domestic and international trade terms · this guide gives an overview of incoterms 2010 and...

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Domestic and International Trade Terms

incoterms 2010

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EXW Ex Works (named place of delivery)

Whether you send something to a customer or order something from a supplier, your freight must arrive on time. As a global insurer, Zurich can help you analyse your transportation risks and advise you on matters including transportation routes and delivery conditions.

Domestic anD international traDe termsValid from 1 January 2011

The terms regulate in particular:

• thedeliveryandtakingdeliveryofgoods

• thecontractsofcarriageandinsurance

• thetransferofrisks

• theallocationofcosts

• thedeliveryofdocumentsandproofofdelivery.

They do not regulate:

• thepricetobepaid

• themethodofpayment

• thetransferofownership

• theconsequencesofabreachofcontract.

Agree on the INCOTERMS 2010 in your commercial agreements and record this, e.g. ‘CIF INCOTERMS 2010’. This clarifies matters. If measures in certain countries mean that legal regulations make it necessary to take out transportation insurance abroad, it is possible to safeguard against a not insubstantial financial risk by means of indemnity insurance. The indemnity insurance (Clause TR12/2006)hasnothingincommonwithanexportriskguarantee. It simply provides comprehensive insurance coverage in addition to foreign transportation insurances.

The trading terms, which are to some degree restrictive, result in the transportation insurer making the following recommendation:

• Exporters: The exporter should handle exports on the basis of, for example, the CIF or CIP clauses.

• Importers:Theimportershoulddealwithimportsonthe basis of, for example, the CFR or CPT clauses.

The Incoterms rules – the ICC rules on the use of domestic and international trade terms – facilitate the conduct of global trade. Reference to an Incoterms 2010 rule in a sale contract clearly defines the parties’ respective obligations and reduces the risk of legal complications.

ThisguidegivesanoverviewofIncoterms2010andhighlights the key information that you as a seller or buyerneedtoknow.YoucanobtainthecompleteIncoterms rules from the International Chamber of Commerce, Zurich (Publication 715 ED) or from bookstores (ISBN 978-3-929621-71-6).

WhaT To considerIncorporate the Incoterms 2010 rules into your contract of sale

IfyouwanttheIncoterms2010rulestoapplytoyourcontract, you should make this clear in the contract by usingwordssuchas,’thechosenIncotermsruleincludingthenamedplace,followedbyIncoterms2010’.

Choose the appropriate Incoterms rule

The chosen Incoterms rule needs to be appropriate to the goods, to the means of their transport, and above all to whetherthepartiesintendtoputadditionalobligations–for example, the obligation to organize carriage or insurance – on the seller or the buyer.

Specify your place or port as precisely as possible

ThechosenIncotermsrulecanworkonlyifthepartiesnameaplaceorport,andwillworkbestifthepartiesspecify the place or port as precisely as possible. A good exampleofsuchprecisionwouldbe:‘Fca 38 cours albert 1er, Paris, France incoterms 2010’.

Each clause regulates the obligations of the seller or buyer. With regard to transportation insurance, interestfocusesprimarilyonwhobearstheriskduringtransportation–fromwheretowhere.

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WhaT beneFiTs does The exPorTer or imPorTer gain From This recommendaTion?• WithZurichyouhaveaglobalinsureryoucan

depend on.

• Youdeterminetheinsurancecoveragethatisappropriate for your goods.

• Theinsuranceisvalidfromthepointofdeparture tothedestination.Alwaysobtain‘warehouse-to-warehouse’insurance.

• Claimscanbedealtwithinyourcountryofdomicile.

• Youminimizeyourfinancialrisk,becausewhen you notify us of a claim you have no transfer difficulties (e.g. as the result of currency restrictions) or exchange risk.

main FeaTure oF The incoTerms 2010 rules:TwonewIncotermsrules–DATandDAP–have replaced the Incoterms 2000 rules DAF, DES, DEQ and DDU. The number of Incoterms rules has been reduced from 13 to 11. Under the FOB, CFR and CIF rules the transfer of risks has changed at the point of delivery.

mode oF TransPorT and The aPProPriaTe incoTerms 2010

rules for any mode(s) of transport

eXW Ex Works (named place of delivery)

Fca Free Carrier (named place of delivery)

cPt Carriage paid to (named place of destination)

ciP Carriage and Insurance paid to (named place of destination)

Dat Delivered at Terminal (named terminal at port/place of destination)

DaP Delivered at Place (named place of destination)

DDP Delivered, Duty paid (named place of destination)

rules for ocean/sea and inland waterway transport

Fas Free alongside Ship (named port of shipment)

FoB Free on Board (named port of shipment)

cFr Cost and Freight (named port of destination)

ciF Cost, Insurance, Freight (named port of destination)

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eXW Ex Works (named place of delivery)

Seller‘s risk Buyer‘s risk

seller‘s obligaTions• Placethegoodsatthedisposalofthebuyeratthe

namedplaceofdelivery(i.e.works,factory, warehouse,etc.).

