to increase the cover to A
or B clauses
o Cover will extend from point of delivery
to the named point at destination at the
contract cost plus 10% in the currency
of the contract
o The seller must deliver the policy to the
buyer
o The seller must assist with additional
information if required for the buyer to
extend cover

(Note the danger here of leaving the
provision of insurance with the seller.
Will it in fact be a company of repute with
representation in SA? Will cover be
adequate when taking into account SA
duty/other charges?)

B3

A: No obligation


A4
Delivery
Seller delivers by handing to the carrier
under A3 and within the agreed time
B4
Taking delivery

25

CIP
A5
Transfer of risks
to the carrier unless the buyer fails to
give notice under B7

A5
Transfer of risks
the order.
A6
Allocation of costs
B6)
unloading
transit
B6
Allocation of costs
The buyer pays:
carriage
C o C
the C o C
o Costs arising from failure to give
goods
o Extra Insurance cover if taken

A7

unplanned costs)
B7
seller

A8
Delivery Document
transport document
B8
Proof of Delivery

26

CIP
A9
o The seller pays for checking
quality, measuring, weighing,
counting as required to comply
with the contract

o Mandatory pre-shipment
inspections are for the account
of the seller

agreed otherwise.

o Packing to meet usual standards
for the mode of transport unless
otherwise agreed.

appropriately.

B9
Inspection of goods
authorities in the country of export.

A10
costs
destination.

incurred under B10 B.

B10
costs
o The buyer must advise the seller
of any security information
required and pay all costs
incurred in obtaining such
information.

o If required, the buyer must
assist the seller with any
information / documents needed
to conclude the export. This at
the sellers cost

27


DAT: Detailed Summary

DELIVERED AT TERMINAL (insert named terminal at port or place of destination)
Incoterms 2010

Guidance Notes:


o Delivery occurs when the goods are unloaded from the arriving carrier at a
named Terminal at the named port/place

o Terminal means any place, covered or not such as a quay, warehouse,
container yard or road air or rail terminal

o Seller pays costs and carrier the risks to the named terminal at destination

o Neither party has to insure, but both must provide information if requested to
do so


o It recommended that the parties clearly define the nominated delivery point
at destination and that the seller enters into a contract of carriage that
matches the choice precisely as the seller carries the risks/costs to that point

28

DAT

buyer)
agreed/customary


the seller)

formalities at its own risk and expense

A3

o Seller contracts the carriage to the
named terminal at the agreed
port/place at destination. If nothing
is agreed, the seller selects the
terminal/port/place:

o Seller has no obligation to the buyer
take cover

(Clearly the seller is at risk to the point of
delivery and common sense would leave the
seller exposed if it failed to insure)
B3

A: No obligation


29

DAT
A4
Delivery
Seller must unload the goods on arrival
and deliver by placing them at the
disposal of the buyer at the named
terminal / port / place on the agreed
date / within the agreed period
B4
Taking delivery
agreed place at destination

A5
Transfer of risks
at the agreed place under A4

A5
Transfer of risks
o The buyer bears the risk after
delivery
o If the buyer fails to pre clear
through customs/get release or
o If it fails to give notice under B7,
then risks may transfer on the
agreed date/end of period
agreed, provided the goods are
identifiable as the order.
A6
Allocation of costs
B6)
unloading
o Customs related charges at origin /
in transit
(Note the insurance risk after delivery
at terminal. The buyer needs to
consider that aspect)
B6
Allocation of costs
The buyer pays:
o Costs after delivery to the terminal /
port / place
customs clear/ get release at
destination or:
o To give notice under B7 provided
the goods have been identified as
the contract goods
o All import related clearance and
delivery charges

A7
notice to enable it to take delivery of
the goods
unplanned costs)
B7
the agreed terminal, giving sufficient
time to the seller

A8
Delivery Document
o The seller must provide the buyer
with a document/s to enable the
destination
B8
Proof of Delivery
The buyer must accept the delivery
30

DAT

A9
with the contract

of the seller

agreed otherwise.

otherwise agreed.

appropriately.

