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EXW/FCA/CPT/CIP/DPU/DAP/DDP: Incoterms Guide

Views: 34     Author: Site Editor     Publish Time: 2022-04-06      Origin: Site

EXW Incoterms

The full name of EXW is Ex Works (...named place). It means that the seller delivers the goods from the factory (or warehouse) to the buyer. Unless otherwise specified, the seller is not responsible for loading the goods on the car or ship arranged by the buyer, nor going through the export declaration procedures. Buyer shall bear all costs and risks from delivery from Seller's factory to final destination. Suitable for any shipping method.


*When trading in EXW terms, the seller's risk, liability and expense are minimal. In terms of presentation, the seller only needs to provide a commercial invoice or electronic data, and if the contract requires it, it needs to provide a certificate that proves that the delivered goods conform to the contract.


Main obligations of seller and buyer:

Seller's main obligations:

(1) The goods that meet the requirements of the contract are handed over to the buyer at the time and place specified in the contract, and the risks and expenses are transferred from the seller to the buyer at this time;

(2) Provide a commercial invoice or EDI, and the proof that the delivery is in line with the contract (usually an inspection and quarantine certificate);

(3) Notify the buyer of the time and place of delivery.

 

Buyer's main obligations:

(1) Bear all costs and risks of receiving the goods at the seller's location;

(2) Handle the export, import license or other official documents of the goods at your own risk and expense;

(3) to transport the goods from the place of delivery to the final destination;

(4) Notify the seller of the time to pick up the goods within the valid period, otherwise bear all risks and expenses of the goods after the expiration of the period.

 

Points to note in actual business:

A. The point of delivery within the designated delivery location should be stated as clearly as possible after the EXW term. If no specific delivery point has been agreed upon at the named delivery location, and more than one delivery point is available, the seller may choose the delivery point that is most convenient to him.

B. The seller does not need to load the goods on any means of transport that will come to receive the goods, if it is more convenient for the seller to load the goods, FCA should be used.

C. When customs clearance is required, the seller does not need to go through export customs clearance procedures. The seller is only obliged to assist the buyer with export procedures at the buyer's request and at the risk and expense. Therefore, the term should not be used, but FCA should be used when the buyer cannot directly or indirectly go through the export formalities.

D. At the buyer's request and at the risk and expense, the seller is obliged to promptly provide or assist the buyer in obtaining relevant documents and information for import and export of goods, including security information. The buyer, on the other hand, has only limited responsibility for providing the seller with information about the export of the goods.

E. Under EXW terms, risk and expense are usually transferred together, or sometimes earlier. The premise of early risk transfer is that the goods have been "specified". The so-called specialization of the goods refers to brushing the nozzles on the packaging of the goods, marking them with appropriate marks, and giving notice to the buyer. This indicates that the shipment has been classified under this contract and is clearly separated from other shipments. If the goods are not specified, no early transfer of risk can occur.


FCA Incoterms

The full name of FCA is Free Carrier (...named place), that is, the delivery carrier (designated place). It means that the seller delivers the goods that have been cleared for export to the carrier designated by the buyer at the designated place to complete the delivery. In accordance with commercial practice, when the seller is required to cooperate with the carrier by entering into a contract, the seller may do so at the buyer's risk and expense.


Added Shipped Notation under FCA Cargo Carrier Terms

In the old version, the delivery of the goods was done prior to loading on board, and the carrier was obliged to issue a "shipped" or "received" bill of lading with a note on board, which would only be issued when the goods were actually loaded on board .


To solve this problem, FCA Incoterms® 2020 offers a new option: the parties to the transaction can agree that the buyer will instruct its carrier to issue and deliver the Bill of Lading to the seller before loading the goods on board.


The shipping company and the seller are obliged to transfer the bill of lading to the buyer through bank channels. The ICC is aware of the market demand, while noting that there is a theoretical inconsistency between the point of delivery envisaged by the FCA clause and the requirements of the on-board bill of lading.

Main obligations of seller and buyer:

Seller's main obligations:

(1) At your own risk and expense, obtain an export license or other official approval certificate, and go through all customs formalities required for the export of goods when customs formalities are required.

