Incoterms

INCOTERMS
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INCOTERMS
What is it?
Shipping goods requires planning and agreement between seller and buyer. Questions that need
to be agreed upon before shipping include:
 Who will arrange for carriage?
 Who will pay for carriage?
 Who will bear risk of loss or damage to goods?
As part of shipping agreements, INCOTERMS (International Commercial Terms) are utilized.
INCOTERMS rules are accepted by governments, legal authorities, and practitioners worldwide
for the interpretation of most commonly used terms in international trade. These trade terms
often define the roles of the buyer and seller in the international trade. This helps both parties to
understand the costs, risks, logistics, and transportation management. Also, the responsibilities of
products right from when they are loaded at the seller’s dock. Until they are received at the
buyer's importing country .They are widely used in international commercial transactions or
procurement processes and their use is encouraged by trade councils, courts and international
lawyers. They are intended to reduce or remove altogether uncertainties arising from the
differing interpretations of the rules in different countries. Anyone who has indulged in
international trade will admit that this is a very vital term. It represents a useful way of
communication. Therefore, it helps to reduce any confusion that may arise between the sellers
and buyers. That being said, an incoterm is like a universal representation.
A short history of Incoterms
The FOB Incoterm was the first Incoterm to be created. And even though its origin traces back
over more than two centuries. Incoterms as they are now weren’t actually created until 1936 by
the International Chamber of Commerce (ICC). When Incoterms were first introduced, they
applied only to 13 countries. Eight revisions later, they are now widely used in over 140
countries and can be found in 31 different languages. Since then, the international transportation
community has gone through many changes. To adapt, there have been new and improved
editions of the Incoterms like the ones introduced in 1953, 1967, and 1976.
But over the past five decades, revisions have been implemented at the turn of every decade and
tend to stay in effect for the entire decade, such as Incoterms 1980, 1990, 2000, and 2010.

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Who is responsible for publishing them?
Incoterms is a registered trademark of the ICC. The ICC is responsible for publishing them.
Incoterms were first introduced in 1936 by the ICC Since then, the ICC has updated the rules
every 10 years. They are imp because 1: they define the obligations and cost between both
parties involved in trade.2: They determine the distribution & transfer of risks regarding the
goods delivered from seller to buyer.3: They clear the sharing of expenses between the parties
during transport.
Why they are important?
They are important because of the following reasons.
1: They define the obligations and cost between both parties involved in trade.
2: They determine the distribution & transfer of risks regarding the goods delivered from seller
to buyer.
3: They clear the sharing of expenses between the parties during transport.
The importance of Incoterms and how they facilitate world trade cannot be denied.
Functions of Incoterms
The function of Incoterms is identified through the acknowledgement of four “moments”:
 Who pays for the main transport?
 Where does the delivery take place?
 Where and when the risk is transferred from the Seller to the Buyer?
 Who bears all the fees arising from transport, issue of documents, insurance of goods
etc.?
The eleven rules are divided into two main groups:
Group A Group B
MULTIMODAL TRANSPORT SEA AND WATERWAYS TRANSPORT
EXW (Ex works) FAS (free alongside ship)
FCA (free carrier) FOB (free on board)
CPT (carriage paid to) CFR (cost and freight)
CIP (carriage and insurance paid to) CIF (cost, insurance and freight)
DAT (delivered at terminal)
DAP (delivered at place)
DDP (delivery duty paid)

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In general, the “transport by sea or inland waterway only” rules should only be used for bulk
cargos (e.g. oil, coal etc. Where the “any transport mode” rules are more appropriate.
However, the most recent revision is Incoterms 2020 which comes into force on 1st January
2020. However, Incoterms® 2010 remains in effect for those using them.
Amendments in Incoterms 2020: - In Incoterms 2020, Delivered at Terminal has been renamed
to Delivered at Place Unloaded (DPU). Further amendments are listed as per one by one
according to the 11 terms.
What do they don’t cover?
The scope of Incoterms is limited there are certain limitations. Incoterms do not regulate
anything related to the payment of the goods, and insurance is not their primary concern. They
excluding "intangibles" like computer software.
INCOTERMS RULES
1. EX WORKS (EXW) INCOTERM:
Can be used for any transport mode, or where there is more than one transport mode. This rule
places minimum responsibility on the seller, who merely must make the goods available, suitably
packaged, at the specified place, usually the seller’s factory or depot. Although the seller is not
obliged to load the goods, if the seller does so, this is at the buyer’s risk. Ex Works obliges the
buyer to undertake export procedures (obtaining of licenses, security clearances and so on.)   The
buyer may be poorly placed to do this.   In any event the seller is only obliged to “provide
assistance”, at the buyer’s risk and expense. However, extra care should be taken when trading
under this Incoterm as it should be used only in cases where the buyer is familiar with the import
laws of the country. Freight forwarder should also be present in the country to prevent
complications.
EXW - EX WORKS Responsibilities
A The Seller Must B The Buyer Must
A1 Provision of Goods in Conformity
with the Contract
The seller must provide the goods
and the commercial invoice or its
equivalent electronic message, in
B1 Payment of the Price
The buyer must pay the price as provided
in the contract of sale.