B9
Inspection of goods

A10
costs
for the import of the goods and for
their transit to destination.

incurred under B10 point 2

B10
costs
information.

the sellers cost

31


DAP: Detailed Summary

DELIVERED AT PLACE (insert named place of destination) Incoterms 2010

Guidance Notes:


o Delivery occurs when the goods are available not unloaded from the arriving
vehicle at the named place

o Seller pays the costs and carries the risks to the named place at destination

do so



o If the buyer wants the good delivered cleared the DDP term should be used

32

DAP

buyer)
agreed/customary


the seller)

formalities at its own risk and expense

A3

named place at the agreed
destination. If nothing is agreed, the
seller selects the point at the named
place

take cover

B3

A: No obligation


A4
Delivery
Seller must deliver the goods by placing
them at the disposal of the buyer on the
arriving vehicle ready for unloading at
the named place on the agreed date /
within the agreed period
B4
Taking delivery
33

DAP

A5
Transfer of risks

A5
Transfer of risks
delivery
A6
Allocation of costs
B6)
unloading if included in the C o C
in transit
(Note the insurance risk after delivery
at the place. The buyer needs to
consider that aspect)
B6
Allocation of costs
The buyer pays:
o Costs after delivery at the named
place
o The cost of unloading if not in the
C o C
destination or:
the contract goods
o All import related clearance and
delivery charges

A7
the goods
unplanned costs)
B7
time to the seller

A8
Delivery Document
destination
B8
Proof of Delivery

34

DAP
A9
with the contract

of the seller

agreed otherwise.

otherwise agreed.

appropriately.

B9
Inspection of goods

A10
costs
for the import of the goods and for
their transit to destination.


B10
costs
information.

the sellers cost

35


DDP: Detailed Summary

DELIVERED DUTY PAID (insert named place of destination) Incoterms 2010

Guidance Notes:


o Delivery occurs when the goods are available cleared for Import but not
unloaded from the arriving vehicle at the named place

o Seller pays the costs and carries the risks to the named place at destination

do so

o Cleared for Export and for Import at Destination by the Seller


o If unloading costs form part of the contract of carriage, the seller cannot
recover them unless agreed with the buyer

o If the seller cannot arrange the import clearance this term should not be
used. Similarly if the intention is for the buyer to clear for import, DAP should
be used

o Unless otherwise agreed the seller is responsible for VAT and Duty

o This term represents the maximum risk to the seller

36

DDP

buyer)
agreed/customary

The seller clears for export, for transit
through any country and for clearance
at Destination

to clear for export/transit/import. In SA
this involves the Customs Bill of Entry,
VAT/duty, Cargo Dues, and all landside
charges. If a statutory inspection is
the seller
The big risk here is for the seller to
reclaim Vat and Duty unless registered
as a vendor in RSA)

The buyer must assist the seller at the
latters risk and expense with any
information required to effect the
import

A3

named place at the agreed
destination. If nothing is agreed, the
seller selects the point at the named
place

take cover

B3

A: No obligation


37

DDP
A4
Delivery
Seller must deliver the goods by placing
them at the disposal of the buyer on the
arriving vehicle ready for unloading at
the named place on the agreed date /
within the agreed period
B4
Taking delivery

A5
Transfer of risks

A5
Transfer of risks
delivery
A6
Allocation of costs
B6)
in transit and at destination

(Note the insurance risk after delivery at terminal.
The buyer needs to consider that aspect)
B6
Allocation of costs
The buyer pays:
o Costs after delivery at the named
place
o The cost of unloading if not in the
C o C
o Costs arising from failure to
destination or:
the contract goods

A7
the goods
unplanned costs)
B7
time to the seller

A8
Delivery Document
destination
B8
Proof of Delivery
38

DDP

A9
with the contract

of the seller in both the country
of export and import

agreed otherwise.

otherwise agreed.

appropriately.
B9
Inspection of goods
The buyer has no obligation to pay pre-
shipment inspections, mandated by the
authorities in the country of export or
import.

A10
costs
for the transport of the goods from
the named place to their final
destination.


