The name “Incoterms®” is the acronym of International Commercial TERMS, that is international commercial terms, registered by ICC ( international Chamber of Commerc) in 1936. In that year, indeed, the first edition of the rules for internation commerc was published, the Incoterms rules, after was reviewed and developeded. The last update has become law in 2020.
Inconterms® rules, born to facilitate exchange’s politics, are universal and they guarantee clarity and predictability of the management of international commercial relationship.
The incoterms®, beyond to facilitate all commercial operations in the world, regulate exactly some fudamental perspectives of relationship between the seller and the buyer:
- Transport costs
- Risk of the loss or damage of the merchandise in transit
- Insurance responsability ( in the case of CIF o CIP)
- Customs Fulfillment export or import, payment of duties and informations related to assistance for payment of customs fulfillment.
For example, we can consider an sales’s operation between a Chinese company ( the exporter) and an Italian company ( the importer). When we have established characteristics of product and its cost, we must define who pay for the transport from the place of departure to destination, which are customs fulfillment and who must pay those duties in the export and import phases, if this merchandise is covered by adequate insurance policy from departure place to the destination. Adding Incoterms® and a place ( for example CIF Genoa port) a series of conditions are automatically clarifyed . This will permit to understand if the declared price of merchandise includes the product’s cost, the transport’s cost and also insurance policy, that generally is stipulade to cover risks of the transfer of necessities from seller’s warehouse to buyer’s warehouse.
Later on a list of the main Incoterms®’ acronyms applied to transport by sea or river:
- FAS Free Alongside ship
- FOB Free On Board
- CFR Cost and Freight
- CIF Cost Insurance and Freight
Later on a list of appropriated Incoterms’s® acronyms for all types of transport:
- FCA Free Carrier
- CPT Carriage Paid to
- CIP Carriage and Insurance Paid to
- DAT Delivered At Terminal
- DAP Delivered At Place
- DDP Delivered Duty Paid
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For the importers and the exporters in all of world some of these acronyms are clear obligations. The use of the Incoterms®, however, isn’t expected by the law: they have been insituted by ICC, that is a private not governmental organism, with the purpose to simplify commercial business deals. They aren’t obligatory and strictly needed by the contracts’ laws: the parts can establish rules and consider different clauses for the transport and the customs procedures. It is evident that, where is an explicit reference to the Incoterm, the obligations will be understandable for each negotiator.
During the years there was different updates of Incoterms’® rules: the most recent are Incoterms® of 2010, Incoterms of 2015 and Incoterms® of 2020.
The increase and the changes in the international commerce have brought to insert new Incoterms’® acronyms or to insert next in- depth analysises. But, if in the contract there is a reference to ancient Incoterms, they are already valid for permitted use.
This article isn’t complete but it has contributed to explain Incoterm’s® terminology: but there are different evaluations about import export business deal. To trust in a consultant, which can evaluates different asppects with expertise, can be decisive to guarantee the success of business deal.
What are and which are the difference in detail
In other words, Incoterms permit to establish throughout their acronyms, employers who: obligations, costs, risks there are between sellers and buyers or between exporters and importers.
Which are these obligations, costs and risks:
- Insurance responsabilities
- Transport’s costs
- Payment of customs duties in import and export
- Risk for damages or loss caused by merchandise.
We have already said that there are some Incoterms® particularly right for transports by water, as follows there are definitions:
FAS (Free Along the Ship)
The seller deliver merchandise near pier of port indicated as departure’s port, also near the side of ship or other means of transport.
FOB (Free on the board)
Point at price of merchandise includes transport up to the ship, therefore the seller must execute customs operations in export; the passage of risks from a person to others happens when merchandise is on the ship indicated by the buyer and in the fixed port.
CFR (Cost and Freight)
Point at in the price are included merchandise’s cost and transport’s cost, which will stipulate with the seller. The risk for merchandise’s damage moves from the buyer to the seller when merchandise is on the ship.
CIF (Cost, Insurance and Freight)
Point at the seller delivers when merchandise is on the ship ( exactly when it has overtaken the bulwark) in the port of shipping. For possible damages at merchandise or losses, the seller stipulates a maritime insurance policy with varying clauses ( generally “ from seller warehouse to buyer warehouse).
Remains in relation to the seller all customs obligations in export, wherease obligations in import are in the charge of importer.