PoinTs oF Prime imPorTance• Evenafterthedeliveryofthegoods,youstillbeara

considerable financial risk as long as full payment has not been made.

• Theseconditionsaredisadvantageousforthebuyer.The buyer bears a high risk and has to arrange everything such as export, clearance, transportation and insurance.

buyer’s obligaTions• Takedeliveryofthegoodsassoonastheyhavebeen

made available at the seller‘s premises or another namedplace(i.e.works,factory,warehouse,etc.).

• Bearallcostsandrisksinvolvedwithorganizingthetransport from that time on.

PoinTs oF Prime imPorTance• Theriskoflossordamagetothegoodsistransferred

to the buyer as soon as they have been placed at their disposal at the named place of delivery.

• Thesellerdoesnotneedtoloadthegoodsonanycollecting vehicle.

• Incaseswherethesellerisinabetterpositiontoloadthe goods, FCA is usually more appropriate.

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Fca Free Carrier (named place of delivery)

seller‘s obligaTions• Deliverthegoodstothecarrieroranotherperson

nominated by the buyer at the agreed point and at the named place.

• Ifthenamedplaceistheseller’spremises,deliveryiscompletedwhenthegoodshavebeenloadedonthemeans of transport provided by the buyer.

• Inanyothercase,deliveryiscompletedwhenthegoods are placed at the disposal of the carrier or another person nominated by the buyer on the seller’s means of transport ready for unloading.

• FCArequiresthesellertoclearthegoodsforexport,whereapplicable.

PoinTs oF Prime imPorTance• Thepartiesarewelladvisedtoclearlyspecifythepoint

withinthenamedplaceofdelivery.

• Evenafterdeliveryofthegoods,thesellerbearsaconsiderable financial risk as long as full payment has not been made.

buyer’s obligaTions• Takedeliveryofthegoodswhentheyhavebeen

delivered by the seller at the agreed point/place.

• Tocontractyourownexpenseforthecarriageofthegoods from the named place of delivery.

PoinTs oF Prime imPorTance• Thebuyermustcontractattheirownexpenseforthe

carriage of the goods from the named place of delivery.

• Ifthebuyerdoesnotgiveanyinstructiontothecontrary in due time, the seller has no obligation to make a contract of carriage.

• Thebuyerhasnoobligationtothesellertomakeacontract of marine insurance.

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cPt Carriage paid to (named place of destination)

seller‘s obligaTions• Deliverthegoodsbyhandingthemovertothecarrier

(whoisnominatedbytheseller),attheagreedpointofdelivery, and to contract from that point a contract for the carriage to the named place of destination.

• Bearallriskoflossordamagetothegoodsuntiltheyhave been delivered to the first carrier.

PoinTs oF Prime imPorTance• Evenafterdeliveryofthegoods,thesellerbears

a considerable financial risk as long as full payment has not been made and the buyer has not obtained marine insurance.


delivered to the first carrier and receive them from the carrier at the named place of destination.

PoinTs oF Prime imPorTance• Thepartiesshouldidentifyaspreciselyaspossible

thepointwithintheagreedplaceofdestination.

• Thesellerisundernoobligationtotakeoutcargoinsurance.

• Withoutaqualitativeandquantitativeexamination of the goods at the time the carrier takes delivery, only restricted coverage can be obtained for the subsequenttransport.

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ciP Carriage and Insurance paid to (named place of destination)

seller‘s obligaTions• Deliverthegoodsbyhandingthemovertothecarrier,

nominated by the seller, at the agreed point of delivery, and to contract from that point a contract for the carriage to the named place of destination.

• Bearallriskoflossordamagetothegoodsuntiltheyhave been delivered to the first carrier.

• Thesellermustobtainattheirownexpensetransferable cargo insurance (110% of the contract price)complyingatleastwiththeminimumcoverprovided by Clauses (C) of the Institute Cargo Clauses or any similar clauses.

PoinTs oF Prime imPorTance• Forsubsequenttransportationfromthenamed

place of destination (if different from the final place of destination) the buyer can only obtain restricted insurance.


delivered to the first carrier and receive them from the carrier at the named place of destination.

