Incoterms: Rules for Any Mode of Transport

Incoterms (International Commercial Terms) 2020 consists of 11 distinct rules, each represented by an abbreviation. These rules are divided into two main categories: those for any mode or modes of transport, and those specifically for sea and inland waterway transport.

This article will cover the terms for any mode of transport include EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAP (Delivered at Place), DPU (Delivered at Place Unloaded), and DDP (Delivered Duty Paid).

 

EXW - Ex Works (named place of delivery) 

EXW represents the minimum obligation for the seller. Under this term, the seller's responsibility ends when they make the goods available at their premises (e.g., factory, warehouse) to the buyer. The buyer bears all risks and costs involved in taking the goods from the seller's premises to the desired destination, including loading onto the collecting vehicle, export clearance, and all subsequent transportation. 

FCA - Free Carrier (named place of delivery) 

FCA is more flexible than EXW and has two possible delivery variations: At the seller's premises, or another named place. 

In both cases, the seller's responsibility ends when the goods are handed over to the carrier nominated by the buyer. The 2020 update allows for the issuance of an on-board Bill of Lading under FCA terms when agreed upon by both parties. 

CPT - Carriage Paid To (named place of destination) 

Under CPT, the seller pays for the carriage of goods to the named destination. The risk transfers to the buyer when the goods are handed over to the first (principal) carrier, but the seller is responsible for contracting and paying for the main carriage up to the named destination. 

CIP - Carriage and Insurance Paid to (named place of destination) 

CIP is similar to CPT, but with the added requirement that the seller obtains insurance coverage against the buyer's risk of loss or damage to the goods during transit. The 2020 update increased the required level of insurance coverage to all risks (ICC A) providing more protection for the buyer. 

DAP - Delivered at Place (named place of destination) 

 With DAP, the seller is responsible for delivering the goods to a specified destination, ready for unloading. The seller bears all risks involved in bringing the goods to the named place. The buyer is responsible for import clearance and any applicable local taxes, import duties, and transportation to the agreed destination. 

DPU - Delivered at Place Unloaded (named place of destination) 

DPU replaced the previous DAT (Delivered at Terminal) term in the 2020 update. The seller delivers and unloads the goods at a specified destination. The buyer is responsible for import clearance and any applicable local taxes, import duties, and transportation from the agreed destination. 
 

DDP - Delivered Duty Paid (named place of destination) 

DDP represents the maximum obligation for the seller. All the transport, insurance and customs clearance obligations are for the seller who will bear all risks of damage or loss until the goods are delivered to the buyer, cleared for import but still loaded, at the named place. 

 

Implications:

Each of these terms carries specific implications for both buyers and sellers. For instance, EXW places minimal responsibility on the seller, with the buyer bearing all costs and risks involved in taking the goods from the seller's premises to the desired destination. On the other hand, DDP represents the opposite extreme, placing maximum obligations on the seller, who is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to destination, duties, taxes, and customs formalities.

To learn more about Incoterms view our Incoterm Resource here!

Contributor: Brandon Munn

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