Incoterms – International Commercial Terms
Incoterms (International Commercial Terms) specify strict and indisputable international delivery conditions. We work solely with the most recent Incoterms (2010) on a global basis, with our contracts containing several clauses with such international trading conditions. Incoterms are subdivided into four groups: the order of the clauses reflects the increasing responsibility on the part of AutoGlobalTrade for the vehicles that are to be supplied:
- C Clause: the main transport costs are borne by the Seller, while the Buyer is responsible for the risks.
- D Clause: arrival clause, the transport costs and risks are borne by the Seller.
- E Clause: collection clause, the transport costs and risks are borne by the Buyer.
- F Clause: the main transport costs and risk are borne by the Buyer.
C Clauses – main transport payable by the Seller:
CFR (cost and freight):
The CFR Clause is used in the case of transport operations by ship. The Seller only needs to ensure that the goods are transported in a proper condition above the ship’s railing, i.e. the risk of damage or destruction on the ship passes to the Buyer. However, the Seller is required to pay costs and freight (including export) that arise up until delivery in the port of destination. The CFR Clause is similar to the CIF Clause which, however, contains an insurance policy that is to be concluded by the Seller. In that respect, the insurance covers just the transport risk. If goods are not transported by ship, consideration is given to the CPT Clause (explanation below).
CIF (cost, insurance, freight):
The CIF Clause is a transport clause frequently used in overseas transactions, whereby the Seller is responsible for the cost of delivery, insurance and freight up to the port of destination. The Seller is required to carry out the customs clearance formalities in the export country.
CPT (carriage paid to…):
Freight free means that the Seller carries the cost of the main transport. All other costs (unloading costs, customs duties, taxes, levies and customs formalities) are the Buyer’s responsibility. The risk of loss and damage pass to the Buyer upon handover to the carrier (in the case of several carriers upon handover to the first).
CIP (carriage and insurance paid to…):
This Clause places the Seller under obligation to carry the transport costs (“freight free”, additional costs such as customs duties are borne by the Buyer as in the case of CPT) and take out, and pay for, insurance cover for the transport. The risk of damage or loss is carried by the Buyer from the handover to the carrier. However, in the event of damage, the Buyer is reimbursed by the insurance company. Without an additional agreement, the Seller is only under obligation to take out insurance with minimum cover. The C clauses are so called two point clauses because the passing of risks and costs vary. For example, in the case of the CIF clause, the Seller is responsible only up to the level above the ship’s railing. It is a requirement to pay for the entire procedure, including the sea freight and the sea insurance. If risk and costs pass to the same party, for example in the case of FOB, the clause is referred to as a one-point clause.
D Clauses – arrival clauses
DAT – Delivered at Terminal (named terminal at port or place of destination):
Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal. It replaces DEQ
DAP – Delivered at Place (named place of destination):
Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer. It replaces DAF, DDU and DES.
E-Clause – the collection clause EXW (ex works):
The Seller is merely under obligation to make the goods available at its premises (factory, warehouse or plant). All costs regarding transport, insurance and export are borne by the Buyer. The risk of loss and damage passes to the Buyer upon provision at the agreed location. The carrier is required to load the material. If the Principal causes damage in the case of lading, the insurance company is not liable.
F Clauses – main transport payable by the Buyer
FCA (free carrier):
The FCA Clause (originally FOT = free on truck) places the Seller under obligation to hand over the goods to a carrier at a specified location, and clear it for export. The cost and risk of the transport is borne by the Buyer from that point on. If the stated location is in the Seller’s plant, the Seller is also responsible for loading the means of transport. If the stated location is elsewhere, the Seller is not responsible for loading the means of transport.
FAS (free alongside ship):
The FAS Clause is a modification of the FCA Clause. The Seller need not supply the goods in a stated carrier, but must place them alongside a certain ship in the shipping port. The Buyer clears the goods for exporting, and carries the cost and risk of the transport from the shipping port to the place of receipt.
FOB (free on board):
In trade via sea ship or inland vessel, the Seller undertakes in the case of the FOB Clause in extension of the FAS Clause to bring the goods on board of the agreed ship. From the point above the level of the ship’s railing, the obligation to carry costs and risk of the transport passes to the Buyer. This clause is very typical, and is usually applied in the case of price quotations to stock exchanges. FOB is a so-called one-point clause because the passing of risk and costs occur at the same place – in this case from the level above the ship’s railing.
FOA (free on airplane):
Same conditions as in the case of FOB, only in relation to air transport.