INCOTERMS

General INCOTERMS

INCOTERMS (= International Commercial Terms) are the international rules which were drawn up for the foreign trade.

They regulate the way of transportation for goods. The rules also regulate the parts of costs of transportation between the seller and the customer and who is bearing the financial risk in case of loss. The INCOTERMS do not regulate the transitional phase of ownership of the goods between the seller and the customer. The terms are generally accepted; to be recognized by court they have to be a part of a contract.

Division of INCOTERMS

The INCOTERMS are subdivided into four groups. The order of the groups is supposed to demonstrate the rising responsibility for the goods on the side of the seller.

Division of the INCOTERMS
E-clause	Pick-up-clause : the transport costs and the risk have to be borne by the buyer.
F-clause	The main transport costs and risk have to be borne by the buyer.
C-clause	The main transport costs have to be borne by the seller, the risk has to be borne by the buyer.
D-clause	Ankunftsklausel: Arrival-clause: The transport costs and the risk have to be borne by the seller.

E-clause: Pick-up-clause

EXW	ex works
The seller is just compelled to have the goods ready on his premises. All costs for transport, insurance and export are borne by the buyer. The risk of loss and damage devolves to the buyer with the provision of the goods at an arranged location. The carrier has to load the material by himself, as the insurance company will not be liable in case the orderer causes a damage when loading the goods.

F-clause : Main transport by the buyer

FCA	free carrier
The FCA-clause commits the seller to hand over the goods to a carrier at an predestined location and to clear them for the export. The buyer bears the costs and the risk of the transport from this moment.
FAS	free alongside ship
The FAS-clause is a modification of the FCA-clause. The seller does not have to deliver the goods to a destined carrier at a destined location, but has to supply the goods alongside a destined ship. The costs and risk of the transport are borne by the buyer.
FOB	free on board
In addition to the FAS-clause the seller is committed to place the goods on board of a destined ship. From the moment the goods pass the railing of the ship the obligation to bear the transport costs and the risk devolve to the buyer. This clause is one of the most common and is often used for price quotations at the commodity market.

C-clause - Main transport by the seller

CFR	cost and freight
THE CFR-clause is used for transports by ship. The seller has to arrange for the goods to be placed on board of the ship in good order. That means that the risk of damage or destruction devolves to the buyer on board of the ship. However the seller has to bear the costs (incl. export) for the delivery to the port of destination. Thus the CFR-clause corresponds with the CIF-clause, which however includes an additional insurance that has to be effected by the seller. The insurance just covers the transport risk. In case the goods are not transported by ship the CPT-clause is to be considered.
CIF	cost, insurance, freight
The CIF-clause is an often used clause in overseas trade. The seller has to bear the transport costs and the insurance costs. He has to clear the goods for exportation in the country of export. Hereby the place of performance is also determined after German law. The risks of loss devolves to the buyer as soon as the seller delivers the goods on board the ship (is equivalent to a FOB-transaction with an additional acceptance of cost, insurance, freightcharges). This means that the seller is not responsible for a damage or destruction of the goods anymore. The buyer has to approach the insurance company that has been commissioned by the seller. The insurance company however provides only a minimum of coverage, if no further insurance has been effected. In case the goods are not transported by ship the CIP-clause is to be considered.
CPT	carriage paid to
Carriage paid to means that the seller bears the costs of the main transport. All other costs (customs duties, taxes, charges, clearing formalities) have to be borne by the buyer. The risk of loss and damage devolves to the buyer from the moment of the transfer of the goods to the carrier (in case of several carriers, to the first carrier).
CIP	carriage paid to
This clause commits the seller to bear the costs of the transport («carriage paid to», further costs as for example customs dutied are borne by the buyer- like CPT) and to effect and pay an insurance (“insured”). Indeed the buyer bears the risk of damage and loss from the moment of the transfer of the goods to the carrier, however in case of loss the insurance will compensate. The seller is only committed to effect an insurance with minimum cover if not otherwise arranged.

D-clause – Arrival-clause

DAF	delivered at frontier
With the DAF-clause the seller commits himself to deliver the goods to the frontier and make them available to the buyer.
DES	delivered ex ship
With the DEF-clause the seller is committed to transport the goods by ship to the port of destination. He is not responsible for the unoading. Costs and risk devolve to the buyer from the moment of the unloading.
DEQ	delivered ex quay
With the DEQ-clause the seller is committed to unload the goods as well and make them available to the buyer on the quay. Then the risk and costs devolve to the buyer.
DDU	delivered duty unpaid
The clause DDU commits the seller to clear the goods for import and make them available to the buyer at a destined location. Customs duties however have to be payed by the buyer. He also is responsible for all formalities.
DDP	delivered duty paid
The DDP-clause is the most conveniant for the buyer. The seller has to bear all costs and risk of the transport to the destination; including customs duties. Also: Carriage paid