B10
costs
information.

to conclude the export/transit
and import at destination. This
at the sellers cost

39


FAS

FREE ALONGSIDE SHIP (insert named port of shipment) Incoterms 2010

Guidance Notes:

o It is a sea/inland waterway term only

o Delivery takes place when the goods are available alongside the vessel
nominated by the buyer on the quay or on a barge at the named port of
shipment.

o The buyer has to bear all costs and risks of loss of or damage to the goods
from that time.

o It recommended that the parties define the loading point and port clearly as
the buyer carries risks and costs from that point

o Seller must deliver or procure the goods already delivered (i.e. have
ownership) thus providing for a string sale (sale at sea transaction)

o Containerised cargo is delivered to a terminal, not alongside the ship and this
term should not be used in this case. Instead FCA is the preferred term

o The FAS term requires the seller to clear the goods for export but is not
responsible for the import clearance.

40

FAS

agreed/customary



to clear for export. In SA this involves
the Customs Bill of Entry, Cargo Dues,
Bank forms and meeting any other Dept
of Trade and Industry needs. If a
statutory inspection is needed, this is
now arranged and paid by the seller)

The buyer clears for transit clearances/
import formalities.

A3

A: No obligation.
buyer


either party although common business
sense means it must be addressed
particularly by the buyer who is at total
risk)
B3

from the named port, except when the
contract of carriage is made by the
seller


41

FAS
A4
Delivery
place/time.
o Alongside the buyers nominated
ship/loading point/port or by
procuring the goods already
delivered.
o If the buyer does not nominate the
place, the seller can select it.
o Must perform within agreed time
scale/custom of the port

B4
Taking delivery
The buyer takes delivery once available
to carrier/nominee as agreed in A4

A5
Transfer of risks
delivery

A5
Transfer of risks
The buyer bears the risk after delivery.
However, if the buyer fails to perform re

o Notice
o Loading of Cargo
o Nominated vessels arrival on
time
o Early closure for loading

Then the buyer is responsible for all
risks and costs so caused

o provided the order can be
identified as the contract goods
o The date that risks/costs transfer
depends on the agreement,
notice given/not given or if no
clarity, the expiry date of
delivery period

42

FAS
A5

Allocation of costs
Subject to B6 the seller pays costs until
delivered under A4*

processing costs including duties, taxes,
and other charges payable upon export.

*The seller pays all costs including the
customs formalities and loading charges
for cargo collected from his premises
and the pre carriage/unloading when
delivery is to the buyer's nominated
carrier. The buyer pays all other
charges)
B6
Allocation of costs
under A4

The proviso is that the goods have been
contract goods

The buyer pays all costs of import and if
applicable transit formalities.

A7
At buyers risk/cost the seller must give
the buyer adequate notice that:

or:

unplanned costs)
B7
o The carrier/nominated agent, giving
sufficient time to the seller to
perform
date

A8
Delivery Document
The seller provides the usual delivery

The seller must assist the buyer to
obtain a transport document at buyers
risk/cost
B8
Proof of Delivery
The buyer must accept proof of delivery

43

FAS
A9

agreed otherwise.

otherwise agreed.

appropriately.
regulations regarding pre-shipment
inspections)
B9
Inspection of goods

B10
costs
for the transport of the goods from
the named place to their final
destination.


B10
costs
information.

to conclude the export/transit
and import at destination. This
at the sellers cost

44


FOB: Detailed Summary

FREE ON BOARD (insert named port of shipment) Incoterms 2010

Guidance Notes:

o It is a unimodal term, good for sea/inland waterway only

o Seller clears for Export

o Buyer clears for Import

o Delivery is on board the vessel or on procurement of goods already delivered

o FCA is more appropriate for containerised cargo where a terminal is the usual
delivery point

o It recommended that the parties define the delivery point (sellers
place/other) clearly as the buyer carries risks and costs from that point

45

FOB

buyer)
agreed/customary



(The seller under Inco 2010 is
required to clear for export. In SA this
needed, this is now arranged and paid
by the seller)


The buyer clears for transit
clearances/ import formalities.