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conformity with the contract of
sale and any other evidence of
conformity which may be required
by the contract
A2 Taking Delivery
The seller must place the goods at
the disposal of the buyer at the
named place of delivery, not
loaded on any collecting vehicle,
on the date or within the period
agreed.
B2 Taking Delivery
The buyer must take delivery of the goods
when they have been delivered.
A3 Transfer of Risks
The seller must bear all risks of
loss of or damage to the goods
until such time as they have been
delivered in accordance with A2.
B3 Transfer of Risks
The buyer must bear all risks of or damage
the goods.
From time they have been delivered in
accordance with A2.
A4 Division of Costs
The seller must, subject to the
provisions of B4, pay all costs
relating to the goods until such
time as they have been delivered in
accordance with A2.
B4 Division of Costs
The buyer must pay:
All costs relating to the goods from the
time they have been delivered in
accordance with A2; and
Any additional costs incurred by failing to
take delivery of the goods is at the expense
of buyer.
A5 Notice to the Buyer
The seller must give the buyer
enough notice as to when and
where the goods will be placed at
its disposal.
B5 Notice to the Seller
The buyer must, whenever it is entitled to
determine the time within an agreed period
and/or the place of taking delivery, give the
seller enough notice thereof.
A6 Proof of Delivery, Transport
Document or Equivalent Electronic
Message
No obligation.
B6 Proof of Delivery, Transport Document or
Equivalent Electronic Message
The buyer must provide the seller with
appropriate evidence of having taken
delivery.
A7 Other Obligations
The seller must render the buyer at
the buyer’s request, risk and
expense, every assistance in
obtaining any documents or
equivalent electronic messages
issued or transmitted in the country
B7 Other Obligations
The buyer must pay all costs and charges
incurred in obtaining the documents or
equivalent electronic messages and
reimburse those incurred by the seller in
rendering its assistance in accordance
therewith.

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of delivery and/or of origin which
the buyer may require for the
export and/or import of the goods
and, where necessary, for the
transit through any country.
The seller must provide the buyer,
upon request, with the necessary
information for procuring
insurance.
2. FREE CARRIER (FCA) INCOTERM
Free Carrier (FCA) can be used for any transport mode, or where there is more than one
transport mode. A very flexible rule that is suitable for all situations where the buyer arranges the
main carriage. In all cases, the seller is responsible for export clearance; the buyer assumes all
risks and costs after the goods have been delivered at the named place. FCA is the rule of choice
for containerized goods where the buyer arranges for the main carriage. Here seller is not
responsible to insure goods for pre-carriage.
FCA – FREE CARRIER Responsibilities
A1 General Obligations
by the contract
B1 General Obligations
A2 Taking Delivery
The seller delivers in one of two
ways:
1) If the named place is the
seller’s premises then when the
goods have been loaded on the
means of transport provided by the
buyer. This includes of course the
buyer’s carrier but allows the
buyer to collect on its own vehicle
such as in a domestic sale. The
B2 Taking Delivery
The buyer’s obligation is to take delivery
when the goods have been delivered as
described in A2.
Note that this rule does not discuss the
means of transport at all, it merely
mentions the carrier regardless of how the
carrier will arrange transport of the goods.

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word “loaded” here would usually
mean safely placed on the vehicle
2) If the named place is not the
seller’s premises then when the
seller places the goods at the
disposal of the buyer or its carrier
on the seller’s vehicle delivering
the goods to that place but not
unloaded.
In all the rules the seller bears all
risks of loss or damage to the
goods until they have been
delivered in accordance with A2
described above. The exception is
loss or damage in circumstances
described in B3 below, which
varies dependent on the buyer’s
role in B2
The buyer bears all risks of loss or damage
to the goods once the seller has delivered
them as described in A2.
.
The seller must pay all costs until
the goods have been delivered
under A2. The seller pays any
costs, export duties and taxes,
where applicable, related to export
clearance. If the buyer is requested
by the seller to provide information
or documents to assist the seller in
their export formalities, then the
seller must pay the buyer for these
costs.
The buyer must pay the seller all costs
relating to the goods from when they have
been delivered, other than those payable by
the seller. If the seller has been requested
by the buyer to provide assistance in
obtaining information or documents needed
for the buyer to effect carriage, import
formalities, insurance and the transport
document, then the buyer must reimburse
the seller’s costs.
Where applicable, the buyer pays any
duties, taxes and other costs for transit or
import clearance.
A5 Carriage
In this rule the seller has no
obligation to the buyer for
arranging carriage of the goods. In
some instances, the seller and
B5 Carriage
The buyer must arrange for the carriage of
the goods, whether by the buyer itself or a
contracted carrier, at its own cost from the
named place of delivery. This allows for

