In the practice of foreign trade, the mutual obligations of the exporter and the importer are captured in concise formulas, which determine the division of costs, responsibilities, and risks of goods delivery between the parties entering into a contract. The most commonly used are the Incoterms rules, developed by the International Chamber of Commerce. On January 1, 2011, a new version came into effect – Incoterms® 2010.
The article highlights the most important changes introduced in them and the division of transport costs between the exporter and the importer. Although these issues are inherently of interest to exporters and importers, knowledge of them is also essential for entities involved in the logistics handling of foreign trade cargo, who are also often advisors to their clients.
It should be added that “Incoterms” is a registered trademark of the International Chamber of Commerce and, in accordance with its requirements, must be written with the ® symbol.
The most important changes introduced in relation to Incoterms 2000 are:
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Incoterms® 2010 contain an interpretation of 11 rules. Compared to Incoterms 2000, their number has decreased by two.
Four rules were eliminated, namely DES, DEQ, DAF, and DDU, which were replaced by two new ones: DAT and DAP (Table 1). Under DAT, the exporter’s obligation is to deliver the goods to a specified terminal at the port or place of destination, including unloading, and under DAP, to deliver the goods to a specified place of destination, without unloading from the means of transport. -
in maritime trade, after 74 years, the “ship’s rail” line, which had been present since the 1936 Incoterms, was eliminated as the point of transfer of risk of damage or loss of goods in the FOB, CFR, and CIF rules, and in the FOB rule, also as the point of cost division. The seller’s obligation is to deliver the goods on board the vessel, and this is also the point of risk transfer between the buyer and the seller.
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a new classification of the rules was made, presenting them in two groups: rules used for the carriage of goods by all modes of transport, including multimodal transport, where a place (of delivery/destination) is specified, and rules used for the carriage of goods by sea or inland waterway, where a port (of loading/destination) is specified.
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the scope of cargo insurance in the CIP and CIF rules was clarified, specifying that it is insurance under the (C) clauses of the Institute Cargo Clauses.
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the seller’s obligations were addressed when goods are sold while in transit.
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obligations of the parties to the sales contract related to security clearances were introduced.
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it was specified that any document referred to in Incoterms® 2010 may be in the form of an electronic record if the parties have so agreed or if it is customary (previously this only applied to the invoice and transport document).
Transport costs
To determine who – the exporter or the importer – bears the costs of transporting the goods and for which segment, the classification of Incoterms® 2010 rules into the following four groups is useful:
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group E, including only one rule, EXW; the buyer, who organizes transport for the entire delivery route from the sender to the recipient, bears all costs and risks associated with the delivery.
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group F, including the rules FCA, FAS, and FOB; the seller does not bear the principal transport costs; in FCA, they do not bear them at all if the carrier collects the goods at their premises, or they bear the cost of transport to the carrier’s terminal, and in FAS and FOB, they bear the cost of transport to the port of loading.
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group C, including the rules CFR, CIF, CPT, and CIP; the seller bears the transport costs to the place (CPT, CIP) or port (CFR, CIF) of destination specified in the rule (the risk of damage or loss of goods during transport is borne by the buyer).
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group D, including the rules DAT, DAP, DDP; the seller bears the costs (as well as the risk) to the place of destination specified in the rule.
The article comes from the magazine “Logistyka” 3/2011.