(2) Deliver the goods to the designated carrier at the time and place specified in the contract, and promptly notify the buyer.

(3) Bear all costs and risks before handing over the goods to the carrier.

(4) Provide the buyer with the usual documents for delivery at its own expense.

 

Buyer's main obligations:

(1) Sign a contract to carry the goods from the designated place, pay the relevant freight, and promptly notify the seller of the name of the carrier and relevant information.

(2) At your own risk and expense, obtain an import license or other officially approved documents, and go through all customs formalities required for the import of goods.

(3) Accept the goods and pay the payment according to the provisions of the sales contract.

(4) Bear all costs and risks after receiving the goods.


Points to note in actual business:

A. The seller's delivery obligations: The General Rules 2020 stipulates the seller's delivery obligations under FCA trade terms as follows:

(a) if the named place is the seller's premises, when the goods are loaded onto a conveyance provided by a carrier nominated by the buyer or by another person acting on the buyer's behalf;

(b) If the nominated place is not (a) but any other place, then when the goods are on the seller's conveyance, unloaded and handed over to the carrier or other person nominated by the buyer or by the carrier selected by the seller in accordance with A3 at the disposal of a person or other person. At the same time, it also specifically stipulates: if there is no specific delivery point agreed at the designated location, and there are several specific delivery points to choose from, the seller can choose the delivery point that is most suitable for its purpose at the designated location; if the buyer does not specify instructions, the seller may deliver the goods for transport depending on the mode of transport/or the quantity and/or nature of the goods.


B. The problem of risk transfer: FCA trade terms are different from the three trade terms of delivery at the port of shipment. Risk transfer is not bounded by the ship's rail, but by the freight carrier, which is not only the case under other modes of transportation other than sea transportation , even under the ocean shipping method, the seller completes the delivery when the goods are handed over to the ocean carrier, and the risk is transferred. However, under the FCA trade terms, the buyer is responsible for concluding the contract of transportation and notifying the seller of the carrier name and related matters in a timely manner, so that the seller can complete the delivery obligation on time and realize the transfer of risks. If the buyer fails to notify the seller in a timely manner, or due to the buyer's responsibility, the seller is unable to complete the delivery on time, is the subsequent risk still borne by the seller? According to the interpretation of the "General Rules 2020", in the event of the above situation, the buyer shall bear all risks of loss or damage to the goods from the specified date of delivery or the expiration of the time limit. It can be seen that under the FCA trade term, the boundary issue of risk transfer cannot be simplistically understood. Under normal circumstances, after the carrier controls the goods, the risk is transferred from the seller to the buyer, but if the seller is unable to complete the delivery obligation on time due to the buyer's responsibility, as long as "the goods have been officially assigned to the contract", then The timing of risk transfer can be moved forward.


C. Liability and Fee Issues: FCA Incoterms apply to all modes of transport including multimodal transport. Seller's delivery location varies depending on the shipping method used. Sometimes delivery must be made inland of the exporting country, such as a station, airport or river port. Regardless of where the delivery takes place, as explained in the General Regulations 2020, the seller shall, at its own risk and expense, obtain an export license or other official approval document and go through all customs formalities required for the export of the goods. With the development of my country's foreign trade, some export goods from inland provinces may not necessarily be delivered at the port of shipment, and more and more practices will be adopted for local delivery and settlement of foreign exchange documents. In order to meet this need, FCA trade terms usage will gradually increase.


In accordance with the FCA trade terms, the contract is generally concluded by the buyer to carry the goods from the designated place. However, if the buyer so requests, and the buyer bears the risk and expense, the seller may also appoint a carrier on behalf of the buyer and conclude the transportation contract. contract. Of course, the seller can also refuse to enter into a contract of carriage, if the refusal should notify the buyer immediately, so that the buyer can make other arrangements.


According to the FCA trade terms, the division of costs borne by the buyer and the seller is also based on the delivery of the goods to the carrier, that is, the seller bears the relevant costs before the goods are handed over to the carrier, and the buyer bears the costs after the delivery of the goods to the carrier. However, the expenses incurred by the buyer entrusting the seller to handle some matters within the scope of its own obligations, as well as additional expenses caused by the buyer's fault, shall be borne by the buyer.


