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A Beginner's Guide to ICC Incoterms 2010 [Chart]

August 20, 2015 by Mary-Kerstin Hassiotis

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Whether you are brand spankin' new to international shipping or just need a refresher on the ins and outs of Incoterms, we have you covered. As a former international logistics coordinator, I used to live and breathe these three-lettered acronyms. International freight is a complex beast, so it's important to understand the industry lingo, associated risks and costs, and how it all affects you. 

ICC_Incoterms_2010

What Are ICC Incoterms 2010?

International Commercial Terms are the International Chamber of Commerce (ICC) standardized rules that explain the most commonly used international trade terms. Incoterms were established in 1936 to avoid misunderstandings or misinterpretations between different countries. Their goal is to clearly communicate the costs, risks and responsibilities related to the transportation of goods. The terms are updated as changes in international trade occur; amendments were made in 1953, 1967, 1976, 1980, 2000 and 2010. 

Incoterms 2010 defines 11 rules, which are broken down into two categories based on method of delivery: 1) all modes of transport and 2) sea and inland waterways only. While you could technically use Incoterms 2000 instead of 2010, I would discourage you from doing so to avoid confusion (plus, it's not posh to live in the past unless you're stuck in a pleather phase, in which case, go ahead and party like it's 1999). 

Why Should I Care about Incoterms?

Because understanding and using them correctly will save you headaches! Whether you are a buyer, seller or shipper, if you are operating globally, you need to know what you're talking about when it comes to Incoterms. Here are just a few reasons Incoterms should matter to you:

  • They ensure that everyone is on the same page. Buyers and sellers can reference a standardized rule with clearly defined responsibilities, costs and risks. 
  • They reduce the risk of legal issues since everything is outlined clearly and there is no room for interpretation or he-said/she-said games. 
  • While Incoterms do not mention pricing, they do help buyers and sellers understand which tasks each party is responsible for so there are no expensive surprises along the way.

Can I See an Incoterms 2010 Chart?

Voila! Click the image to open larger (then zoom in).

Incoterms

That is a Lovely Chart, But What Does It All Mean? 

Descriptions via export.gov

Any Mode of Transport:

  • EXW (Ex Works)
    The seller fulfills his obligations by having the goods available for the buyer to pick up at his premises or another named place (i.e. factory, warehouse, etc.). Buyer bears all risk and costs starting when he picks up the products at the seller’s location until the products are delivered to his location. Seller has no obligation to load the goods or clear them for export.
  •  
  • FCA (Free Carrier)
    The seller delivers the goods export cleared to the carrier stipulated by the buyer or another party authorized to pick up goods at the seller’s premises or another named place. Buyer assumes all risks and costs associated with delivery of goods to final destination including transportation after delivery to carrier and any customs fees to import the product into a foreign country.
  •  
  • CPT (Carriage Paid To)
    Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment. Seller is responsible for the transportation costs associated with delivering goods to the named place of destination but is not responsible for procuring insurance.
  •  
  • CIP (Carriage and Insurance Paid To)
    Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment. Seller is responsible for the transportation costs associated with delivering goods and procuring minimum insurance coverage to the named place of destination.
  •  
  • DAT (Delivered at Terminal)
    Seller clears the goods for export and bears all risks and costs associated with delivering the goods and unloading them at the terminal at the named port or place of destination. Buyer is responsible for all costs and risks from this point forward including clearing the goods for import at the named country of destination.
  •  
  • DAP (Delivered at Place)
    Seller clears the goods for export and bears all risks and costs associated with delivering the goods to the named place of destination not unloaded. Buyer is responsible for all costs and risks associated with unloading the goods and clearing customs to import the goods into the named country of destination.
  •  
  • DDP (Delivered Duty Paid)
    Seller bears all risks and costs associated with delivering the goods to the named place of destination ready for unloading and cleared for import.  
Sea and Inland Waterway Transport Only:
  • FAS (Free Alongside Ship)
    Seller clears the goods for export and delivers them when they are placed alongside the vessel at the named port of shipment. Buyer assumes all risks/costs for goods from this point forward.
  •  
  • FOB (Free on Board)
    Seller clears the goods for export and delivers them when they are onboard the vessel at the named port of shipment. Buyer assumes all risks/cost for goods from this moment forward.
  •  
  • CFR (Cost and Freight)
    Seller clears the goods for export and delivers them when they are onboard the vessel at the port of shipment. Seller bears the cost of freight to the named port of destination. Buyer assumes all risks for goods from the time goods have been delivered on board the vessel at the port of shipment.
  •  
  • CIF (Cost, Insurance and Freight)
    Seller clears the goods for export and delivers them when they are onboard the vessel at the port of shipment. Seller bears the cost of freight and insurance to the named port of destination. Seller’s insurance requirement is only for minimum cover. Buyer is responsible for all costs associated with unloading the goods at the named port of destination and clearing goods for import. Risk passes from seller to buyer once the goods are onboard the vessel at the port of shipment. 

And there you have it: a beginner's guide to ICC Incoterms 2010. Stay tuned for more logistics posts, including a breakdown of expediting options and how to determine when air freight is worth the cost.

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Posted by Mary-Kerstin Hassiotis

Mary-Kerstin, also known as MK, worked with East West Manufacturing for over 4 years before leaving to launch her own business. She joined the marketing team in 2015 as content writer after managing East West's international logistics for 2 years. She is a proud graduate of the University of Georgia.

Topics: Logistics

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