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buyer can agree for the seller to
contract for carriage, possibly
because it can obtain more
favorable rates than the buyer
could, but such carriage is at the
buyer’s risk and cost.
the buyer itself to take delivery of the
goods such as might occur in a domestic
transaction. The exception is where, as
stated in A4, the contract for carriage is
arranged by the seller.
A6 Transport Document
The seller, at its own cost, must
provide the buyer with the usual
proof evidencing that the goods
have been delivered to the buyer or
another person, most usually of
course its carrier, in accordance
with A2. What form that proof
takes is a matter for the parties to
agree in their contract of sale. It
could be as simple as the buyer’s
signature on a copy of the invoice
through to a forwarder’s cargo
receipt or anything else agreed.
B6 Transport Document
The buyer must accept the proof provided
by the seller that goods have been
delivered as described in A2. When the
parties have agreed in their contract that
the seller is to be given a transport
document stating that the goods were
loaded, such as an “on board” bill of
lading, the buyer must instruct its carrier
accordingly at the buyer’s cost and risk.
3. FREE ALONGSIDE SHIP (FAS) INCOTERM:
Use of this rule is restricted to goods transported by sea or inland waterway.
In practice it should be used for situations where the seller has direct access to the vessel for
loading, e.g. bulk cargos or non-containerized goods. For containerized goods, consider “Free
Carrier FCA” instead. Seller delivers goods, cleared for export, alongside the vessel at a named
port, at which point risk transfers to the buyer. The buyer is responsible for loading the goods
and all costs thereafter. Here seller is not responsible to insure good for pre-carriage.
FAS – FREE ALONGSIDE SHIP Responsibilities
A1 General Obligations
by the contract
B1 General Obligations

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A2 Taking Delivery
The seller has to place the goods
alongside the vessel nominated or
provided by the buyer on the
agreed date, or within the agreed
period as notified by the buyer, or
if there is no such time notified
then at the end of that period.
B2 Taking Delivery
The buyer’s obligation is to take delivery
when the goods have been delivered as
described in A2.
The seller must bear all risks of
loss of or damage to the goods
until such time as they have been
The buyer bears all risks of loss or damage
to the goods once the seller has delivered
them as described in A2.
If the buyer fails to inform the seller of
where and when the vessel will be
presented or if the vessel fails to arrive on
time, or it fails to take the goods, so that
the seller cannot deliver, then the buyer
bears the risk of loss or damage to the
goods from the agreed date or at the end of
the agreed period.
The seller must pay all costs until
the goods have been delivered
under A2, meaning alongside the
vessel for FAS and loaded on
board the vessel for FOB, except
any costs the buyer must pay as
stated in B9.
The seller has to pay any costs
involved in providing the usual
proof that the goods have been
delivered, so if the contract
between the parties’ states that
proof as being a bill of lading then
any document fee is for the seller.
The buyer must pay the seller all costs
relating to the goods from when they have
been delivered, other than those payable by
the seller.
Additionally, and provided the seller has
advised that the goods have been clearly
identified as the goods under the contract,
the buyer pays any additional costs
incurred if the buyer fails to nominate the
vessel, or the vessel fails to take the goods
from the seller, or closes for cargo earlier
than when the buyer notified the seller.

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The seller pays any costs, export
duties and taxes, where applicable,
related to export clearance.
A5 Notice to the Buyer
The seller must give the buyer
sufficient notice that the goods
have been delivered alongside the
buyer’s vessel, or that the vessel
failed to take delivery once they
were made available.
B5 Notice to the Seller
The buyer must give enough notice to the
seller of any transport-related security
requirements and the vessel’s name and
loading point within the port of loading.
These would usually be specified in the
contract.
A6 Transport Document
The seller, at its own cost, must
provide the buyer with the usual
proof that the goods have been
What form it takes is likely to be
agreed in the contract of sale
having regard to whether the goods
are placed on the quay or brought
to the vessel’s side by a barge and
the nature of the goods.
B6 Transport Document.
The buyer must accept the proof of
delivery provided by the seller.
A7 Carriage
The seller has no obligation to
contract for carriage. If the buyer
requests the seller it must provide
the buyer, at the buyer’s risk and
cost, any information known by
the seller, including transport-
related security requirements, that
the buyer needs to arrange
carriage.
B7 Carriage
The buyer must contract for carriage,
which includes the loading on board, from
the port of shipment, except if it is agreed
that the seller makes the contract of
carriage as described in A7.
4. FREE ON BOARD (FOB) INCOTERM:
In shipping, the term FOB means ‘Free on Board’ and refers to a popularly used Incoterm. It’s
usually the best way to control your shipping costs.
By using FOB, the seller must clear the goods for export and delivers when the goods pass the
ship’s rail at the agreed port. Under FOB shipping terms, the seller is responsible for all costs

