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The so-called Incoterms (International Commercial Terms / Terms of International Trade) serve to define, within the framework of an international purchasing and selling contract, the reciprocal rights and obligations of the exporter and importer, establishing a standard set of definitions and rules determining and practices neutral, for instance: where the exporter must deliver the goods, who is in charge of the freight payment, who is the responsible party for hiring of insurance.

The Incoterms have that goal, since it is all about international rules, fair, of uniform character, which are the basis of all international business and aiming to promote its harmony.

As a matter of fact, does not impose but propose the understanding between seller and buyer, as far as the required tasks for displacement of the goods of where it is drafted to the place of final destination (area of consumption): packaging, internal transport, import and export licenses, terminal handling charge, transport and international insurance are all concerned.

EXW - Ex Works
  • Merchandise is available to the buyer in the vendor’s establishment, or any other location designated (factory, warehouse, etc), not custom cleared for export and not loaded in any collector vehicle;
  • This term represents minimum obligation for the vendor;
  • The buyer pays for all the costs and risks involved in removing the goods out of the vendor’s establishment;
  • As long as the purchasing and selling contract contains a specific clause about it, the risks and costs involved and loading of the goods in the way out may run on the vendor’s;
  • EXW should not be used if the buyer can not be responsible, directly or indirectly, by the export formalities;
  • This term may be used in any mode of transport.
FCA - Free Carrier
  • The vendor complete its obligations when the goods are delivered, duly custom cleared for export, to the attention of international carrier indicated by the buyer, at the given location;
  • As from that moment onwards, all vendor’s responsibilities cease, being then the buyer full responsible for all expenses and for any loss or damage that might happen to the goods;
  • The venue for delivery is very important to define responsibilities on the loading and unloading of the goods: if the delivery occurs at vendor’s premises, then it is the responsible for loading the buyer’s vehicle; if the delivery takes place elsewhere agreed, the vendor is not responsible for the unloading of your vehicle;
  • The buyer could indicate a third party, other than the carrier, to receive the goods. In this case, the vendor ceases its obligations when the goods are delivered to that indicated third party;
  • This term may be used in any mode of transport.
FAS - Free Along Ship
  • The vendor terminates its obligations at the time the goods are placed alongside the vessel carrier, at the quay or onto ferryboats used for loading at the appointed loading port;
  • As from that moment onwards, the buyer assumes all the risks and costs of loading, both freight and insurance payment and other expenses;
  • The vendor is responsible for the custom clearance of goods for export purposes;
  • This term may only be used for sea, river or lake transportation.
FOB - Free on Board
  • The vendor terminates its obligations when the goods transposes the ship's rails, at the indicated loading port and, as from that very moment onwards, the buyer assumes all responsibility for the losses and damages;
  • The delivery is consumed on board of the designated vessel by the buyer, when all costs are running on the buyer’s;
  • The vendor is responsible for the customs clearance of goods for export purposes;
  • This term may be exclusively used in the sea, river or lake transportation.
CFR - Cost and Freight
  • The vendor is responsible for payment of the needed costs to place the goods on board the ship;
  • The vendor is responsible for freight payment up to the designated port of destination;
  • The vendor is responsible for the customs clearance of goods for export purposes;
  • The risks of loss or damage to goods, as well as any other additional costs are transferred from the vendor to the buyer at the very moment the goods are crossing the ship’s rails;
  • If it is a vendor’s wish, for his own protection, the buyer must hire and pay the insurance of the goods;
  • Clause only usable in the sea, river or lake transportation.
CIF - Cost, Insurance and Freight
  • The responsibility over the goods is transferred from the vendor to the buyer at the very moment that goods are crossing the ship’s rails at the loading port;
  • The vendor is responsible for paying the needed costs and freight involved to take the goods to the indicated port of destination;
  • The buyer should receive the goods at the port of destination and then, as from that point, be responsible for all expenses;
  • The vendor is responsible for the custom clearance of goods for export purposes;
  • The vendor must hire and pay the insurance of the main transport;
  • The insurance paid by the vendor has minimum coverage, so it is for the buyer to evaluate the need to have a supplementary insurance made or not;
  • The risks as from the delivery point (after transposing the ship’s rails) are the buyer’s;
  • Clause only usable in the sea, river or lake transportation.
CPT - Carriage Paid to
  • The vendor hires and pays the freight to take the goods to the designated place of destination;
  • As from the moment that the goods are delivered to the custody of the carrier, the risks for loss and damages are transferred from the vendor to the buyer, as well as any possible additional costs which may incur;
  • The vendor is responsible for the customs clearance of goods for export purposes;
  • Clause used in any mode of transport.
CIP - Carriage and Insurance Paid to
  • In this mode, the vendor’s responsibilities are the same as those described in the above CPT – Carriage and Insurance Paid to - plus the hiring and payment of insurance to the goods destination;
  • As from the very moment that the goods are delivered to the custody of the carrier, the risks for loss and damages are transferred from the vendor to the buyer, as well as any possible additional costs which may incur;
  • The insurance paid by the vendor has minimum coverage, so it is for the buyer to evaluate the need to have a supplementary insurance made or not;
  • Clause used in any mode of transport.
DAF - Delivered at Frontier
  • The vendor must deliver the goods in the combined site at the border, but before the neighboor country’s customs border, assuming all the costs and risks up to this delivery site;
  • The delivery is made onto the vehicle transporter, without unloading it;
  • The vendor is responsible for the customs clearance of export purposes, but not by the import purposes;
  • After delivery of the goods, the costs and risks of loss or damage done to the goods are transferred from the vendor to the buyer;
  • Clause used for land transportation.
DES - Delivered Ex Ship
  • The vendor must place the goods available to the buyer, on board of the vessel, not customs cleared for import purposes, at the appointed port of destination;
  • The vendor assumes all the costs and risks up to the port of destination, before unloading;
  • This term should only be used in the sea, river or lake transportation.
DEQ - Delivered Ex Quay
  • The vendor’s liability consists in placing the goods available to the buyer, not customs cleared for import purposes, at the appointed port of destination quay side;
  • The vendor assumes all the costs and risks of transportation up to the port of destination and the unloading of the goods in the wharf;
  • As from that very moment onwards, the responsibility is buyer’s, including as regards to the customs clearance of import purposes;
  • This term should be used only in the sea, river or lake transportation.
DDU - Delivered Duty Unpaid
  • The vendor must place the goods available to the buyer at the appointed place of destination, without being customs cleared to import purposes and without unloading from the carrier vehicle;
  • The vendor assumes all costs and risks up to the delivery of the goods at the appointed place of destination, except for the customs clearance of import purposes;
  • It is up to the buyer the payment of duties, taxes and other official charges by means of import purposes;
  • This term may be used for any mode of transport.
DDP - Delivered Duty Paid
  • The vendor delivers the goods to the buyer, customs cleared to import purposes, at the appointed place of destination;
  • It is the INCOTERM which establishes a major degree of commitment to the vendor, according as the same assumes all risks and costs related to the transport and delivery of the goods at the appointed place of destination;
  • It should not be used when the vendor is not able to obtain, directly or indirectly, the needed documents for the import of the goods;
  • Although this term can be used for any mode of transport, it should be observed that it is required the use of the terms DES or DEQ for those cases when the delivery is made at the port of destination (on board of the carrier vessel or at the pier).

Source: Condições Internacionais de compra e Venda INCOTERMS 2000 - Ângelo Luiz Lunardi - Edição Aduaneira - SP 2000.


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