Terms of international transport
CPT (Carriage Paid To) - Incoterms.
Under the terms of CPT, the seller bears the costs of freight and transportation to the destination, and the buyer pays for shipping insurance. Risks associated at the time of delivery move to the first carrier.
Applicable to all modes of transportation, including multimodal transport.
FOB (Free On Board) - International trade term, Incoterms.
FOB has certain conditions. According to them, the seller's obligations include delivery and loading of goods on the vessel indicated by the buyer. Also, the seller pays all costs.
All the risks are imposed on the seller, until the goods cross the board. From this point the risk shall pass to the buyer.
Notes on conditions of FOB in the contract mean that the seller pays for the delivery of goods and loading on board. In addition, it is required to clear the goods from customs duties (in export shipment).
The buyer has the following obligations:
1) insurance;
2) the costs of unloading;
3) transportation to the point of destination.
FOB is used exclusively for the carriage of goods by sea or inland waterway.
EXW (Ex Works) – Incoterms
Notes on EXW conditions in the contract means that the seller's obligations are minimized, his/her responsibility ends when the goods are transferred to the buyer or the hired carrier delivers them to the seller's premises (shop, factory, warehouse, etc.).
All risks and costs are paid for by the buyer:
1) exportation of goods from the warehouse;
2) transportation;
3) customs clearance;
4) loading of goods on trucks, etc.
EXW cannot be applied if the buyer is not able to perform directly or indirectly the export formalities.
These conditions apply to all modes of transport, including multimodal transportation.
FCA (Free Carrier) - Incoterms.
It means that the seller fulfills his/her obligation to deliver by providing exempted from duties goods to the buyer or its designated carrier.
Specified site of delivery affects the obligations of loading and unloading the goods. If delivery occurs at the seller's premises, the responsibility for unloading is with the seller. If delivery occurs at any other place, the seller is therefore not responsible for loading.
Carrier can be any person who, according to the contract of transportation, undertakes to implement the transportation of cargo.
The buyer has the right to appoint any person to receive the goods who is not a carrier. In such circumstances, the seller fulfills his obligation to deliver as soon as the goods are handed over to that individual.
FCA terms may apply to any form of transport.
FAS (Free Alongside Ship) - Incoterms. It means that the seller bears the costs of delivery to the port of departure.
The seller's obligations are considered fulfilled when the goods are placed alongside the vessel on the quay or in lighters (at the named port of shipment).
The buyer covers the costs of:
1) loading;
2) freight (chartering) of vessel;
3) insurance;
4) unloading;
5) shipping to the destination.
Risks from the seller to the buyer transfer at the time of delivery to the dock port of loading.
FAS terms of delivery are used exclusively for the transportation of goods by sea or river routes.
CFR (Cost and Freight) - Incoterms.
Under the terms of CFR, the seller is obliged to:
1) to pay for delivery of goods to the port;
2) to pay for loading and freight of vessel;
3) to provide customs clearance for export of goods;
4) to pay the fees.
Buyer pays for insurance, as well as additional costs after the goods pass the ship's rail. All the risks then pass to the buyer.
CFR is used exclusively for the carriage of goods by sea or river routes.
CIF (Cost, Insurance and Freight) - a commercial
term of Incoterms.
Under the terms, the seller has performed the delivery as soon as the goods are loaded on a ship in the port of shipment. In this case, the seller will cover:
1) freight;
2) costs of transportation;
3) insurance.
For CIF conditions the seller must have or obtain insurance. This insurance policy allows the transfer of responsibility to cover by insurance companies the risks associated with the delivery of cargo. Insurance is required to cover, at a minimum, provided for in the contract of sale price +10% (i.e. 110%) and shall be made in the currency of the contract of sale.
The seller's responsibility ends once the goods have been delivered to the port of the buyer and accepted by the freight forwarder hired by the latter.
CIF terms of delivery are used exclusively for the transportation of goods by sea or river routes.
CIP (Carriage and Insurance Paid to) - Incoterms. It means that the seller must deliver the goods to the named carrier.
Expenses of the seller include transportation of goods to the named destination, customs procedures for export of goods and insurance with minimum coverage.
The seller's responsibility ends after delivery of the goods to the carrier which has been specified by the buyer. If there are several carriers, the responsibility ends after the delivery of the goods to the first carrier.
Buyer assumes all risks and any additional costs occurring after the goods have been delivered.
Applies to all modes of transport, including multimodal transport.
DAT (Delivered At Terminal) - a new term of Incoterms.
Under DAT terms, the seller is responsible for all costs and risks involved with transportation of the goods and unloading at the terminal, including any fees to export from the country of origin.
The seller fulfills obligations when the goods are unloaded from the arriving vessel and made available to the buyer at the agreed terminal of the place of destination.
“Terminal” is any place, including air/car/rail terminal, wharf or warehouse.
Under DAT terms, the seller is obliged to fulfill export customs procedures for export of goods. But carrying out procedures for the import or paying for anything (customs formalities for the import of goods, import duties) is not the seller’s responsibility.
Applies to all modes of transport, including multimodal transport.
DAP (Delivered At Point) - Incoterms.
DAP means that the seller has fulfilled his/her obligations to deliver, after having passed over to the buyer the goods that are ready for unloading at the named place of destination.
DAP terms of delivery mean the seller is obliged to bear all costs and risks involved with transportation of the goods to the destination, including any fees to export from the country of origin.
Under DAP terms the seller is obliged to fulfill export customs procedures for export of goods. Customs formalities for the import of goods, payments of import customs duties or the performance of other customs procedures for import does not concern the seller.
DAP refers to any means of transport, including multimodal transport.
DDP (Delivered, Duty Paid) - Incoterms.
The seller must deliver the goods to the named destination. All the risks and the costs of delivering the goods (taxes, fees, etc.), as well as customs clearance are the responsibilities of the seller.
As soon as the cargo is in the buyer's country, the responsibility shifts to the latter.
DDP applies to any form of transport, including multimodal transport. Multimodal transport is a transportation of goods under a single contract, but carried out by at least two modes of transportation.
More clearly Incoterms are described in the picture.