The incoterms® As above are particularly appropriate for transport by sea, wherease there are inconterms® used for other types of transport.
Incoterms® used for other types of transport are:
EXW (Ex Works)
This definition means that trasnfer of merchadise’s property takes place at the moment in which the seller makes available in the established place, which could be a warehouse or factory.
The delivery is considered realized with only the declaration of the merchandise’s availability from the seller, not with the real cargo of the merchandise on whichever means of transport. All costs of transport and potential customs costs in export and later in import, are at the expense of buyer.
FCA (Free Carrier)
In this case, the delivery of merchandise happens, when the seller delivers merchandise in the established place ( also own warehouse), or when the merchandise has putted on the means of transport of the seller to designated place. The tird hypothesy is when merchandise is made available of a courier designated by buyer.
CPT (Carriage Paid to)
The delivery happens when merchandise is delivered to a courier or to other appointed person and the seller must pay expense of transport up to the destination.
CIP (Carriage and Insurance paid to)
The seller, also in this case, adheres to his obligation when there is the delivery of merchandise to courier. In the planned place e not when it arrives to destination.
The seller must pay transport up to the destination, but he also must stipulate an insurance policy for possible damges.
DAP (Delivered at Place)
The seller is responsible for all risks and costs of transport up to the established destination, except customs duties in import. Merchandise is considered transferd when:
- The Merchandise is in the established place at buyer disposal
- The Merchandise is ready to be unload by buyer
- It is in the place established by the seller and the buyer.
DDP (Delivered Duty Paid)
The seller must deliver the merchandise to buyer, when it is ready to be unload from means of transport in the established place or in the established location in the place.
Only in that moment the seller transferts the risk, the seller takes charge of all costs concerning customs export or import duties.
DPU (Delivered at Place Unloaded)
The seller deliveries the merchandise to buyer when it is unload from means of transport and it is made available to the buyer in the established place or in a point of established place.
Until that moment, all risks are in the seller care. Therefor the applications of the Incoterms are a lot of and each one can be used for some or other needs.
Gli 11 Inconterms® da diversi punti di vista :
Dal punto di vista delle obbligazioni generali
- EXW, FCA, CPT, CIP, DAP, DPU, DDP, FAS, FOB, CFR, CIF
Il venditore deve provvedere alla fattura e a tutti gli eventuali documenti stabiliti nel contratto di vendita, questi documenti possono essere in formato cartaceo o in formato elettronico, laddove non esiste alcuna indicazione in merito, secondo le consuetudini.
Dal canto suo, il compratore è tenuto a pagare il prezzo stabilito nel contratto di vendita (sales contract). Inoltre, laddove debbano essere presentati dei documenti possono essere in formato cartaceo, elettronico o, in mancanza di indicazioni, secondo le consuetudini.
Dal punto di vista dell’assicurazione
- EXW, FCA, CPT , FAS, FOB , CFR
In queste 5 modalità, il compratore non ha nessun obbligo nei confronti del venditore di stipulare un’assicurazione.
- CIP, DAP, DPU, DDP, CIF
In questo caso, il compratore non ha nessun obbligo nei confronti del venditore, ma qualora questi ne faccia richiesta il compratore è tenuto a dare tutte le informazioni necessarie affinché
Il venditore possa stipulare un’assicurazione.
Dal punto di vista del controllo, del packaging e della marcatura delle merce
Tutte queste operazioni e costi sono a carico del venditore per tutti gli 11 Incoterms® che deve agire e porre in essere quanto necessario per completare la consegna.
La merce deve essere, nella maggior parte dei casi, imballata dal venditore, a meno che non si tratta di una vendita alla rinfusa. Ovviamente, il venditore rispetterà quanto stabilito per il packaging e la marcatura in sede di contratto con il compratore.
Tutte queste obbligazioni riguardano solo il venditore, mentre il compratore non ha alcun obbligo, se non diversamente stabilito dalle parti.
This short article doesn’t want to be complete about Incoterms, that are a registered trademark by ICC to which postpone for whatever in-depth analysis.
We postpone to official publication of Incoterms of 2020 for all in depth analysises.
For informations related applicatyion of the trademark and copyrit we pospone to follow link:
“The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterm® Rules may be obtained from the ICC website [insert hyperlink]. Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. “
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterm® Rules may be obtained from the ICC website iccwbo.org.