EXW
In the factory (Ex Works)
“Ex factory” means that the exporter delivers the merchandise when it makes it available to the importer at the exporter’s establishment or other agreed place (i.e., workshop, factory, warehouse, etc.), without clearing it for export or load it into a receiving vehicle. It entails minimum obligations for the exporter, and maximum assumption of costs and risks by the importer. For foreign trade operations, the use of FCA is more appropriate.
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FCA
Free carrier (Free Carrier)
“Free Carrier” means that the exporter will deliver the merchandise to the carrier or person indicated by the importer, in the agreed place, loading the merchandise in the means of transportation provided by the importer, within the exporter’s facilities, or placing the merchandise at Available to the carrier or person indicated by the importer, in the exporter’s means of transport, ready for unloading. “Carrier” means any person who, in a contract of carriage, undertakes to perform or cause to be performed by rail, road, air, sea, inland waterways, or a combination of these modes. Optionally (if agreed by the parties), the importer may instruct the carrier / transporter of the merchandise he has acquired to issue an “on board” bill of lading for the exporter, once the merchandise is loaded. And the latter (exporter) undertakes to deliver said bill of lading to the importer (normally, through a financial entity), although it is not bound by the conditions of the transport contract.
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FAS
Free Alongside Ship
“Free Alongside the Ship” means that the exporter will deliver the merchandise placing it alongside the ship designated by the importer, at the loading point set by said importer, within the agreed port of shipment (following the operational practices of this port). There is also the possibility that the exporter obtains the merchandise thus delivered, alongside the ship, for shipment; as in the case of raw materials, or other merchandise associated with chain sales. This term can only be used with means of maritime transport and inland waterways. The costs and expenses of handling the merchandise are variable, according to the (operative) practice of the chosen port. If the merchandise is transported in a container, this term should be replaced by the FCA, since, in this case, the exporter will usually deliver the merchandise to the carrier in the terminal (not alongside the ship).
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FOB
Free On Board
“Free on Board” means that the exporter will deliver the merchandise on board the ship designated by the importer, at the agreed port of shipment (in the usual manner in said port). It is also possible that the exporter obtains the merchandise already delivered in Incoterms | Guides 2020 11 © Prepared by International Financial Analysts. All rights reserved. These conditions (on board the ship), as in the case of raw materials, or other merchandise associated with chain sales. This term can only be used with means of maritime transport and inland waterways. If the merchandise is transported in a container, this term should be replaced by the FCA, since, in this case, the exporter normally delivers the merchandise at the container terminal, before it is shipped. In the “Incoterms 2000” version, delivery occurs when the merchandise passes the ship’s rail (and not when it is already placed on board). The term “ship’s rail” is normally interpreted as the imaginary line perpendicular to the ship’s side.
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CRF
Cost and freight (Cost and Freight)
“Cost and Freight” means that, like FOB, the exporter delivers the merchandise on board the designated vessel, in accordance with port practices. It is also possible that the exporter already obtains the merchandise thus delivered, as in the cases of raw materials, or others associated with chain sales. This term can only be used with means of maritime transport and inland waterways. The transfer of the assumption of risks (in the port of shipment) and of costs (in the port of destination) from the exporter to the importer occurs in different places. It is important that the contract specifies the port of shipment of the merchandise (not only the port of destination) since that is where the exporter transfers the risk to the importer. It is also convenient to specify the point of delivery, within the agreed port of destination, since the exporter assumes the costs up to that point. The exporter may have to pay the costs of unloading the merchandise at the port of destination if both points are in the sales contract, since the distribution of costs and the transfer of risk between exporter and importer do not occur in the same place. The exporter’s obligation to deliver the merchandise ends with its delivery to the carrier and NOT with the arrival of the merchandise at the destination. However, the exporter assumes the transportation costs to the agreed place/destination point. The risk of loss or damage to the merchandise is transferred by the exporter to the importer at the place/point of delivery of said merchandise.
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CIF
Cost, Insurance and Freight (Cost, Insurance and Freight)
“Cost, Insurance and Freight” means that the exporter delivers the merchandise on board the named vessel, in accordance with the (operational) practices of the port. It is also possible that the exporter obtains the merchandise already delivered under these conditions for its transport to its destination. This term can only be used with means of maritime transport and inland waterways. The transfer of the assumption of risks (in the port of shipment) and of costs (in the port of destination) from the exporter to the importer occurs in different places. It is important that the contract specifies the port of shipment of the merchandise (not only the port of destination) since that is where the exporter transfers the risk to the importer. It is also convenient to specify the point of delivery, within the agreed port of destination, since the exporter assumes the costs up to that point. The risk, assumed by the importer, of loss or damage to the merchandise during transport will be covered by the insurance to be contracted by the exporter. However, the latter is only required to purchase insurance with a minimum coverage, so if the importer wishes to extend it, it will be he who assumes the additional costs. The exporter may have to pay the costs of unloading the merchandise at the port of destination if it is stated in the transport contract that he has formalized; unless the parties (exporter and importer) have agreed otherwise. If the merchandise is transported in a container, this term should be replaced by the CIP, since, in this case, the exporter normally delivers the merchandise at the terminal, before it is shipped.
