Incoterms

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Incoterms are international rules that are accepted by governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade. They either reduce or remove altogether uncertainties arising from differing interpretations of such terms in different countries.

The eleven pre-defined terms that make Incoterms 2010 are subdivided into two categories based only on method of delivery. The larger group of seven rules applies regardless of the method of transport, with the smaller group of four being applicable only to sales that solely involve transportation over water.

Incoterms 2010

Any mode of transport

The 7 rules defined by Incoterms 2010 for any mode(s) of transportation are:


EXW – Ex Works (named place of delivery)

The seller makes the goods available at its premises. The buyer is responsible for unloading. This term places the maximum obligation on the buyer and minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included. EXW means that a seller has the goods ready for collection at his premises (works, factory, warehouse, plant) on the date agreed upon. The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination. The seller doesn't load the goods on collecting vehicles and doesn't clear them for export. If the seller does load the good, he does so at buyer's risk and cost. If parties wish seller to be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale.


FCA – Free Carrier (named place of delivery)

The seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the named place. The buyer pays for carriage to the named point of delivery, and risk passes when the goods are handed over to the first carrier.


CPT – Carriage Paid To (named place of destination)

The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier at place of Import.


CIP – Carriage and Insurance Paid to (named place of destination)

The containerised transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.


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.


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.


DDP – Delivered Duty Paid (named place of destination)

Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The buyer is responsible for unloading. This term is often used in place of the non-Incoterm "Free In Store (FIS)". This term places the maximum obligations on the seller and minimum obligations on the buyer.


Sea and inland waterway transport

The four rules defined by Incoterms 2010 for international trade where transportation is entirely conducted by water are:


FAS – Free Alongside Ship (named port of shipment)

The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). This term is typically used for heavy-lift or bulk cargo.


FOB – Free on Board (named port of shipment)

The seller must load the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel. The seller must clear the goods for export. The term is applicable for maritime and inland waterway transport only but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). The buyer must instruct the seller the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. This term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments.


CFR – Cost and Freight (named port of destination)

Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is NOT included. This term is formerly known as CNF (C&F). Maritime transport only.


CIF – Cost, Insurance and Freight (named port of destination)

Exactly the same as CFR except that the seller must in addition procure and pay for the insurance. Maritime transport only.

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» Visit the Incoterms website for more information.

* Image from FER Fischer & Rechsteiner

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I just wanted to drop you a short note because our team locally has been under enormous pressure in satisfying some of our largest customers with product.Thru the efforts of Zdenka, we are delivering pretty much as the customers need and they have acknowledged the excellent service we are providing them . A large part of this is thru your teams efforts too ..so thank you and pls pass on our positive and appreciated comments to Zdenka

Brian Pert
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Sebastian Loader, Owner/Operator
Sustainable Living Furniture
www.sustainablef.com.au
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www.jvplay.com.au
"At Lovehoney and personally, we try to deliver good and bad news in equal proportion. As bad as our previous forwarder has been for us over recent months, this is mirrored in the positive and proactive stance of your Brisbane Team. They have all been excellent, specifically Alice and Tara. It makes a nice change when a supplier puts in as much effort into their business, as we do for our customers.
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Rob Godwin
Love Honey
www.lovehoney.com.au
"Just a quick note to say thanks for the excellent delivery service this week of our goods from VITSOE UK. Your communication in the lead up was exemplary and your driver on the day was punctual, friendly and helpful. Recently I find it rare to come across people who do as they promise… You were 100% reliable from start to finish. Feel free to forward this to your boss. We couldn't have been happier with the service you provided.
All the best mate. "
Rory Toomey, Architect
"Just over two years ago we approached ICE to assist with our international freight forwarding of importing goods from UK to Australia. We were a newly established start-up with no experience in importing and freight, nor with any trading history. It was the personal support and belief in us by ICE that made us choose to work with you. We appreciated the hand on support and guidance in the early stages, as international freight can be a complicated task for SMEs to take on when starting up. Having direct access to you and your team, offering quality service and flexibility made a real difference for us.

Also of value to our relationship has been the ability to store & access product at both you Melbourne and Sydney offices – which is useful when expanding across the country. As is the ability to arrange collection in the UK and delivery from door to door.

I'm sure there's many other freight forwarders out there competing for the same customer, but aren't convinced many of them offer more of a personalised service, backed up with support and flexible access when you need it most.

Thanks for the great two years, happy to advocate your success to others, and speak with them should they want to hear first-hand about our experience with ICE. Here's to a great working relationship in the year ahead."

Rob Mikecz, Owner, Rochester Ginger
www.indigogreen.com.au
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All the best mate. "
www.ulbrich.com.au
"Hi guys
Just wanted to let you know how well Mark Mackovski has looked after us (me!) over the past two weeks regarding our three open top containers from Italy. Customs attempted to make life difficult but Mark arranged the entire situation from start to finish with expertise. Thank you for the opportunity to work with Mark as he was diligent, very helpful and pro-active in keeping me informed of the changing status of our 3 containers. Mark's efforts enabled me to keep various managers here at APP alerted each and every step of the way relating to the clearance and delivery of such large shipments. Our managers are happy with me and I am happy with Mark!
You have obviously taught him well!
Thanks again guys."

Annie Henry, Marketing – Import/Export Assistant, Australian Plastic Profiles Pty. Ltd. & Pipe King Pty. Ltd.
http://www.app.net.au
"It's nice to finally deal with a professional organisation with a friendly and efficient sales person! I have spent some time on the phone today getting grunted at and told "we will get back to you". I was starting to think that the entire industry was made up of nuffy's! Please make sure you pass on my positive feedback to your manager (and ask him/her for a raise while you're at it!):0) As I mentioned on the phone, we are just embarking on a trading relationship with a couple of companies in India. I foresee that we will have ongoing orders with these companies and there will be a steady stream of airfreight from them to us. Hence the need to get my head around my freight costs. The idea of using a "one stop shop" for our supply chain requirements appeals to me.
Cheers, Doug Baird"

bendigopatternmakers.com.au
"I was nervous about jumping into the international scene after managing a successful domestic e-commerce business for 3 years. But ICE offered such great hands-on service, I didn't need to worry about anything. I was guided along by the ICE cargo professionals from start to finish. Any question I had was immediately addressed by their really friendly staff. Thumbs up. "

Alan Reynolds, Perth
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Andrea Martin, Sydney
"Starting an online business is difficult for beginner like myself. Not only was I new to e-commerce, but also I had zero experience with international trade and importing. ICE explained and managed this process for me in such a friendly and accessible way, that any apprehension I felt quickly disappeared. "

Rob Dellenbauch, Sydney
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Laurie Bradford, Brisbane

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