CPT Incoterms

The CPT term Carriage Paid to (...named place of destination) means that the seller delivers the goods to its designated carrier and must pay the freight to deliver the goods to the designated destination, and the buyer bears all risks and risks after delivery. other fee. The term applies to all modes of transport, including multimodal transport.


Comparison of CFR and CPT

The similarities between the two are: the seller arranges the transportation of the goods, pays the relevant freight, goes through the export procedures, and submits the relevant documents; the risks are transferred after the goods are delivered to the carrier, and the risks of the goods in transit are borne by the buyer; is a contract of shipment.


The difference between the two is: First, the applicable modes of transportation are different. CFR is only applicable to sea transportation, which belongs to port-to-port transportation; CPT is applicable to various modes of transportation (including container transportation, multimodal transportation, sea, land and air), which belongs to Door to door shipping. Secondly, the places of delivery and risk transfer are different. CFR risk division is based on the cargo on board at the port of shipment, and CPT is based on the delivery of the cargo to the carrier. Finally, the documents submitted are different. CFR provides a bill of lading, which is a document of title, which can be transferred and sold; CPT usually provides a combined transport document, which is only a certificate for handing over the goods, which cannot be transferred or sold. From the perspective of development trend, CPT has a tendency to replace CFR.

Main obligations of seller and buyer:

Seller's main obligations:

(1) Place the goods specified in the contract under the control of the carrier designated by the buyer at the time and place specified in the contract, and notify the buyer in time.

(2) The goods and commercial invoices in accordance with the contract must be provided, or electronic data with the same effect.

(3) The contract of carriage must be concluded under the usual conditions at its own expense, and the goods shall be transported to the agreed place of the designated destination or other suitable specific place by the customary route and in the customary manner.

(4) The risk must be assumed until the goods are handed over to the carrier's control.

(5) At your own risk and expense, obtain an export license or other officially approved documents, go through export customs clearance procedures, and pay customs duties and other relevant fees.


Buyer's main obligations:

(1) Accept the relevant documents provided by the seller, receive the goods, and pay the payment according to the contract.

(2) bear the risk since the goods are handed over to the carrier's control at the agreed place of delivery.

(3) At your own risk and expense, obtain an import license or other officially approved documents, go through the customs procedures required for the import of goods, and pay customs duties and other relevant fees.


Points to note in actual business:

A. Risk transfer: There are methods of using Free Border or Franco Border abroad. When these two terms are used, the seller is only responsible for arranging transportation and paying the freight to a certain place at the border, and the seller's delivery place does not extend to the designated place at the border. Therefore, when the transaction is only equivalent to the CPT term, both parties to the transaction should make it clear that the risk borne by the seller will only be transferred to the buyer when the delivery is completed at the designated location at the border, not before that.


B. Insurance policy: When the CPT term is used in import trade, the seller is not obliged to provide an insurance policy, but can assist in handling it, but the cost should be paid by the buyer. And the insurance policy should not be within the scope of the review when the bank reviews the document.


C. Delivery notice: The buyer should timely handle cargo transportation insurance and handle import formalities, customs declaration and delivery. The content of the delivery notice usually includes the contract number or order number, letter of credit number, name of the goods, quantity, total value, shipping mark, place of departure, date of departure, name of the means of transport and the expected date of arrival at the destination, etc. If the buyer requires the seller to provide special information, it should be agreed in the sales contract or stipulated in the letter of credit. If the seller fails to issue a delivery notice in accordance with the customary regulations or fails to issue a delivery notice in a timely manner, which makes the buyer's insurance coverage unfounded or causes the buyer to omit insurance, the seller shall be liable for any loss or damage to the goods during transportation.


D. Frontier delivery location: When there are several locations available for delivery on the frontier, the parties should clearly agree on one of the locations as the delivery location and list it after the DFA to avoid disputes during performance. If the two parties fail to clearly stipulate the specific delivery location at the time of contract, the seller has the right to choose the most suitable border location as the exchange location. If the location is a port in the importing country, the General Principles 2000 recommends that the parties use DES (Delivered on Ship at Destination) or DEQ (Delivered at Quay at Destination).