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involved in the process up until the goods are on a vessel at the designated port. Once goods
have been loaded onto the vessel the buyer is responsible for any costs and risks involved in the
onward shipment.
Using FOB shipping terms means the costs, risks and responsibilities are split fairly equally
between the buyer and the seller of goods. On FOB terms the supplier is responsible for paying
all the costs involved with shipment until the goods are on a vessel at their outbound port. After
this point, the responsibility then shifts to buyer. The term is used in commodities like oil, bulk
cargo or grain.
Seller and Buyer Obligations:
THE SELLER’S OBLIGATIONS THE BUYER’S OBLIGATIONS
1. Genera
The seller must deliver the goods,
commercial invoice, and any evidence
of conformity.
1. General
The buyer must pay the price of goods as agreed.
2. Delivery
Deliver the goods by placing on board
the vessel nominated by the buyer at
the loading point, in the agreed date or
period. In a customary manner at the
port.
2. Taking Delivery
The buyer takes the goods after delivered.
3. Risks
All risk of loss/damage until goods
have been delivered.
3. Risks
All risk of loss/damage from the time or end of the
period agreed for delivery. If the buyer fails to
nominate a carrier, or if the carrier doesn’t arrive, the
risk is under the buyer.
4. Carriage
No obligation to make a contract of
carriage. Provide at buyer’s risk and
cost, information for arranging
carriage. If agreed, the seller must
contract the carrier.
4. Carriage
Contract the carriage from the place of delivery
unless agreed the seller will contract the carrier.
5. Insurance
No obligation. Provide at buyer’s risk
and cost, any required information.
5. Insurance
No obligation to insure the goods.

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6. Delivery/transport document
Proof of delivery at sellers cost and a
transport document if arranged by
seller.
Accepts the proof of delivery.
7. Export/Import clearance
All export clearance expenses (license,
security, inspection, etc.). Assist with
import clearance
Assist with export clearance. Pay for import
clearance and formalities (licenses, security, official
documentation).
8. Checking
The seller must check, count, weight,
mark, and package goods
8. Checking
No obligation.
9. Allocation of cost
Pay all the cost until delivery. Cost of
proof of delivery. Duties and taxes for
export. All costs related to providing
assistance in obtaining documents to
the buyer
Pay from the time goods delivered. All costs for
assistance on getting carriage, insurance, delivery,
and customs documentation. Pay duties and taxes for
import or transit. Any additional cost if the carrier is
not nominated or carrier fails to collect goods.
10. Notices
Give notice that goods have been
delivered or the vessel failed to collect
the goods.
10. Notices
Notify the vessel name, loading point and time or
period.
5. COST AND FREIGHT (CFR) INCOTERM:
Cost and freight is a legal term in international trade. In this contract, the seller is required to
arrange for the carriage of goods by sea to a port of destination and provide the buyer with the
documents necessary to obtain them from the carrier. Under CFR, the seller does not have to
procure marine insurance against the risk of loss or damage to the cargo during transit.
Contracts involving international transportation often contain abbreviated trade terms that
describe matters such as the time and place of delivery, payment, the conditions under which the

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risk of loss shifts from the seller to the buyer, and specifying the party responsible for the costs
of freight and insurance.
It should only be used in situations where the seller has direct access to the vessel such as bulk
cargo shipping when goods are loaded directly onto the vessel instead of dropped off in a
container at a terminal prior to loading. CFR is a term used strictly for cargo transported by sea
or inland waterways.
Seller and Buyer Obligations
1. General
The seller must deliver the goods,
commercial invoice, and any evidence of
conformity.
1. General
The buyer must pay the price of goods as
agreed.
2. Delivery
Deliver the goods by placing on board the
vessel in the agreed date or period. In the
customary manner at the port.
2. Taking Delivery
The buyer takes the goods from the carrier at
the port of destination.
3. Risks
All risk of loss/damage until goods have been
delivered.
3. Risks
All risk of loss/damage from the time or end
of the period agreed for delivery. If the buyer
fails to give note of the port of destination, the
risk is under the buyer.
4. Carriage
Contract carriage of goods until port of
destination.
4. Carriage
No obligation to contract a carrier.
5. Insurance
No obligation. Provide at buyer’s risk and
cost, any required information.
5. Insurance
Provide the usual transport document.