PoinTs oF Prime imPorTance• Thebuyercarriesallrisksforlossordamagetothe

goodsduringshipment.However,thesellerhastoobtaincargoinsurancewhichmustcoverthegoodsfrom the point of delivery to at least the named place of destination.

• Thebuyerneitherknowstheinsurancecompanynorthe exact scope of coverage.

• Thebuyerhastheoptionofagreeingthescopeofinsurancewiththeseller.Ifnosuchagreementismade, the buyer is only obliged to obtain a minimum cover as provided by Clauses (C) of the Institute Cargo Clauses or any similar clauses.

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Dat Delivered at Terminal (named terminal at port/place of destination)

seller‘s obligaTions• Obtainacontractforcarriageofthegoodsaswell

as place the goods at the disposal of the buyer at the namedterminal,suchasaquay/warehouse,containeryard or road, rail or air cargo terminal, at the named port or place of destination.

• Bearallcostsandtheriskoflossordamagetothegoods until the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at the named terminal at the port of destination.

• Toclearthegoodsforexport.

PoinTs oF Prime imPorTance• Specifyapointwithintheterminalattheagreedport

or place of destination, as the seller is liable for risks up to that point.

buyer’s obligaTions• Takethegoodsattheagreedterminal/place.

• Bearallcostsandtheriskoflossordamagetothegoods from the moment they are at their disposal, unloaded from the arriving means of transport, and at the named terminal.

PoinTs oF Prime imPorTance• Specifyasclearlyaspossibletheterminalandaspecific

pointwithintheterminalattheagreedportorplaceofdestination, as the buyer is liable for risks from that pointonwards.

• Ifthepartiesintendthesellertobeartherisksandcosts involved in transporting and handling the goods from the terminal to another place, then the DAP or DDP rules should be used.

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DaP Delivered at Place (named place of destination)

seller‘s obligaTions• Obtainacontractforcarriageofthegoodsaswell

as place the goods at the disposal of the buyer at the named place of destination.

• Bearallcostsandriskoflossordamagetothegoodsuntil they have been delivered via the arriving means of transport, ready for unloading, at the named place of destination.

• Toclearthegoodsforexport.

PoinTs oF Prime imPorTance• Specifyasclearlyaspossiblethepointwithinthe

agreed place of destination, as the seller is liable for risks up to that point.

buyer’s obligaTions• Takedeliveryofthegoodsattheagreedplace

of destination.

• Bearallcostandriskoflossordamagetothegoodsfrom the moment they are at the disposal of the buyer, ready for unloading on the arriving means of transport, at the named place of destination.

PoinTs oF Prime imPorTance• Specifyasclearlyaspossiblethepointwithinthe

agreed place of destination, as the buyer is liable for risksfromthatpointonwards.

• Ifthepartieswishthesellertoclearthegoodsforimport, pay any import duty and carry out relevant import customs’ formalities, the DDP term should be used.

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DDP Delivered Duty paid (named place of destination)

seller‘s obligaTions• Placethegoodsatthedisposalofthebuyeronthe

arriving means of transport ready for unloading at the named place of destination.

• Bearallcostsandriskoflossordamagetothegoodsaswellasallcostsincurredthroughcustoms’formalities,duties, taxes and other charges.

PoinTs oF Prime imPorTance• Thepartiesareadvisedtospecifyasclearlyaspossible

thepointwithintheagreedplaceofdestination,astheseller is liable for all costs and risks up to that point.

• Thebuyermayonlybeabletoobtainrestrictedcoverageforthesubsequenttransportation.

• ThepartiesareadvisednottouseDDPifthesellerisunable to directly or indirectly obtain import clearance. In such situations, the DAP rule is more appropriate.

buyer’s obligaTion• Takedeliveryofthegoodsonthearrivingmeansof

transport ready for unloading at the named place of destination and from that time bear all costs to the final destination.

PoinTs oF Prime imPorTance• Thesellerisundernoobligationtotakeout

marine insurance.

• Damagethatoccursbeforethegoodsreachthenamedplaceofdestination,butwhichisonlydetectedat the final destination, can no longer be claimed for from the seller.

• Withoutaqualitativeandquantitativeexamination of the goods at the named place of destination, only restricted coverage can be obtained for the subsequenttransport.

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Fas Free alongside Ship (named port of shipment)

seller‘s obligaTions• Deliverthegoods,fortheaccountoftheseller,by

placing them alongside the vessel or loading point (e.g.onaquayorabarge)nominatedbythebuyer at the named port of shipment.

• FASrequiresthesellertoclearthegoodsforexport,whereapplicable.

PoinTs oF Prime imPorTance• Thebuyermayonlybeabletoobtainrestricted

insurance from the named place of shipment.