CIP Incoterms

The full name of CIP is Carriage and Insurance Paid to (...named place of destination), which means that the seller delivers the goods to its designated carrier, pays the freight for transporting the goods to the designated destination, and handles the goods for the buyer in transit. Cargo insurance, the buyer bears all risks and other costs after delivery. The written form is "CIP Designated Destination". The CIP term applies to all modes of transport, including multimodal transport.


Changes in CIP insurance coverage in Incoterms2020:

CIP belongs to the highest insurance category (such as CIC all risks and ICC (A) insurance) under the buyer's insurance, while the insurance requirements under the CIF term remain unchanged, and the minimum insurance category can still be purchased.

Main obligations of seller and buyer:

Seller's main obligations:

(1) It is necessary to provide the goods and commercial invoices in compliance with the contract, or electronic data with equivalent effect, and other documents that may be required by the contract to prove that the goods conform to the contract.

(2) Place the goods specified in the contract under the control of the carrier designated by the buyer at the time and place specified in the contract, and notify the buyer in time.

(3) Enter into a contract of carriage for the delivery of the goods to the designated destination, and pay the relevant freight.

(4) In accordance with the stipulations in the sales contract, take out the cargo transportation insurance at your own expense.

(5) Bear the risk before the goods are handed over to the carrier's control.

(6) At your own risk and expense, obtain an export license or other officially approved documents, go through export customs clearance procedures, and pay customs duties and other relevant fees.


Buyer's main obligations:

(1) Accept the relevant documents provided by the seller, receive the goods, and pay the payment according to the contract.

(2) bear the risk since the goods are handed over to the carrier's control at the agreed place of delivery.

3) At your own risk and expense, obtain an import license or other officially approved documents, go through the customs procedures required for the import of goods, and pay customs duties and other related fees.


Points to note in actual business:

A. Risk and insurance issues: Under normal circumstances, the seller should purchase insurance according to the insurance types negotiated by both parties. If both parties do not specify the insurance types that should be insured in the contract, the seller will insure the lowest insurance type as usual, and the insurance amount is generally Add 10% to the contract price, which is 110% of the CIF contract price, and insure in the contract currency.


B. The price should be reasonably determined: the seller should carefully calculate the cost and price when making an external quotation. In the calculation, the transportation distance, insurance coverage, various transportation methods and various insurance charges should be considered, and issues such as the changing trend of freight rates and insurance premiums should be expected.


    

DPU Incoterms

The full name of DPU is Delivered at Place Unloaded, which means that after the seller unloads the goods at the designated destination or destination port terminal, the delivery is completed and the seller is responsible for delivering the goods to the seller's designated destination or destination port terminal. All risks and charges except import charges.


*DAT is changed to DPU in Incoterms2020, the delivery point of the DPU term is still the destination, but the destination is no longer limited to the end point of transportation, but can be anywhere.

Main obligations of seller and buyer:

Seller's main obligations:

(1) The seller bears all the risks and expenses of transporting the goods to the destination by means of transport, and unloading the goods to the terminal designated by the destination for delivery to the buyer, including the customs declaration procedures for the export goods and the various requirements for loading the goods. costs and risks.

(2) Provide goods that meet the contract requirements.

(3) Go through export formalities.

(4) Handling cargo transportation.

(5) Hand over relevant shipping documents or digital information.


Buyer's main obligations:

(1) The seller receives the goods when they deliver the goods in accordance with the contract, and pays the price according to the contract; bears all the risks of damage and loss of the goods from the time of receipt, and pays all the costs related to the goods from the time of delivery. .

(2) If customs clearance is required, the buyer must go through customs clearance procedures at its own risk and expense, and pay import duties, taxes and other import fees. Otherwise, the buyer must bear the risk of all damage and loss of the goods arising from the failure to perform this obligation, and pay all the additional costs arising therefrom.

(3) The buyer shall bear all unloading charges required to collect the goods from the arriving means of transport.