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security, inspection, etc.). Assist with import
clearance.
clearance and formalities (licenses, security,
official documentation).
8. Checking
The seller must check, count, weight, mark,
and package goods
8. Checking
No obligation.
Pay all the cost until delivery, freight cost,
and loading cost. Unloading cost if agreed in
the contract. Transit costs. Cost of proof of
delivery. Duties and taxes for export. All
costs related to providing assistance in
obtaining documents to the buyer.
Pay from the time goods delivered. All costs
for assistance on getting carriage, insurance,
delivery, and customs documentation. Pay
duties and taxes for import or transit. Any
additional cost if the carrier is not nominated
or carrier fails to collect goods.
10. Notices
Give notice that goods have been delivered
on board.
10. Notices
Time or period for receiving the goods and
name the port of destination.
6. COST, INSURANCE AND FREIGHT (CIF) INCOTERM:
In “Cost, Insurance and Freight” (CIF), the seller delivers the goods, cleared for export, onboard
the vessel at the port of shipment, pays for the transport of the goods to the port of destination,
and also obtains and pays for minimum insurance coverage on the goods through their journey to
the named port of destination.
The buyer assumes all risk once the goods are on board the vessel for the main carriage;
however, they don’t take on any costs until the freight arrives at the named port of destination.
CIF applies to ocean or inland waterway transport only. It is commonly used for bulk cargo,
oversized or overweight shipments.

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Seller and Buyer Obligations
1. General
The seller must deliver the goods, commercial
invoice, and any evidence of conformity.
1. General
The buyer must pay the price of goods as
agreed.
2. Delivery
Deliver the goods by placing on board the
vessel in the agreed date or period. In a
customary manner at the port.
2. Taking Delivery
The buyer takes the goods from the carrier at
the port of destination.
3. Risks
All risk of loss/damage until goods have been
delivered.
3. Risks
All risk of loss/damage from the time or end
of the period agreed for delivery. If the buyer
fails to give notice of the port of destination,
the risk is under the buyer.
4. Carriage
Contract carriage of goods until port of
destination.
4. Carriage
No obligation to contract a carrier.
5. Insurance
The seller must obtain cargo insurance.
Additional insurance coverage under the buyer
account.
5. Insurance
Provide the usual transport document.
security, inspection, etc.). Assist with import
clearance.
clearance and formalities (licenses, security,
official documentation).

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8. Checking
The seller must check, count, weight, mark,
and package goods
8. Checking
No obligation.
Pay all the cost until delivery, freight cost, and
loading cost. Unloading cost if agreed in the
contract. Transit costs. Cost of proof of
delivery. Insurance. Duties and taxes for
export. All costs related to providing assistance
in obtaining documents to the buyer.
Pay from the time goods delivered. All costs
for assistance on getting carriage, delivery,
and customs documentation. Pay duties and
taxes for import or transit. Any additional
cost if the carrier is not nominated or carrier
fails to collect goods.
10. Notices
Give notice that goods have been delivered on
board.
10. Notices
Time or period for receiving the goods and
name the port of destination.
7. CARRIAGE PAID TO (CPT) INCOTERM:
“Carriage Paid To” means that the seller delivers the goods to the carrier or another person
nominated by the seller at an agreed place (if any such place is agreed between parties) and that
the seller must contract for and pay the costs of carriage necessary to bring the goods to the
named place of destination.
This rule may be used irrespective of the mode of transport selected and may also be used where
more than one mode of transport is employed. The agreed destination in CPT term could be any
place expressly agreed between the buyer and seller and will most commonly be an overseas
destination.
Seller’s obligations under the CPT Incoterm:
 Do the export clearance formalities
 Pay for the transportation from his door to the named and agreed destination and enter
into the relevant contract of carriage with the various carriers
 Take care of any and all export permits, quotas, special documentation, etc. relating to the
cargo

