WHAT THE INCOTERMS RULES DO?
The Incoterms rules explain a set of eleven of the most commonly-used three-letter trade terms such as CIF , DAP, et c. reflecting business-to-business practice in contracts for the sale and purchase of goods.
The Incoterms rules describe:
Obligations: Who does what as between seller and buyer, e.g. who organize carriage or insurance of the goods or who obtains shipping documents and export or import licenses ;
Risk: Where and when the seller “delivers” the goods, in other words where risk transfers from seller to buyer; and
Costs: Which party is responsible for which costs, for example transport, packaging, loading or unloading costs, and checking or security-related costs.
WHAT THE INCOTERMS RULES DO NOT DO
The Incoterms rules are NOT in themselves—and are therefore no substitute for—a contract of sale. They are devised to reflect trade practice for no particular type of goods—and for any. They can be used as much for the trading of a bulk cargo of iron ore as for five containers of electronic equipment or ten pallets of airfreighted fresh flowers.
The Incoterms rules do NOT deal with the following matters:
- whether there is a contract of sale at all;
- the specifications of the goods sold;
- the time, place, method or currency of payment of the price;
- the remedies which can be sought for breach of the contract of sale;
- most consequences of delay and other breaches in the performance of contractual obligations;
- the effect of sanctions;
- the imposition of tariffs;
- export or import prohibitions;
- force majeure or hardship;
- intellectual property rights;
- the method, venue, or law of dispute resolution in case of such breach.
Perhaps most importantly, it must be stressed that the Incoterms rules do NOT deal with the transfer of property/title/ownership of the goods sold.
THE ELEVEN INCOTERMS 2020 RULES OF “SEA AND INLAND WATERWAY” AND “ANY MODE(S) OF TRANSPORT”
RULES FOR SEA AND INLAND WATERWAY TRANSPORT
*Blue indicates seller’s *orange indicates buyer’s *green indicates mixed or shared
FAS | Free Alongside Ship
FOB | Free On Board
CFR | Cost and Freight
CIF | Cost Insurance and Freight
RULES FOR ANY MODE OR MODES OF TRANSPORT
*Blue indicates seller’s *orange indicates buyer’s *green indicates mixed or shared
- EXW | Ex Works
- FCA | Free Carrier
- CPT | Carriage Paid To
- CIP | Carriage and Insurance Paid To
- DAP | Delivered at Place
- DPU | Delivered at Place Unloaded
- DDP | Delivered Duty Paid
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