(4) At the seller's request and at the seller's risk and expense, promptly provide the seller with the documents and information required for the transportation and export of the goods or through any country, and provide assistance. Otherwise, the buyer must pay all losses and expenses arising from the failure to provide information and assistance in a timely manner.

(5) Pay the cost of pre-shipment inspection, except for the cost of compulsory inspection carried out by the competent authority of the exporting country.


Points to note in actual business:

A. The seller needs to deliver the goods in compliance with the contract to the designated terminal within the time limit specified in the contract and unload the goods to the buyer or its agent for disposal.


B. Before the goods are handed over to the buyer or its agent, all export customs clearance, transportation and insurance, and unloading procedures at the port of destination or destination are handled by the seller, and the costs and risks arising therefrom are also borne by the seller.


C. After the buyer or its agent accepts the goods delivered by the seller at the terminal, it needs to go through the import customs clearance, transshipment and other procedures by itself, and bear the related costs and risks arising therefrom.



DAP Incoterms:

The full name of DAP is Delivered At Place (named place of destination). When using the term DAP, the seller shall be responsible for loading and unloading the goods specified in the contract according to the usual route and customary method within the specified time limit. When it is handed over to the buyer, the delivery is completed, and the seller bears all the risks of transporting the goods to the designated place.

Main obligations of seller and buyer:

Seller's main obligations:

(1) A contract of carriage must be signed to pay for the freight incurred in transporting the goods to the designated destination or to an agreed place within the designated destination.

(2) The delivery is completed when the goods conforming to the contract are placed at the designated destination on the arriving means of transport and handed over to the buyer for disposal.

(3) The required notice must be given to the buyer for the buyer to take the measures normally required to take delivery of the goods.

(4) Bear all risks and expenses before delivery on the designated destination means of transport.

(5) Obtain licenses or other official authorizations required for export at your own risk and expense, and go through all customs formalities required for goods to be exported and transported in transit from other countries before delivery.

(6) Provide a commercial invoice or equivalent electronic information.


Buyer's main obligations:

(1) Bear all risks and expenses after delivery on the designated destination means of transport.

(2) Obtain the license or other official authorization required for import at your own risk and expense, and go through all customs formalities required for the import of goods.

(3) Receive the goods according to the contract, accept the delivery certificate, and pay the price.


Points to note in actual business:

A. DAP is a new term in INCOTERMS 2010 and is intended to replace the terms DAF, DES and DDU in INCONTERMS 2000. That is to say, the delivery point of DAP can be either a designated point on the border between the two countries, a ship at the port of destination, or a certain point in the inland of the importing country.


B. The seller delivers at the specified destination, but the seller is not responsible for unloading the goods from the arriving means of transport, similar to DAF, DES and DDU in INCOTERMS 2000. The buyer is responsible for unloading the goods from the arriving conveyance at the named destination, but the seller guarantees that the goods are available for unloading. When signing the contract of carriage, the seller should pay attention to the coordination of the place of delivery related to the contract of carriage and the contract of sale. If the seller incurs unloading costs at the designated destination in accordance with the contract of carriage, the seller has no right to claim reimbursement from the buyer unless otherwise agreed by both parties.


C. Since the seller assumes the risk of delivery at the specified delivery location, the buyer and the seller should specify the delivery address for the specified destination as clearly as possible, preferably to a specific point within the specified destination. If a specific delivery point is not agreed or cannot be determined, the seller may choose the delivery point most suitable for its purpose at the specified destination.


D. The seller has no obligation to the buyer to enter into an insurance contract, but since the risk of the entire transportation process is borne by the seller, the seller usually avoids the risk of cargo transportation by insuring.


E. The DDP term should be used if the buyer and the seller want the seller to handle the licenses or other official authorizations required for importation, as well as all customs formalities required for the importation of the goods, including payment of all import duties.



DDP Incoterms:

The full name of DDP is Delivered Duty Paid (…named place of destination). The seller completes the customs clearance procedures at the designated destination and delivers the unloaded goods on the delivery vehicle to the buyer for disposal, that is, the delivery is completed. The seller assumes all risks and costs of transporting the goods to the destination, including any import duties and taxes due at the destination where customs formalities are required.


