In our last post, we touched upon the topic of Incoterms and their importance. While it is true that Incoterms define a sales contract by listing the respective obligations of buyer and seller in terms of expenditure and risk involved, these by themselves do not constitute a contract. Incoterms also do not address the price payable to the seller, nor do they define the currency or credit terms. They, however, define parties’ intent and help them to standardize their contracts.
For a better understanding these internationally recognized rules for importers and exporters, we have given below a description of what the acronyms mean, and its interpretation:
EXW – EX WORKS
This is the first Incoterm under which the Seller’s only responsibility is to make the goods accessible to the Buyer. After that, the Buyer undertakes the expense and risk of moving the products from the Seller’s location.
FCA – FREE CARRIER
The Seller is responsible to deliver the goods, get them cleared for export and ensure they reach the place given by the Buyer. Under this Incoterm, the Buyer is liable to bear the cost and risk related to loading/unloading of the goods.
CPT – CARRIAGE PAID TO
CPT implies that the Seller is responsible for the freight of the goods carriage to the agreed destination and bears the cost and risk of loss/ damage to/of the goods till the time they are delivered into the custody of the Buyer or contractual carrier.
CIP – CARRIAGE AND INSURANCE PAID TO
The Seller purchases the cargo insurance and is responsible for the cost of moving the goods to the Buyer’s destination. However, as soon as the goods are transferred, the Buyer bears the risks of loss or damage to the goods.
DAT – DELIVERED AT TERMINAL
The Seller is responsible for the delivery of goods in addition to the maximum responsibility of both for costs (including export fees, carriage, insurance, and destination port charges) and risks. DAT can be used for any transport mode, or where there are multiple transport mode.
DAP – DELIVERED AT PLACE
The Seller delivers when the goods are placed at the Buyer’s disposal on the arriving means of transport ready for unloading at the named place of destination. The Seller bears all risks involved in bringing the goods to the named place. DAP and DAT Incoterm have only a single major difference – In DAT, the seller holds the responsibility for the unloading of goods to the named ‘terminal’, and consequently carries the risk, title and associated costs during the unloading. However, with the DAP Incoterm, the buyer holds the responsibility for the unloading of goods – the seller simply has to ensure that the goods are brought to the named ‘place’ and are available for the buyer to unload.
DDP – DELIVERED DUTY PAID
The Seller is responsible for coordinating and setting up the carriage to deliver the goods at the named place, with all the clearance (including that of import, taxes and duties) duly paid. The risk of loss or damage transfers to the Buyer only when the goods are made available to the buyer, ready for unloading. This rule places the maximum obligation on the seller.
Heavy Load Freight Services, while working for you, ensures that the respective Incoterm(s) is/are defined clearly in the beginning so that you have a clarity on how and when your good will be delivered. We understand that while exporting greatly contributes to your business’s financial growth, it can also be a time consuming process and offer customized solutions for the small and medium-sized business. To know more about how we can work together for your greater success, please contact us today!