A3

A: No obligation.
buyer


either party although common
business sense means it must be
addressed particularly by the buyer
who is at total risk)
B3

from the named place, except when
the contract of carriage is made by the
seller


46

A4
Delivery
place/time.
o On board the vessel at the named
port/loading point or
o By procuring the goods already
delivered
o Within the agreed time frame
o If no port/place is nominated, the
buyer has discretion to choose

(The term procurement is new and
allows for string sales or sales at sea)
B4
Taking delivery
The buyer takes delivery once
available to carrier/nominee as agreed
in A4

A5
Transfer of risks
delivery

(The seller is on risk until the cargo is
"on board the ship)
A5
Transfer of risks
The buyer bears the risk after delivery
However, if the buyer fails to perform
re notice/collection, then the buyer is
responsible for all risks and costs
provided the order can be identified as
the contract goods
The date that risks/costs transfer
depends on the agreement, notice
given/not given or if no clarity, the
expiry date of delivery period

Subject to B6 the seller pays costs
until delivered under A4

processing costs including duties,
taxes, and other charges payable
upon export.

(The seller pays all costs including the
customs formalities and loading
charges for cargo collected from his
premises and the pre carriage when
delivery is to the buyer's nominated
carrier. The buyer pays all other
charges)
B6
Allocation of costs
under A4

The proviso is that the goods have
been identified as the contract goods

The buyer pays all costs of import and
if applicable transit formalities.

A7
At buyers risk/cost the seller must
give the buyer adequate notice that:

or:
B7
o The carrier/nominated agent,
giving sufficient time to the seller
to perform
47


Incoterms. Both parties are required
to communicate clearly regarding
extends the risk and liability for costs
if something goes wrong and results in
unplanned costs)
date

A8
Delivery Document
The seller provides the delivery

If this is not a transport document,
the seller must assist the buyer to
obtain a transport document at
buyers risk/cost
B8
Proof of Delivery
The buyer must accept proof of
delivery

A9
with the contract

agreed otherwise.

otherwise agreed.

appropriately.
(The seller's obligations are the same
as for a domestic sale. The buyer
must be fully aware of any
government regulations regarding
pre-shipment inspections)
B9
Inspection of goods

48

A1
0
costs
information /security info required
where necessary, for their transit
to destination.

B1
0
costs

o If required the buyer must assist
the seller with any
complete the export. This at the
sellers cost

49


CFR: Detailed Summary

COST AND FREIGHT (insert named port of shipment) Incoterms 2010

Guidance Notes:

o It is a unimodal term, good for sea/inland waterway only

o Seller clears for Export

o Buyer clears for Import

o Delivery is on board the vessel or on procurement of goods already delivered

o Risks transfer on loading

o The Seller contracts the transport to destination at the Buyers risk

o CPT is more appropriate for containerised cargo where a terminal is the usual
delivery point

o It recommended that the parties define the delivery point (port/pier) clearly
as the buyer carries risks from that point and ultimately carries the costs

o Unloading costs at destination cannot be recovered from the Buyer if part of
the contract of carriage

50

CFR

buyer)
agreed/customary


the seller)

country.

A3

named port/point at destination on:
o Usual terms
o Customary route/vessel
discretion
(This leaves the buyer wide open to
abuse and it is essential the place/point
as well as the carrier/routing are
defined)
B3

No obligation


A4
Delivery
Seller delivers when the cargo is board
the ship or when the pre loaded cargo is
procured within the agreed
time/customary manner
B4
Taking delivery
51

CFR

A5
Transfer of risks
The seller takes the risks until the cargo
is on board

A5
Transfer of risks
the order.
A6
Allocation of costs
B6)
transit
B6
Allocation of costs
The buyer pays:
carriage
C o C
the C o C
o Cost arising from failure to give
goods

A7

unplanned costs)
B7
seller

A8
Delivery Document
transport document
B8
Proof of Delivery

52

CFR
A9

o Mandatory pre-shipment inspections
are for the account of the seller

agreed otherwise.

otherwise agreed.

appropriately.

B9
Inspection of goods

A10
costs
destination.