*DDP term is one of the 11 trade terms that the seller bears the most responsibility and bears the most expense. It refers to the goods that the seller has not yet unloaded on the means of transport at the place of delivery after going through the import customs clearance procedures at the designated destination. Hand over to the buyer to complete the delivery. The seller must bear all risks and costs of transporting the goods to the designated destination, including any "taxes" payable at the destination when customs formalities are required (including the responsibility and risk of customs formalities, as well as the payment of handling charges, customs duties , taxes and other charges). This term should not be used if the seller cannot directly or indirectly obtain an import license. However, if the parties wish to exclude from the seller's obligations all costs to be paid for import (eg VAT), this should be clearly stated in the sales contract. The term applies to all modes of transportation.

Main obligations of seller and buyer:

Seller's main obligations:

(1) The goods and commercial invoices or equivalent electronic information must be provided in accordance with the provisions of the sales contract, as well as other documents that may be required by the contract to prove that the goods conform to the provisions of the contract.

(2) You must obtain any export license and import license or other official license or other documents at your own risk and expense, and go through all customs formalities required for transit from other countries, and pay customs duties and other relevant fees.

(3) The goods that have not been unloaded on the delivery vehicle must be handed over to the buyer or another person designated by the buyer at the specified destination within the agreed date or delivery period.

(4) All risks of loss of or damage to the goods must be assumed until delivery has been made in accordance with regulations.

(5) Proof of delivery, shipping documents or equivalent electronic messages must be provided to the buyer at its own expense.


Buyer's main obligations:

(1) The price must be paid in accordance with the provisions of the sales contract.

(2) At the seller's request and at the risk and expense of the seller, the buyer must give the seller all assistance to help the seller obtain the import license or other official permission required for the import of the goods when customs formalities are required.

(3) All risks of loss or damage to the goods must be assumed from the time of delivery as specified.

(4) As soon as the buyer has the right to determine the time within the agreed period and/or the point at which to receive the goods at the designated port of destination, the buyer must give the seller sufficient notice of this.

(5) The bill of lading or shipping documents provided as required must be accepted.

(6) The cost of any pre-shipment inspection must be paid, except for inspections mandated by the relevant authorities of the exporting country.


Points to note in actual business:

A. Under the delivery conditions of DDP, the seller delivers the goods at the designated destination after going through the export customs clearance procedures, which is actually the seller has shipped the goods into the importer's domestic market. If it is difficult for the seller to go through the import formalities directly, it can also ask the buyer to assist in handling it. DDP terminology should not be used if the seller cannot directly or indirectly obtain an import license or carry out import formalities.


B. If the parties wish to exclude from the seller's obligations certain charges to be paid upon importation of the goods, such as value-added tax, they should add words to that effect, such as "Deliver duty paid, value added tax not paid (insert named destination )" to make it clear.


C. Unloading charges: The buyer is responsible for unloading the goods from the arriving means of transport at the designated destination, but the seller guarantees that the goods are available for unloading. When signing the contract of carriage, the seller should pay attention to the coordination of the place of delivery related to the contract of carriage and the contract of sale. If the seller incurs unloading costs at the designated destination in accordance with the contract of carriage, the seller has no right to claim reimbursement from the buyer unless otherwise agreed by both parties.


D. Risk avoidance: The seller has no obligation to the buyer to enter into an insurance contract, but since the risk of the entire transportation process is borne by the seller, the seller usually avoids the risk of cargo transportation through insurance.



Warm Tips About Incoterms:

Incoterms® are terms of trade, not legal terms, and have no legal effect. Incoterms are only stipulations in international practice, not mandatory laws. How the contract is determined still depends on the meaning of the buyer and the seller, but after the contract takes effect, it has legal effect. When there is a conflict between the terms of trade and the contract conditions, the provisions in the contract shall be followed. That said, contracts are legally enforceable, but Incoterms® are not, this must be kept in mind.


For About FAS/FOB/CFR/CIF: Detailed Incoterms:

https://stusupplychain.com/fas-fob-cfr-cif-incoterms.html

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