EXW or “Ex Works” rests all responsibility for delivery of the goods on the buyer. The consignor has minimal responsibilities – to prepare the goods for dispatch at the warehouse or elsewhere. The consignee organizes the entire transportation chain:
- hiring of transport;
- loading;
- insurance;
- accompaniment;
- customs clearance.
The buyer bears all risks for cargo transportation.
In the case of FCA or Free Carrier the seller loads the goods, prepares customs clearance and pays charges. The place of delivery the goods are indicated in the contract. Changes to Incoterms 2020 allow the buyer to transfer the bill of lading to the consignor through the carrier after accepting the goods on the matine vessel. This speeds up the receipt of payment for the delivered products. CPT or “Carriage Paid To” establishes that the seller undergoes export customs clearance and hands over the goods to the carrier. Thereafter, responsibility for motor freight transportation, sea and air delivery passes to the consignee. The buyer in a port accepts and unloads the goods, gets customs clearance and delivers to the destination. CIP or “Carriage and Insurance Paid To” are identical to the CPT terms, but the seller is obliged to insure the goods to the point of transfer to the buyer. The new Incoterms rules increased the insurance coverage. It should now be equal or exceed 110% of the delivery amount. The increase is due to the fact that according to CIP standards, industrial equipment and mechanisms are usually transported by multimodal schemes. The insurance should cover the risks of damage and loss of production machines. DAP or “Delivered at Place” means that the seller pays for the cargo transportation to the point specified in the contract in full. The supplier also processes customs procedure of release in export mode. The responsibility for the goods passes to the buyer at the time of transfer at his own warehouse or elsewhere. The unloading and customs clearance procedure is also assigned to him.
DPU or “Delivered at Place Unloaded” is a fully organized and seller-paid delivery. The risk passes to the buyer after the unloading of goods at the designated place. The consignee only makes an import transaction at customs and accepts the goods. In this way, turnkey cars are delivered from Korea. The DPU basis in Incoterms 2020 replaced DAT (“Delivered at Terminal”) which was in the 2010 rules. The difference in terms is purely technical – the word “terminal” is replaced by “place”. DDP or “Delivered Duty Paid” expands the seller's responsibilities over the previous condition:- loading of goods;
- delivery to the destination;
- export and import customs clearance;
- unloading.
The consignee only accepts the goods. Before the adoption of Incoterms 2020, it was expected that DDP would be divided into DTP and DPP – delivered duty paid to the terminal or to the address. But the International Chamber of Commerce has skipped this point so far.
Regulation for maritime and inland water transport
CIF or “Cost, Insurance and Freight” completely repeats the terms of CIP, but is valid for maritime transport. When concluding a CIF contract, the minimum insured amount is usually applied. The adopted Incoterms 2020 did not change the norms. The International Chamber of Commerce leaves the amount of insurance at the discretion of partners.
CFR or “Cost and Freight” means that the seller goes through export customs clearance, pays charges and loads the goods on board. The responsibility then passes to the buyer.
The freight cost is paid by the supplier. But he is not obliged to insure the goods. The buyer is responsible for unloading, customs clearance, and delivery to the final destination at the port of arrival.
FOB or “Free on Board” limits the seller's obligations by delivering the goods on board and completion of customs formalities. The goods should not only be on the ship, but also be properly placed on the deck or in the hold. That is, the supplier pays for the loading. In this way, groupage cargo is usually organized. FAS or “Free Alongside Ship” assumes that the seller get customs clearance for goods and delivers them to the ship. This is where the supplier's responsibility ends. Loading is paid by the buyer.