B10
costs

o If required, the buyer must assist
the seller with any information /
documents needed to conclude the
export. This at the sellers cost

53


CIF: Detailed Summary

COST, INSURANCE AND FREIGHT (insert named port of destination) Incoterms
2010

Guidance Notes:

o It is a Unimodal Term for Sea/Inland waterway only

o Delivery on board the nominated vessel/procurement of goods pre-loaded at
the agreed port/place

o Seller pays costs to named port at destination

o The seller provides minimum insurance unless otherwise agreed




o Buyer bears all costs and risks involved once on board/procured

o It recommended that the parties clearly define both the nominated port/point
and the named place at destination clearly as the seller carries the costs to
that point. However the risks are for the buyers account from the port of
origin


o CIF is not best suited to containerised cargo that is delivered to a terminal
54

CIF

agreed/customary


(The seller under Inco 2010 is required to clear
for export/transit. In SA this involves the Customs
Bill of Entry, Cargo Dues, Bank forms and meeting
any other Dept of Trade and Industry needs. If a
statutory inspection is needed, this is arranged
and paid by the seller)

country.

55

CIF
A3

named port at destination on:
o Usual terms
o Customary route
discretion to select the
carrier/routing
o Seller to provide minimum cover
(Clauses C) with an insurer of good
repute and must allow buyer/others
with insurable interest to process
claims
o On request and at buyers cost,
seller is to increase the cover to A
or B clauses
o Cover will extend from point of delivery
to the named port at destination at the
contract cost plus 10% in the currency
of the contract
o The seller must deliver the policy to the
buyer
extend cover

(Note the danger here of leaving the
provision of insurance with the seller.
Will it in fact be a company of repute with
representation in SA? Will cover be
adequate when taking into account SA
duty/other charges?)

B3

A: No obligation


A4
Delivery
Seller delivers by loading the cargo on
board/procuring pre-loaded cargo under
A3 and within the agreed time
B4
Taking delivery

56

CIF
A5
Transfer of risks
to the carrier unless the buyer fails to
give notice under B7

A5
Transfer of risks
the order.
A6
Allocation of costs
B6)
port at destination including
unloading if covered by the C o C
transit
o The cost of insurance
B6
Allocation of costs
The buyer pays:
carriage
C o C
the C o C
goods
o Extra Insurance cover if taken

A7

unplanned costs)
B7
seller

A8
Delivery Document
transport document
B8
Proof of Delivery

57

CIF
A9
with the contract

of the seller

agreed otherwise.

otherwise agreed.

appropriately.

B9
Inspection of goods

A10
costs
destination.


B10
costs
information.

the sellers cost

58

Summary of Incoterms2010
NOTE: The following information refers to Incoterms 2010. For a given
term, "Seller" indicates that the seller has the responsibility to provide the
service included in the price. "Buyer" indicates it is the buyer's
responsibility. If insurance is not included in the term (for example, CFR)
then insurance for transport is the responsibility of the buyer or the seller
depending on who owns the cargo at time of transport. In the case of CFR
terms, it would be the buyer while in the case of CIF or CIP terms, it would
be the seller. *Note: Although Incoterms are vague on insurance except in
the cases of CIP/CIF the parties need to assess the risk in each case and
agree on cover. There are very few shipments when insurance is not a
necessity.
Incoterms
Load
onto
truck
Export-
duty
payment
Transport
to
delivery
point at
origin
Unload
from
truck
at port
of
origin
Loading
charges
at port
of
origin
Transport
to
importer's
port
Terminal
charges
at
importer's
port
Loading
at the
import
Delivery
point
Transport
/ other
from
Delivery
Point
Insurance
Guideline
* (see
note)
Entry -
Customs
clearance
Entry
-
Duties
and
Taxes
EXW Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FCA Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
CPT Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer
CIP Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Seller Buyer Buyer
DAT Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Seller Buyer Buyer
DAP Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Seller Buyer Buyer
DDP Seller Seller Seller Seller Seller Seller Seller Seller Buyer Seller Seller Seller
FAS Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FOB Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer
CFR Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer
CIF Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Seller Buyer Buyer

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A Guide to Incoterms 2010

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