INCOTERMS 2010

Incoterms make up the set of international rules agreed and revised by the International Chamber of Commerce, helping us to understand the terms according to which an international goods purchase-sale agreement has been signed.

Through Incoterm we can establish certain criteria regarding the distribution of costs and transfer of risks. The Incoterms form part of – and should be considered to be – the price clause, given that they enable us to determine the total cost of the operation.

Through Incoterm we can establish:

The price of the operation
When and where the transfer of risks regarding the goods passes from the seller to the buyer
The place where the goods must be delivered
Documents to be processed by each party and their cost
Who contracts and pays the goods insurance

The most habitual Incoterms include the following:

EXW

Can be used for any kind of transport.
The designated place must always be specified: “EXW (Place of collection of goods)
Definition:
Ex Works: “En fabrica”
The seller hands over the goods or places the goods at the disposal of the buyer at the seller’s premises or a place agreed by the two parties, without loading the goods.

FCA

Can be used for any kind of transport.
The designated place must always be specified: “FCA (Place of collection of goods)
Definition:
Free Carrier: “Franco Porteador”
The seller hands over the goods to the carrier at the designated place. The customs procedures are paid by the seller.

FOB

Can be used for transport by sea.
The designated port of embarkation must always be specified: “FOB (Port or Terminal agreed).
Definition:
Free On Board: “Franco a Bordo”
The seller hands over the goods onboard the ship designated by the buyer at the port of embarkation. The customs procedures are paid by the exporter.

CFR

Can be used for transport by sea.
The destination port must always be specified:” CFR (Designated port of destination).
Definition:
Cost and Freight: “Coste y Flete”
The seller hands over the goods on-board the ship and must contract and pay the freight charges.

CPT

Can be used for any kind of transport.
The designated place must always be specified: “CPT (Designated place of destination)
Definition:
Carriage Paid To: “Transporte Pagado Hasta”
The seller hands over the goods to the carrier at a designated place, contracting and paying the cost of transport to the destination agreed.
The distinction between the Incoterms CFR, CPT, CIP (same obligations as CPT, but the seller also contracts the insurance) and CIF (same obligations as CFR, but the seller also contracts the insurance) is important, because the risks and costs are transferred in different places.

It is often erroneously thought that in a CFR, CPT, CIP or CIF sale the buyer does not assume the risks of international transport or the main form of transport, but this is not the case. The risk is transferred at the port of embarkation.

DAP

Can be used for any kind of transport.
The designated place must always be specified: “DAP (Designated place of destination)
Definition:
Delivered At Place: “Entregada En Lugar”
The seller hands over the goods unloaded from the main form of transport, placing them at the disposal of the buyer at the buyer’s premises or at an agreed place, thus paying all of the costs and assuming all of the risks up to the place agreed, without paying the import dispatch costs.

DDP

Can be used for any kind of transport.
The designated place must always be specified: “DDP (Designated place of destination)
Definition:
Delivery Duty Paid: “Entregada derechos (aranceles) pagados”
The seller places the goods at the disposal of the buyer at the buyer’s premises or at an agreed place, paying all of the costs and assuming all of the risks up to the place agreed. The seller also pays for the import procedures and corresponding charges.