• Ontheonehand,thesellerbearsaconsiderablefinancial risk if no payment has been made before the shipment; on the other hand, the seller has no guarantee that the buyer has obtained marine insurance.

• Wherethegoodsareincontainers,itistypicalfor the seller to hand the goods over to the carrier at a terminal and not alongside the vessel. In such situations,theFASrulewouldbeinappropriate, and the FCA rule should be used.

buyer’s obligaTions• Takedeliverofthegoodswhentheyhavebeen

delivered by the seller at the named place of shipment.

• Tocontract(attheirownexpense)thecarriageofthegoods from the named port of shipment.

PoinTs oF Prime imPorTance • Thebuyerbearsallrisksoflossordamagetothe

goods from the time they have been delivered at the named point.

• Thebuyerhasnoobligationtothesellertotakeoutmarine insurance.

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FoB Free on Board (named port of shipment)

seller‘s obligaTion• Deliverthegoodsonboardthevesselnominatedby

the buyer at the named port of shipment.

• Bearallcostsandrisksoflossordamagetothegoodsuntil they are on board of the vessel at the named port of shipment.

• FOBrequiresthesellertoclearthegoodsforexport,whereapplicable.

PoinTs oF Prime imPorTance• Ontheonehand,thesellerbearsaconsiderable

financial risk if no payment has been made before the shipment; on the other hand, the seller has no guarantee that the buyer has obtained marine insurance.

• FOBmaynotbeappropriatewheregoodsarehandedover to the carrier before they are on board the vessel –forexample,goodsincontainers,whicharetypicallydelivered at a terminal. In such situations, the FCA rule should be used.

buyer’s obligaTion• Obtaintherequiredspaceonthevessel.

• Bearallcostsandrisksoflossordamagetothe goods from the time they have been delivered on board the vessel.

PoinTs oF Prime imPorTance• Thesellerhasnoobligationtoobtaininsurancefor

the maritime voyage.

• Thebuyermayonlybeabletoobtainrestrictedinsurance from the port of shipment.

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cFr Cost and Freight (named port of destination)

seller‘s obligaTions• Deliverthegoodsonboardthevessel.

• Obtainacontractforcarriagetothenamedport ofdestinationandpaythefreightaswellasall other costs.

• Bearallrisksoflossordamagetothegoodsuntiltheyhave been delivered on board the vessel at the named port of shipment.

PoinTs oF Prime imPorTance• Evenafterthedeliveryofthegoods,thesellerstill

bears a considerable financial risk until full payment has been made.

• Thebuyermayonlybeabletoobtainrestrictedinsurance for the maritime voyage.

• CFRmaynotbeappropriatewheregoodsarehandedover to the carrier before they are on board the vessel –forexample,goodsincontainers,whicharetypicallydelivered at a terminal. In such circumstances, the CPT rule should be used.

buyer’s obligaTions• Acceptdeliveryofthegoodsatthenamedportof

destination after receipt of the transport documents.

• Bearallrisksoflossordamagetothegoodsfrompoint they are on board the vessel at the named port of shipment.

PoinTs oF Prime imPorTance• Thesellerbearsallrisksoflossordamagetothe

goods only up until they have been delivered onboard the vessel at the port of shipment.

• Withoutaqualitativeandquantitativeexamination of the goods at the port of shipment, the buyer may be able to obtain only restricted coverage for the subsequenttransport.

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ciF Cost, Insurance, Freight (named port of destination)

seller‘s obligaTions• Deliverthegoodsonboardthevessel.

• Obtainacontractforcarriagetothenamedport ofdestinationandpaythefreightaswellasall other costs.

• Bearallrisksoflossordamagetothegoodsupuntilthey have been delivered on board the vessel at the named port of shipment.

• Obtain(attheirownexpense)atransferablecargoinsurance (110 % of the contract price) complying at leastwiththeminimumcoverprovidedbyClauses(C)of the Institute Cargo Clauses or any similar clauses.

PoinTs oF Prime imPorTance• Iftheinsurancehasbeenagreed‘CIFnamedportof

destination’, it is usually possible to obtain only restricted coverageforthesubsequentoverlandtransport.

buyer‘s obligaTions• Acceptdeliveryofthegoodsatthenamedportof

destination after receipt of the transport documents.

• Bearallrisksoflossordamagetothegoodsfromthetime they have been delivered on board the vessel at the named port of shipment.

PoinTs oF Prime imPorTance • Theselleronlyhastoobtainminimalcoverageforthe

goods during the maritime voyage.

• Withoutaqualitativeandquantitativeexamination of the goods at the port of arrival, only restricted insurancecanbeobtainedforthesubsequenttransport to the final destination.

