PLEASE NOTE: THE INCOTERMS 2010 ARE OBSOLETE. HERE YOU WILL FIND THE INCOTERMS 2020
It is not always easy to determine which Incoterm to use. If you sell goods to a customer (usually abroad), you agree on the delivery terms with him. For the sake of transparency, international agreements have been made about this, which are laid down in the Incoterms. These Incoterms are renewed or adapted to the new circumstances every 10 years.
The most commonly used Incoterms are currently the Incoterms 2010.
Among others, the following questions are answered in the Incoterms:
What are the obligations of the buyer and seller?
Who takes care of the transport? And until where?
When are the risks transferred to the other party?
The so-called “Critical Point” is important. At this point the responsibility shifts from the buyer to the seller.
All Incoterms 2010 are explained individually in the diagram and question table below. Here you can easily determine what is a favorable incoterm for you.
A tip from us: be careful with the use of DDP in countries where you do not know the rules. If you sell a machine to Guatemala and you do not know how much import duties have to be paid in Guatemala, this incoterm obliges you to also pay the import duties. Then you may be faced with strange surprises. Unfortunately, many companies have already had negative experience with this.
Many sellers or exporters say they deliver Ex Works, but often this term is confused with FCA - Free Carrier. The Ex Works delivery condition obliges the seller to produce the goods and have them ready in the warehouse. No more. Put simply, you sell the goods and say to the buyer: come and pick them up, they are in the corner of our warehouse. The so-called “critical point” here is therefore the moment when your buyer has sold the goods to the buyer and makes them available. The customer is therefore responsible for the preparation of the consignment note, any export or customs documents and more importantly: must load the goods himself. The transport must therefore also be arranged by the buyer and the driver must start loading the goods himself in your shed or warehouse.
You can imagine that this entails quite a few risks. What if the driver damages other of your goods during loading? How can you prove that the goods are being taken to a specific destination? Who is the carrier? Are the goods properly secured in the trailer? How are the goods invoiced to your customer, with or without VAT reverse charge? And how can you demonstrate whether these goods actually cross the border?
If you do not want to arrange the transport and still want to serve your customer properly, we are in favor of the Incoterm FCA - Free Carrier. We strongly advise against using the Incoterm Ex Works for international transport!
FCA was also referred to as FCR in the previous Incoterms. With this Incoterm, most of the responsibility rests with the purchasing party. Free Carrier / Freight to first carrier actually says that the exporter takes care of the preparation of the bill of lading and any clearance and export documents and the loading of the goods into the truck or container from the agreed point. This is often the warehouse or warehouse of the supplier. The “Critical Point” is located here when the goods are loaded and secured in the trailer and the driver has signed the bill of lading for receipt of the goods. The buying party takes care of the transport and is from that moment also responsible for the insurance.
With this Incoterm, the supplier has more responsibilities. The seller says to deliver the goods to an agreed point. This is often the warehouse of the buyer or his customer. The buying party is responsible for any insurance. You deliver the goods when you have delivered them to the agreed location. You must therefore also prepare the consignment notes, arrange customs clearance and, as an extra service, have any export documents drawn up.
We are not such a supporter of this Incoterm for a high commodity value, as it can cause a discussion with your customer if the goods arrive damaged. After all, the selling party does not have to take care of the insurance of the goods. It is better than choosing the Incoterm CIP.
This CIP Incoterm is equal to CPT, with the major difference that the supplier or selling party not only arranges the transport, but also provides insurance for at least the value of the goods and delivers the goods to the agreed location of the purchasing party.
This Incoterm is widely used for cross-EU transports. For example, if you have to deliver in Russia or Turkey, this usually takes place at a Customs terminal at the instructions of the customer. The selling party arranges the transport, insurance, export documents and delivers the goods to the terminal that has been agreed. The customer must take care of the import duties in the country of destination and arrange the transport from the Terminal to the final destination. The terminal can also be a quay, warehouse, container, road, rail or air cargo terminal.
DAP is different from DAT, because you do not deliver to a (Customs) terminal, but directly to the agreed destination. As with DAT, the seller must take care of the transport, insurance and export documents. The “Critical Point” is here therefore when the goods arrive at their destination. The purchasing party must arrange for the unloading of the goods. A difference with DDP is that you do not have to pay the import duties in the country of destination. Be careful with this construction, because in some countries customs clearance must be done before continuing to the final destination in that country. If long waiting times arise during clearance (at the border, for example) because the buying party does not pay its import duties on time, you will pay for the waiting costs. So only choose this Incoterm if you have experience with transports to these countries. THAT is a better option if you are delivering to a customer in a new country outside the EU for the first time.
The DDP Incoterm places almost all responsibility on the selling party. You sell the goods to the customer and you even have to pay the import duties in the country of destination. Until you have cleared the delivery of the goods, you are responsible for insurance, transport and export and import documents. BEWARE OF THIS INCOTERM: You are responsible for import taxes in the destination country. Unfortunately, it still regularly happens that exporting parties deliver goods DDP to a customer outside the EU. This can cause significant problems as you have to pay the import duties. Strictly speaking, the customer does not have to do anything and just wait for you to deliver the goods. But how do you know what the import duties are for your goods in the country of destination? You must also arrange a customs agent in the country of destination who pays the import duties so that the truck or container can be cleared. In some countries this is a difficult task if you do not have a branch in that country. And despite the fact that we have a lot of experience with transport to exotic countries: we do not know how much import duties will have to be paid if you are going to transport screws to Kazakhstan…. Make sure you know what you are talking about if you are going to deliver goods outside the EU under the DDP Incoterm.
FAS is not much used internationally anymore, because a delivery “alongside” ship hardly occurs anymore due to the use of containers for overseas transport. However, it is used for goods that must be delivered for use on the ship itself. For example provisions for the crew. The seller arranges the transport, transport documents and possibly. export documents, insurance and bears the further risk until the moment the goods are unloaded next to the ship. At that moment the “critical point” moves from the seller to the buyer. The buyer pays for the rest of the transport of the goods.
FOB is widely used, you agree that the “critical point” is transferred from the seller to the buyer when the container is loaded onto the cargo ship. The seller prepares the documents, but the buyer pays for the ocean freight and takes care of the rest from the moment the goods are loaded on the ship.
This Incoterm is the same as FOB, with the difference that the seller also pays for the transport of the container (overseas) until the moment it is delivered to the desired terminal or port of the customer in the country of destination. The delivery of the goods is when the container is loaded on board the ship. The buying party therefore bears responsibility from that moment on and must take care of insurance itself. This is also a very common Incoterm for overseas transport.
This Incoterm goes one step further, the seller delivers the goods at the moment of loading on board the ship. However, in addition to the contract of carriage for the transport to the desired port or terminal, the seller also takes out insurance for damage or loss of the goods during transport. This insurance must at least cover the value of the goods.
The Incoterms of 2010 are outdated and therefore no longer up to date. The new variant are the incoterms of 2020
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