2.1 INTRODUCTION

• The International Chamber of Commerce (ICC) has produced standardised terms of trade known as Incoterms since the 1930s.
• Incoterms are recognised by trading nations and clarify which party is responsible for arranging and paying for different parts of an international transaction.
• Although aimed at buyers and sellers, transport operators should understand their role and responsibilities when road transport forms part of the movement.
• Incoterms are reviewed and reissued by the ICC, usually each decade.
• The latest version identified in the source is Incoterms 2020.
• Each Incoterm has a three-letter internationally recognised abbreviation.
• Incoterms 2020 contains 11 standard terms divided into:
• Terms applicable to all modes of transport.
• Terms applicable only to sea and inland-waterway transport.
• The four sea/inland-waterway terms identified by the source are:
• Free Alongside Ship (FAS).
• Free on Board (FOB).
• Cost and Freight (CFR).
• Cost, Insurance and Freight (CIF).
• The seven Incoterms applicable to all modes are the focus of this chapter.

2.2 EX WORKS (EXW)

• Full term: Ex Works named place.
• Normally, the seller's responsibility ends when the goods are packed and made available to the buyer at the seller's premises.
• The seller must provide a commercial invoice so the buyer can make necessary Customs arrangements.
• If requested, the seller must help the buyer arrange any export clearance necessary.
• The buyer arranges and pays for all transport from the seller's premises to the final destination.
• This includes arranging and paying for loading the goods onto the transport vehicle at the seller's premises.
• The buyer arranges and pays for all Customs formalities in both the seller's country and destination country.
• The buyer takes responsibility for all risks of loss or damage in transit.

2.3 FREE CARRIER NAMED PLACE (FCA)

• The seller is responsible for delivering the goods to a carrier named by the buyer.
• The buyer arranges and pays for transport after the seller delivers the goods to the named place.
• The buyer assumes the risks of loss or damage once the goods are loaded by the carrier at the named place.
• The named place is usually either the seller's premises or the carrier's premises.
• The seller is responsible for loading the goods onto the transport vehicle.
• The seller is also responsible for arranging export clearance.

2.4 CARRIAGE PAID TO (CPT)

• CPT and CIP are the two Incoterms beginning with the letter C discussed here.
• Under both, the seller contracts and pays for carriage, but risk passes to the buyer once the goods have been shipped.
• Full term: Carriage Paid To the named place of destination.
• The named destination is not necessarily the port of entry.
• Under CPT, delivery is legally complete, and risk passes from seller to buyer at the port of departure from the UK.
• Despite the transfer of risk, the seller must pay for transport to the named location in the destination country.

2.5 CARRIAGE AND INSURANCE PAID TO (CIP)

• CIP is very similar to CPT.
• The additional requirement is that the seller must arrange transit insurance for the entire journey.
• The seller therefore pays for carriage and arranges the required insurance, while risk passes to the buyer at the point specified by the Incoterm.

2.6 DELIVERED AT PLACE UNLOADED (DPU)

• The three D-group Incoterms share the key feature that legal ownership and risk do not pass from seller to buyer until the goods are delivered to a named place in the destination country.
• Under DPU, delivery occurs when the seller makes the goods available to the buyer after unloading at the named terminal.
• Example given by the source: the quayside at the port of destination.
• The buyer is responsible for import Customs clearance.
• The buyer pays any Customs duties required.

2.7 DELIVERED AT PLACE (DAP)

• The seller makes the goods available to the buyer on a vehicle at a named place.
• The goods are ready for unloading but have not yet been unloaded.
• The named place may be the buyer's premises.
• The seller is responsible for most costs and risks up to the point of unloading.
• The seller's responsibilities do not include import Customs clearance or payment of Customs duties.

2.8 DELIVERED DUTY PAID (DDP)

• Under DDP, the buyer has virtually no responsibilities.
• The seller arranges and pays for everything needed to deliver the goods to the specified destination.
• This includes duties, taxes and Customs formalities.
• The seller carries all risks until the goods are safely received by the buyer.