• Thebuyerhastheoptionofagreeingthescopeofinsurancewiththeseller.Ifnosuchagreementsaremade, the buyer is only obliged to obtain a minimum cover as provided by Clauses of the Institute Cargo Clauses or any similar clauses.

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resPonsiBilities For sellers anD Buyers For Delivery oF gooDs unDer sales contracts

Thefollowingillustrationservesonlyforafirstoverview.ThechosenIncotermsruleneedstobeappropriatetothegoods,tothemeansoftheirtransport,andabovealltowhetherthepartiesintendtoputadditionalobligationsontheselleroronthebuyer.(Recommendation:PublicationICCRulesfortheUseofDomesticandInternationalTradeTerms.)

consideraTionsTwonewIncotermsrules–DATandDAP–havereplacedtheIncoterms2000rulesDAF,DES,DEQandDDU.Thenumber of Incoterms rules has been reduced from 13 to 11. Under the FOB, CFR and CIF rules the transfer of risks has changed to the point of delivery.

Point of deliveryIntheIncoterms2010rules‘Pointofdelivery’isusedtoindicatewheretheriskoflossofordamagetothegoodspassesfrom the seller to the buyer.

carrierForthepurposesoftheIncoterms2010rules,thecarrieristhepartywithwhomcarriageiscontracted.

clear for export

clear for import

contract of carriage

Point of delivery

Transfer of risks

costs of carriage insurancemodes of transport

EXW Buyer Buyer BuyerAt seller’s premises

Point of delivery

- - All

FCA Seller Buyer BuyerFirst carrier or

another personPoint of delivery

- - All

CPT Seller Buyer SellerFirst carrier or


Place of destination - All

CIP Seller Buyer SellerFirst carrier or


Place of destinationBy seller only on minimum cover

All

DAT Seller Buyer Seller

Terminal at port or named

place of destination

Point of delivery, unloaded from the arriving means of transport

- All

DAP Seller Buyer SellerNamed place of destination

Point of delivery, ready for unloading from the arriving means of transport

- All

DDP Seller Seller SellerNamed place of destination

Point of delivery, ready for unloading - P111

FAS Seller Buyer BuyerAlongside the vessel at the named port

Point of delivery - Vessel

FOB Seller Buyer BuyerNamed port of

shipmentOn board the vessel Vessel

CFR Seller Buyer SellerNamed port of

shipmentOn board the vessel

Named port of destination

Vessel Vessel

CIF Seller Buyer SellerNamed port of

shipmentOn board the vessel

Named port of destination

By seller only on minimum cover

Vessel

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This is intended as a general description of certain types of insurance and services available to qualifiedcustomersthroughsubsidiarieswithintheZurichInsuranceGroupLtdincluding,intheUnitedStates,ZurichAmericanInsuranceCompany,1400AmericanLane,Schaumburg,Illinois60196,and,inCanada,ZurichInsuranceCompanyLtd,400UniversityAvenue,Toronto,Ontario M5G1S7,and,outsidetheUSandCanada,ZurichInsuranceplc,BallsbridgePark,Dublin4,Ireland,ZurichInsuranceCompanyLtd,Mythenquai2,8002Zurich,Switzerland,ZurichAustralianInsuranceLimited,5BlueStreet,NorthSydney,NSW2060,Australiaandfurtherlegalentities,asmayberequiredbylocaljurisdiction(“Zurich”).Zurichdoesnotguaranteeaparticularoutcomeandfurtherassumesnoliabilityinconnectionwiththeprovisionofservices.IntheUnitedStates,riskengineeringservices are provided by Zurich Services Corporation.

Incaseyoumayhavequestions,onanyoftheseentities,[email protected]. Yourpolicyisthecontractthatspecificallyandfullydescribesyourcoverage.Incontrast,thedescriptionhereingivesabroadoverviewofcoveragesandprogramsanddoesnotreviseoramendapolicyorprogram. Certain coverages are not available in all countries or locales. Some coverages in the U.S. maybewrittenonanon-admittedbasisthroughlicensedsurpluslinesbrokers.

Insurance product obligations are the sole responsibility of each issuing insurance company. For example, only the assets of Zurich American Insurance Company (and no other assets of the Zurich InsuranceGroupLtd)areavailabletomeetitsobligationsfortheperformanceofitsproducts.Formorecompletefinancialinformation,auditedannualstatementsoftheGroupandinformationon theratingsoftheunderwritingcompaniesofZurichinNorthAmerica,accesswww.zurich.com.

domestic and international trade terms · this guide gives an overview of incoterms 2010 and...

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