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Because CPT term may be used for all modes of transport, the movement could involve a road,
rail, and sea movement (in that order). Which means there are 3 carriers involved here.
In CPT, once the seller hands over the goods to the road carrier for further movement, the “risk”
transfers from the seller to the buyer, but the cost of the movement till the point of destination
remains with the seller.
Buyer’s obligations under the CPT Incoterm:
 Any transport movement from the agreed place of destination
 The risk from the time the seller hands over the cargo to the 1st carrier as mentioned
above
 The full cargo insurance portion from origin to destination
 Any and all import permits, quotas, special documentation, etc. relating to the cargo
 Import customs clearance and all related formalities
In CPT, since the contract of carriage is arranged by the seller at his expense, it is normal for the
seller to use his service contract and prepay the cost of the freight up to destination.
CPT terms could generally end at a seaport, an inland container depot or a door location in the
destination country.
8. CARRIAGE AND INSURANCE PAID TO (CIP) INCOTERM:
“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another
person nominated by the seller at an agreed place (if any such place is agreed between the
parties) and that the seller must contract for and pay the costs of carriage necessary to bring the
goods to the named place of destination. The seller is also obliged to arrange for insurance to
cover the buyer’s risk of loss of or damage to the goods during carriage.
This agreed destination in CIP term could be any place expressly agreed between the buyer and
seller and will most commonly be an overseas destination. This rule may be used irrespective of
the mode of transport selected and may also be used where more than one mode of transport is
employed.
Seller’s obligations under the CIP Incoterm:
 Do the export clearance formalities
 Pay for the transportation from his door to the named and agreed destination and enter
into the relevant contract of carriage with the various carriers

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 Arrange and pay for the insurance to cover the buyer’s risk
 Take care of any and all export permits, quotas, special documentation, etc. relating to the
cargo
Because the CIP term may be used for all modes of transport, the movement could involve a
road, rail, and sea movement (in that order). Which means there are 3 carriers involved here.
In CIP, once the seller hands over the goods to the road carrier for further movement, the “risk”
transfers from the seller to the buyer, but the cost of the movement till the point of destination
remains with the seller.
Buyer’s obligations under the CIP Incoterm:
 Any transport movement from the agreed place of destination
 The risk from the time the seller hands over the cargo to the 1st carrier as mentioned
above
 Any additional insurance coverage over and above the minimum insurance coverage that
the seller covers
 Any and all import permits, quotas, special documentation, etc. relating to the cargo
 Import customs clearance and all related formalities
In CIP since the contract of carriage is arranged by the seller at his expense, it is normal for the
seller to use his service contract and prepay the cost of the freight up to destination.
CIP terms could generally end at a seaport, an inland container depot or a door location in the
destination country.
9. DELIVERY AT TERMINAL (DAT) INCOTERM:
DAT, or, Delivery at Terminal, is where the seller clears goods for export and is fully
responsible for the goods until they have arrived at a named terminal at the end destination. The
goods must be unloaded at the terminal. DAT can be used with any transportation mode. It is
recommended that the seller’s contract with their forwarding company mirrors the contract of
sale.
Delivery at Terminal is used when the seller’s responsibility includes the full delivery of goods
up until the end terminal or port of destination, as well as the unloading of the goods. The seller
pays for all the expenses incurred until the place of delivery and the buyer pays for customs
clearance and taxes at destination.
‘Terminal’ means a quay, warehouse, container yard or any road for rail, air or road.

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As with all the ‘D’ Incoterms®, the risks and responsibility of goods gets transferred from the
seller to the buyer at the same point – the end destination. DAT was specifically designed to
meet airport and port deliveries.
For ocean cargo and shipping goods by sea, any discharged containers are then moved to
a container yards (CY), which is where containers are storedbefore they are moved to their final
destination. Sellers are responsible for any destination terminal handling charges and the buyer
only pays for customs clearance, duties and taxes.
Buyer and Seller Obligations of DAT
1. Provision of goods:
The seller must deliver the goods to the buyer
as agreed, providing the necessary invoice or
equivalent electronic document, as well as
proof of delivery.
1. Payment:
The buyer must pay for the price of the goods
as quoted in the contract of sale.
2. Licenses:
The seller must provide the export licenses or
local authorizations for exporting the goods
from their factory / country of origin
2. Licenses,authorizations and formalities:
The buyer must get any export license and
import permit for the export of goods
3. Shipping and Insurance
Contract of carriage (transport of goods) is the
seller’s responsibility, and so is insurance
3. Shipping and Insurance
Contract of carriage – no obligation, this is
the seller’s responsibility to cover costs and
risk
Contract of insurance – no obligation, this is
the seller’s responsibility to cover costs and
risk
4. Delivery of the goods
The seller must deliver the goods and unload
them at the agreed destination point and time
4. Taking delivery
The buyer must take the goods which are
delivered at the agreed destination point and
time
5. Transfer of risks
The seller is responsible for the goods until
they are available to connect at the end
destination port or terminal as agreed
5. Transfer of risks
The buyer must bear all risks of loss or
damage of their goods once they have been
offloaded at the agreed place of delivery
6. Costs
The seller must pay for:
the cost of transport (contract of carriage)
6. Costs
The buyer pays for all cost relating once the
goods are made available, as well
as import customs duties and taxes

