What are Incoterms?
Since 1936, the Incoterms of the ICC, the International Chamber of Commerce, have regulated clearly and uniformly the worldwide rights and obligations between seller and buyer, or exporter and importer respectively. Although they do not possess status as laws, the Incoterms have facilitated their formulation and given both sides legal certainty. A revised version has been in force since 1 January 2011. We explain to you the most important changes and give you some handling tipps as well as more detailed information on some of the clauses. There is also an overview available for download.*
*(all data without engagement)
Current version (2010) vs. the previous version (2000)
- The revised version that has been in force since 1 January 2011 contains only eleven instead of the original 13 clauses.
- These were divided into two categories:
- The EXW, FCA, CPT, CIP and DDP clauses that apply to all types of transportation and - new - DAP and DAT which replace DEQ, DAF, DES and DDU.
- FAS, FOB, CFR, CIF – exclusively for sea and inland navigation.
- DAP replace DAF, DES and DDU.
- DAT replaces DEQ.
- With CIF, CFR and FOB, the risk is no longer transferred at the ship’s railing (“suspended”) to the buyer, but instead when the goods are deposited on the ship’s deck.
- With the C-clauses there is a new obligation for the buyer to provide insurance-related information.
Facts you ought to know when using the Incoterms
- Incoterms are legally binding only if they have been properly agreed to.
- Modifying them jeopardizes legal certainty.
- The clauses are suitable solely for business-to-business transactions.
- The new Incoterms can also be applied in national trade.
- The Incoterms 2000 and older versions retain their validity; therefore, it is recommended that one specify the version in use.
- For container shipment, the ICC recommends using FCA instead of FAS and FOB, and CPT and CIP instead of CFR and CIF.
- Instead of delivering DDP, the sender had rather deliver DAP or DAT and add "including import customs clearance" or "excluding import customs clearance" as DDP represents the maximum obligation for sellers. The latter bears all costs and risk to the destination of the goods and is obliged to clear them for export and import, paying all the export and import fees as well as completing the customs formalities. Using DAP or DAT and adding the term "including import customs clearance", however, he only has to pay for any costs incurring at the border .
- For the buyer, using the clause "FCA named place of delivery" is preferable over EXW as the EXW clause represents the minimum obligation for sellers. Unlike the use of FCA, with EXW the seller has no obligation to the buyer to load the goods or to clear them for export. If the seller does do the loading, under the EXW clause, the buyer pays the risk and expense. Using FCA, however, the seller, too, stands to benefit from clearer rules as regards his liability, costs and the extent of his duties.
Explanations on clauses DAP, DAT, DDP and EXW
- DAP: The DAP (delivered at place) clause regards the delivery as complete when the goods are placed, ready for unloading by the buyer, on the arriving means of transportation at the designated destination. The seller bears all the risks that arise in connection with the transport to this place. It is thus more of a general clause in which the destination is defined as accurately as possible.
- DAT: According to the DAT (delivered at terminal), the seller delivers the goods as soon as they are unloaded from the arriving means of transportation and made available to the buyer at a named terminal in the designated port or destination. "Terminal" can be any place, roofed or not. Whether it be a pier, a storage hall, a container depot or a highway, railway or air freight terminal.
- DDP: DDP (delivered duty paid) represents the maximum obligation for sellers. The latter bears all costs and risk to the destination of the goods and is obliged to clear them for export and import, paying all the export and import fees as well as completing the customs formalities.
- EXW: The EXW (ex works) clause represents the minimum obligation for sellers. Unlike the use of FCA, with EXW the seller has no obligation to the buyer to load the goods or to clear them for export. If the seller does do the loading, under the EXW clause, the buyer pays the risk and expense.