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CPT
Transportation Paid To (Carriage Paid To)
Carriage Paid To” means that the exporter will deliver the merchandise to the carrier that he has contracted (or another person designated by the exporter himself), at the place agreed by the exporter and the importer. The carrier will take the goods from this place / point of delivery to the place / point of destination. Incoterms | Guides 2020 16 © Prepared by International Financial Analysts. All rights reserved. “Carrier” means any person who, in a contract of carriage, undertakes to perform or cause to be performed by rail, road, air, sea, inland waterways, or a combination of these modes. If successive carriers are used for transportation to the agreed destination, the risk passes when the goods have been delivered to the first carrier at the point chosen by the exporter (not controlled by the importer). The place / point of delivery of the merchandise does not coincide with the destination. It is advisable to specify both points as much as possible in the sales contract, since the distribution of costs and the transfer of risks between exporter and importer do not occur in the same place. The exporter’s obligation to deliver the merchandise ends with its delivery to the carrier and NOT with the arrival of the merchandise at the destination. However, the exporter assumes the transportation costs to the agreed place / point of destination. The risk of loss or damage to the merchandise is transferred by the exporter to the importer at the place / point of delivery of said merchandise. Notwithstanding the foregoing, the transport contract to be formalized by the exporter will determine who (exporter / importer) assumes each of the costs associated with the merchandise during its transit and unloading to / at the place of destination.
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CIP
Transportation and insurance paid to (Carriage and insurance Paid to)
“Carriage and Insurance Paid to” means that the exporter will deliver the goods to the carrier he has hired (or another person designated by the exporter himself), at the place agreed between the exporter and importer. The carrier will take the goods from this place / point of delivery to the place / point of destination. The place / point of delivery of the merchandise does not coincide with the destination. It is advisable to specify both points as much as possible in the sales contract, since the distribution of costs and the transfer of risks between exporter and importer do not occur in the same place. The obligation to deliver the merchandise, by the exporter, ends with the delivery to the carrier and NOT with the arrival of the merchandise at the destination. However, the exporter assumes the transportation costs to the agreed place / point of destination. The risk of loss or damage to the merchandise is transferred by the exporter to the importer at the place / point of delivery of said merchandise. Notwithstanding the foregoing, the transport contract to be formalized by the exporter will determine who (exporter / importer) assumes each of the costs associated with the merchandise during its transit and unloading to / at the place of destination. The risk, assumed by the importer, of loss or damage to the merchandise during transport will be covered by the insurance to be contracted by the exporter. However, the exporter is only required to purchase insurance with a minimum coverage, so if Incoterms | Guides 2020 18 © Prepared by International Financial Analysts. All rights reserved. the importer wishes to extend it, it will be he who assumes the additional costs. In accordance with the Incoterms 2020, the exporter must contract coverage according to the Cargo Clauses of the Institute (A); notwithstanding that the parties may agree on lesser coverage.
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DAP
Delivered at the agreed place (Delivered At Place)
“Delivered at the agreed place” means that the exporter delivers the merchandise once it is made available to the importer at the agreed place, before unloading it. The exporter will have to pay the costs of unloading the merchandise at the place of destination if it is included in the transport contract that it has formalized; unless the exporter and importer have agreed otherwise. It is important to specify in as much detail as possible the point of delivery of the merchandise, within the place of destination agreed between the exporter and importer. It must not be forgotten that the exporter assumes the risks of taking the merchandise to that point. In the event that the parties, exporter and importer, want the exporter to be responsible for the import clearance of the merchandise (in Customs of the country of destination), they must opt for the Incoterms DDP.
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DPU
Delivered At Place Unloaded
“Delivered at the place of unloading” is a term that, as a novel element in Incoterms 2020, replaces the DAT (Delivered at Terminal) rule of Incoterms 2010 Incoterms | Guides 2020 21 © Prepared by International Financial Analysts. All rights reserved. providing more flexibility in terms of the type of delivery point for the goods at destination (not just a “terminal”). It is the only rule that requires the exporter to unload the merchandise at the agreed place. The transfer of risks from the exporter to the importer occurs at the agreed delivery point. If the exporter and the importer want the seller not to bear the risk and the cost of unloading, they must opt for the DAP term.
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DDP
Delivered. Rights Paid (Delivered Duty Paid)
“Delivered Duty Paid” means that the exporter delivers the merchandise, making it available to the importer, after carrying out the import customs procedures (in the country of destination), ready to be unloaded from the means of transport used, at the place / point of agreed destination. It is the commercial term that entails more obligations for the exporter and, consequently, minimum obligations for the importer. It is important that the parties, exporter and importer, specify the point of delivery within the agreed place of destination. The exporter will bear the costs and risks up to that point. The exporter may have to pay the costs of unloading the merchandise at the place of destination if this is included in the transport contract that he has formalized; unless the exporter and importer agree otherwise. The taxes required for the importation of the merchandise must be paid by the exporter, unless otherwise indicated in the sales contract. It is necessary that the exporter has the capacity to carry out the customs procedures necessary for import clearance in the country of destination. In this sense, the exporter must have a presence in the destination market. If the parties, exporter and importer, prefer that the customs procedures and formalities for the importation of the merchandise in the country of destination are borne by the importer, established there, they must choose the term DAP.
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