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loading of goods at the place of origin
export clearance at origin
unloading the goods at place of destination
7. Notice to the buyer
The seller must notify the buyer that the
goods have been delivered at the place of
destination
7. Notice to the seller
The buyer must provide a clear time of
shipment and the port of destination
8. Proof of delivery
The seller must obtain proof of delivery at
their own expense, which is a document that
allows the buyer to pick up the goods
8. Proof of delivery
Must accept the seller’s delivery document
9. Checking
The seller must bear the cost of checking the
goods, quality control, measuring, weighing,
counting, packing of goods and marking.
If a special package (e.g. fragile goods) is
being shipped, the seller must inform the
buyer and have them agree any extra expenses
9. Inspection
Unless it’s a mandatory at origin, the buyer
needs to pay any pre-shipment inspection
10. Other
The seller must help in obtaining additional
information required by the seller
10. Other
Assist obtaining additional information
required by the seller
 DELIVERED AT PLACE UNLOADED (DPU) INCOTERM:
Previously named Delivered at Terminal (DAT), this Incoterm has been renamed Delivered at
Place Unloaded (DPU) because the buyer and/or seller may want the delivery of goods to occur
somewhere other than a terminal.
This term is often used for consolidated containers with multiple consignees, and it is the only
term that tasks the seller with unloading the goods. Seller clears the goods for export and bears
all risks and costs associated with delivering the goods and unloading them at the terminal at the
named port or place of destination. Buyer is responsible for all costs and risks from this point
forward including clearing the goods for import at the named country of destination.

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10. DELIVERED AT PLACE (DAP) INCOTERM:
The DAP Incoterm, or “Delivered at Place”, replaces the now outdated DDU Incoterm, or
Delivery Duty Unpaid, which appeared in the previous Incoterms edition, Incoterms 2000.
DAP is an Incoterm that states that the seller must make the goods available to the buyer at the
buyer’s chosen location at origin.
Under DAP delivery terms, the seller is not responsible for unloading the goods at destination or
for any customs-related costs, tariffs, taxes, fees, or duties that may apply.
The buyer is therefore responsible for all risks involved with processing the import customs
clearance and all applicable duties and taxes upon cargo arrival at destination.
Under DAP, the seller is responsible for most of the transportation process and leaves minimal
liabilities for the buyer. This makes it one of the two most popular Incoterms, the other
being Delivery Duty Paid (DDP), for sellers looking to differentiate themselves by offering high
levels of customer service to buyers.
The DAP Incoterm is versatile and can be used irrespective of the mode of transportation.
Seller’s obligations under the DAP Incoterm:
 Delivery of goods and documents required
 Packaging and wrapping
 Inland transport in the country of origin
 Customs handling fees at origin
 Origin charges
 International freight
 Destination charges
 Inland transport at the destination country
Buyer’s obligations under the DAP Incoterm:
 Payment of goods
 Customs handling fees at destination
 Payment of duties and taxes
 DAP insurance
 Cargo insurance is not an obligation for either party under the DAP Incoterm.
However, given the significant responsibilities and liabilities of the seller, most sellers exporting
under DAP often prefer to purchase insurance.

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This may just be to cover the portions they’re liable for. But the more likely scenario would be
for them to ensure the entire transportation from start to end.
When arranging insurance under DAP, make sure the insurance terms and conditions are
specified in the sales contract.
11. Delivery Duty Paid (DDP) Meaning: Delivery & Shipment
Terms
DDP is one of the Incoterms rules developed by the International Chamber of Commerce and is
quite widely used within international trade. DDP stands for “Delivered Duty Paid” which means
that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared
for import on the arriving means of transport, and ready for unloading at the named place of
delivery.
The seller bears all the costs and risks involved in bringing the goods to the place of destination,
has an obligation to clear the goods not only for export but also for import, to pay any duty for
both export and import, and to carry out all customs formalities. This rule may be used
irrespective of the mode of transport selected and may also be used where more than one mode
of transport is employed.
In all documentation, the DDP freight Incoterms is followed by the name of a place like DDP,
Grand Canyon Mall, because under this Incoterms rules, the named place is the place where
delivery takes place and where the risk passes from the seller to the buyer.
DDP Incoterms is usually used by a buyer who does not want to enter into any kind of transport
contract with any entity and would rather let the seller handle all these responsibilities right up to
their door. In DDP shipping, the seller has the maximum obligation as it involves the delivery of
the goods to the buyer at the agreed destination and in that sense may be considered as the
opposite of EXW which involves the buyer picking up the cargo from the seller’s door.
Selleris obliged to:
 Take care of all export clearance formalities at the origin including any and all export
permits, quotas, special documentation, etc. relating to the cargo
 Cover the cost of transportation from the packing area to the named place of delivery
 Arrange contracts of carriage with the various carriers up to the named place of delivery
including any on-carriages wherever it is applicable
 Ensure that all risks are covered up to the agreed place of delivery
 Ensure that the goods arrive at the destination as the risk and responsibility of
the seller ceases only when the cargo is at the agreed place of delivery

