With Freightfinders, you get a fast and easy to understand overview of the Incoterms 2010 by the ICC (International Chamber of Commerce). These international rules of commerce harmonise and simplify contractual provisions between the byer and seller .
- What is Incoterms
- Classification of the Incoterms 2010
- Incoterms 2010 overview
There has been issued a new version on the first of January 2020 – the Incoterms 2020. The Incoterms 2010 are still valid and are still in use, if both parties agree on it.
This article is for first information only. When designing a contract, please be sure to consider the exact wording of the ICC Incoterms 2010.
What is Incoterms
During import and export, you frequently stumble over abbreviations like FCA, EXW or DAP. These represent the different clauses of Incoterms 2010, which are indispensable in international trade. These are rules that define the obligations of sellers and buyers for the transport of the goods and thus unify them. That is why Incoterms, which are issued by the International Chamber of Commerce (ICC), have a very high priority in foreign trade.
Today, Incoterms are the standard and are applied in contracts between buyer and seller. Only when they are referred to in the contract, they become effective. The Incoterms are transport-agreements, which clarify questions such as “who bears the costs”, “who has which responsibility”, and “who bears the risk when”. In addition, the exact transition point is also defined, which is usually mentioned in the contract next to the abbreviation of the respective Incoterms. The Incoterms 2010 clauses were reduced from 13 to 11. The Incoterms DDU, DAF, DEQ and DES have been removed and the Incoterms DAP and DAT have been added instead.
In September 2019, there have been some adjustments, which have been issued in a new version of these trading rules. The Incoterms 2020 are in use since the first of January 2020. However, the Incoterms 2010 can still be used, if both parties agree. It is very important to then state in the contract, which version of the ICC Incoterms are being used.
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Classification of the Incoterms 2010
The Incoterms 2010 can be divided into two groups. On the one hand, there are the "Rules for any Mode of Transport", which are the general clauses. These include the Incoterms DAT, DAP, DDP, CPT, CIP, FCA and EXW. On the other hand, there is a group of Incoterms that are used for sea and inland waterways. These "Rules for Sea and Inland Waterway Transport" include the Incoterms FOB, FAS, CFR and CIF.
In addition, the Incoterms 2010 are divided into four groups:
- E-Clause: In this clause, the seller has only a minimum obligation, as they make the goods available on their own premises or at another agreed place. Hence, the buyer bears all risks and costs for the transport. This clause includes the EXW Incoterm 2010.
- F-Clause: Here, the seller passes the goods to a carrier, who was previously named by the buyer and thus the seller does not bear the costs for the main transport. The Incoterms FCA, FAS and FOB can be found in this group.
- C-Clause: This clause includes Incoterms, which stipulate that the seller will take over the costs of the transportation contract without covering the liability for loss or damage, as well as additional costs. The Incoterms CFR, CIF, CPT and CIP are included in this clause.
- D-Clause: In this clause, the seller takes over the costs and risks during the whole transport up to the arrival at the destination. This clause includes the Incoterms DDP, DAP and DAT.
Incoterms 2010 overview
Here, you will find the individual Incoterms 2010 shortly explained. However, before applying them in a contract, the original text of the perspective Incoterms clause should be considered, since these are only summaries which are intended to facilitate the understanding.
EXW Incoterms 2010 – Ex Works
In the Incoterm 2010 EXW ("Ex Works"), most of the responsibility lies with the buyer. They must take care of the transport, the costs, and the insurance. The seller, on the other hand, must provide the buyer with the goods, which can be picked up at the place of departure. The departure location is usually the plant itself, the factory or a warehouse.
FCA Incoterms 2010 – Free Carrier
The Incoterm FCA ("Free Carrier ") states that the goods are delivered by the seller to the carrier or another person designated by the buyer. This is done either at the seller's place or at a place named in the contract. The 2010 Incoterm FCA stipulated that up to this designated place, the costs and risks lie at the seller.
CPT Incoterms 2010 – Carriage Paid to
The Incoterm 2010 CPT ("Carriage Paid to") determines that the goods are delivered by the seller to the carrier or a person named by the seller. The place of delivery was previously agreed, if necessary. CPT Incoterm 2010 also states that the transport costs, required to deliver the cargo to the place of delivery, must be covered by the seller.
CIP Incoterms 2010 – Carriage and Insurance Paid
Incoterm 2010 CIP ("Carriage and Insurance Paid") says that the seller must supply the goods at a previously agreed place (if a place has been determined) to the carrier or to a person named by the seller. The CIP Incoterm of 2010 also states that the transport to this place must be financially covered by the seller. In addition, the seller must cover insurance against the buyer’s risk of loss or damage. If the buyer wishes a larger coverage than agreed in the Incoterm CIP, they can make an agreement with the seller or cover an additional insurance at their own expense.
DDP Incoterms 2010 – Delivered Duty Paid
The Incoterm 2010 DDP ("Delivered Duty Paid") determines that the goods’ customs clearance for import and export has been paid for by the seller. This means that all required customs formalities have been fulfilled and all customs duties and associated costs during import and export have been covered by the seller. In addition, the 2010 Incoterm DDP says that the seller bears all costs and risks associated with the transport to the destination.
DAP Incoterms 2010 – Delivered at Place
The Incoterm 2010 DAP ("Delivered at Place") stipulates that the goods are then delivered, if they have been provided ready for unloading to the buyer on the designated means of transport in the previously named terminal and port or another determined place. The seller bears all risks and costs during the transport of the goods up to the date of arrival at the place of destination.
DAT Incoterms 2010 – Delivered at Terminal
The 2010 Incoterm DAT ("Delivered at Terminal") states that the seller delivers as soon as the discharge has taken place from the means of transport and the goods are made available to the customer. This can be at an agreed terminal in a port or a place, for example, a quay, container depot, a warehouse or an air freight, rail or road terminal. DAT also determines that the seller bears all risks and costs up to this point. However, the customs duties for importation are excluded from these costs.
FAS Incoterms 2010 – Free Alongside Ship
In the Incoterm 2010 clause FAS ("Free Alongside Ship”), the seller delivers as soon as the goods are placed in the designated port of shipment alongside the ship determined by the seller. At this exact moment, the risk is also transferred from the seller, as the buyer is now responsible for the loss and damage of the goods. Moreover, the Incoterm 2010 FAS determines that the buyer will bear all costs from this point on.
FOB Incoterms 2010 – Free on Board
The 2010 Incoterm FOB ("Free on Board") states that the seller delivers the goods on board the ship designated by the buyer in the agreed port. The seller must clear the goods for export. As soon as the goods have arrived aboard the ship, the responsibility for the risks and all costs is transferred from the seller to the buyer.
CFR Incoterms 2010 – Cost and Freight
With the 2010 Incoterm CFR ("Cost and Freight"), the seller supplies the goods to the named ship. From this point on, the risk of loss and damage is transferred from the seller to the buyer. However, the costs for the transport to the port of destination are still covered by the seller.
CIF Incoterms 2010 – Cost, Insurance and Freight
The 2010 Incoterm CIF ("Cost, Insurance and Freight") is similar to the Incoterm CFR. Here, too, the seller delivers the goods onto the ship or procures the goods already so delivered. The risk of loss and damage is transferred to the buyer as soon as the goods are on board the vessel. According to Incoterm 2010 CIF, the seller bears the necessary costs until arrival at the port of destination. Furthermore, the latter must cover a transport insurance with a minimum coverage. If the buyer wishes to have a higher insurance coverage, this must be agreed upon with the seller or an additional insurance can be covered at their own expense.
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