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 Arrange and pay for customs clearance formalities at the destination port(s), all customs
duties and VAT if applicable and all the charges of the carrier(s) till the agreed place of
delivery.
Buyer’s activities are limited to:
 Taking care of any further movement from the agreed place of delivery
 Covering themselves for any risk and insurance past the agreed place of delivery
 This agreed place of delivery could be the warehouse of the buyer or their agent
Under DDP Incoterms neither the buyer nor the seller is obliged to insure the goods and this
insurance requirement is not specifically covered by the Incoterms rules. This crucial issue must
be discussed and agreed upon as part of the sales contract and terms of sale.
From above, although it may seem that the buyer has it easy and can take it easy, this may come
at a cost. The reason is that in the case of a DDP shipment, the buyer depends totally on
the seller to everything from origin door to destination door. This means that the buyer could be
at the mercy of the seller in terms of costs as there could be certain costs that the buyer may be
better equipped to procure than the seller. For example, a buyer may have better rates and
services at the destination than the seller who is sitting somewhere else and may need to use the
services of an agent to do all the work on their behalf.
The buyer also needs to ensure that the seller can do the customs clearance and all other
formalities without any delays because at the end of the day it is in the buyer’s best interest to get
their cargo delivered on time. The buyer needs to remember that under DDP, although
the seller is doing all the work, the buyer might end up paying for all of this as the seller’s
product price will include all these charges.
If you are a seller on DDP Incoterms, then it is advisable that you check and ensure that you or
the agent that you may appoint at destinations can handle the import clearance at the destination
without incurring unnecessary costs. As a seller under DDP shipping terms, it may also be in
your best interest to ensure that you have a reliable freight forwarder or agent at destination who
does not take you for a ride and ensures that all costs are verified.
In some countries, the buyer may be eligible for certain tax benefits which could be returned to
you as a seller under DDP as agreed with your buyer.
If you are selling on DDP shipping terms, your obligation ends with the delivery of the goods at
the named place, cleared. But in some cases, you may need the assistance of the buyer in
securing some documents required for the local customs clearance. Remember though, you as
the seller are still liable for all costs and risks till the agreed place of delivery.

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Page | 23
If you are a seller trading under DDP Incoterms, you may need to take cognizance of CISG
(Contracts for the International Sale of Goods) or other corresponding provisions in the relevant
national Sale of Goods Acts. These provisions may provide you with some relief from any
unforeseen or reasonably unforeseen circumstances that may prevent you from delivering on
DDP shipping terms. As with all Incoterms, it is important that the point of delivery is expressly
discussed and agreed between the buyer and the seller.
Conclusion:
Because of the common adoption of Incoterms into international sales agreements, a familiarity
with the terms is of great value to counsel who are engaged in international commercial law. The
terms provide a prudent and efficient way to allocate the duties and risks in agreements.
Incoterms can make international trade easier, but one should consider several issues when
choosing an Incoterm. Incoterms should be used only for sales of goods and not for services.
Another issue is the transport method used and one should consider which term is most suitable
from a customer-service point of view. Thus, parties should take great care to recognize their
objectives under the sales agreement, appreciate the underlying law that will govern the
agreement, and adopt the appropriate Incoterm to meet party objectives by explicitly identifying
it in the contract.
However, while the terms are easy to use, they are equally easy to misuse, and the use of an
improper term may result in unintended consequences to the transaction One also must be careful
to consist of conditions and terms which are not defined by the Incoterms. If one party changes
the usual Incoterm normally used by the seller or buyer, one should be aware of changes that will
affect the costs like insurance. Therefore, it is prudent for international trade partners to choose
and negotiate with care the right Incoterm. As mentioned above, Incoterms offer parties an
opportunity to clarify their roles by using internationally accepted contractual standards and thus
reduce the possibility for cross-cultural misunderstandings, contractual ambiguity and
disagreements.

INCOTERMS
Page | 24
References:
https://www.linbis.com/incoterms/
https://www.pierobon.org/export/ch11/exwr.htm
https://www.incotermsexplained.com/the-incoterms-rules/incoterms-2010-rules/
https://www.tradefinanceglobal.com/freight-forwarding/incoterms/
https://internationalcommercialterms.guru/incoterms-fob/
https://internationalcommercialterms.guru/incoterms-cfr/
https://internationalcommercialterms.guru/incoterms-cif/
https://www.xeneta.com/blog/incoterms#index
https://www.tradefinanceglobal.com/freight-forwarding/incoterms/dat-delivery-at-terminal/
https://freighthub.com/en/blog/ddp-delivered-duty-paid-incoterm/

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