Under the contract of sales, Incoterms® determine the rights and obligations of the parties as far as the delivery of goods from the seller to buyer is concerned. They give a common framework to understand how transport is organized and by whom, who bears the risks inherent to it, and who is in charge of the shipment’s security and customs compliance.
Incoterms® always follow the same structure – a three-letter acronym and a location name. The location name is important in the sense that it indicates where transportation costs are handed over from the seller to the buyer. However, from one Incoterm to the other, that same location name may not indicate where risks are being transferred, nor give information on where and by whom transport insurance should be organized
The Incoterms® only indicate how transport costs and risks are distributed between the seller and the buyer, as explored above. The Incoterms® rules do not indicate the price to be paid for the goods, nor their payment method. They also do not regulate the transfer of ownership of goods or the dispositions in case of a breach of contract. These matters are usually defined in express terms in the sales contract, or in the laws applicable to it. Moreover, the parties are strictly bound by local laws – they may take precedence over any aspect of the contract of sale, including the selected Incoterms®.
EXW (EX WORKS)
The seller fulfils its obligations by having the goods available for the buyer to pick up at its premises or another named place (i.e. factory, warehouse, etc.). Buyer bears all risk and costs starting when it picks up the products at the seller’s location or other named place until the products are delivered to its location. Seller has no obligation to load the goods or clear them for export.
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 on board the vessel at the named port of shipment. Buyer assumes all risks and cost for goods from this moment forward.
CFR (COST AND FREIGHT)
Seller clears the goods for export and delivers them when they are on board the vessel at the port of shipment. Seller bears the cost of freight to the named port of destination. Buyer assumes all risks for the goods from the time the 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 on board the vessel at the port of shipment. Seller bears the cost of freight and insurance to the named port of destination. The seller is required to purchase the minimum level of insurance under Clause C of the Institute Cargo Clauses. This requirement is unchanged from Incoterms 2010.
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 on board the vessel at the port of shipment.
FCA (FREE CARRIER)
The seller is responsible for either making the goods available at its own premises or at a named place. In either case, the seller is responsible for loading the goods on the buyer’s transport and is responsible for delivery to the port and export clearance including security requirements. Risk transfers once the goods are loaded on the buyer’s transport.
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, at which point risk transfers to the buyer. 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, at which point risk transfers to the buyer. Seller is responsible for the transportation costs associated with delivering goods and procuring insurance coverage to the named place of destination.
In Incoterms 2020 rules for CIP, the seller is now responsible for purchasing a higher level of insurance coverage—at least 110% of the value of the goods as detailed in Clause A of the Institute Cargo Clauses.
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. DAP means the 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.
DPU (DELIVERED AT PLACE UNLOADED)
Previously named Delivered at Terminal (DAT), this Incoterm has been renamed Delivered at Place Unloaded (DPU) because the buyer and/or seller may want the delivery of goods to occur somewhere other than a terminal.
This term is often used for consolidated containers with multiple consignees, and it is the only term that tasks the seller with unloading the goods. 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.
DDP (DELIVERED DUTY PAID)
DDP Incoterms means the seller bears all risks and costs associated with delivering the goods to the named place of destination ready for unloading and cleared for import.
*For more information please refer to: https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/
According to IATA, dangerous goods (DGs) are “articles or substances which are capable of posing a risk to health, safety, property or the environment, and which are shown in the list of dangerous goods in these Regulations or which are classified according to these Regulations.”
According to the international regulatory agencies recognize nine classes of dangerous goods:
Class 1: Explosives
Fireworks, airbag inflators, ammunition, etc.
Class 2: Gases
Aerosols, fire extinguishers, propane cylinders, etc.
Class 3: Flammable liquids
Paints, lacquers, alcohols, etc.
Class 4: Flammable solids, spontaneous combustibles, and “dangerous when wet” materials
Matches, carbon, sodium batteries, etc.
Class 5: Oxidizers
Hydrogen peroxide, ammonium nitrate fertilizers, pool chlorine, etc.
Class 6: Toxic or infectious substances
Medical waste, dyes, pesticides, etc. Infectious substances are materials that contain pathogens. These micro-organisms (including bacteria, viruses, parasites and fungi) and other agents can cause disease in humans or animals.
*For more information please refer to: https://www.iata.org/contentassets/b08040a138dc4442a4f066e6fb99fe2a/dgr-61-en-3.6.2.pdf
Class 7: Radioactive materials
Density gauges, medical treatment products, uranium, etc.
Class 8: Corrosives
Acids/acid solutions, batteries, iodine, etc.
Class 9: Miscellaneous
Dry ice, internal combustion engines, first aid kits, etc.
Many of these classes are divided into sub-classifications according to various properties such as temperature sensitivity (also known as flash point), toxicity, and flammability.
*For more information please refer to: https://www.iata.org/contentassets/b08040a138dc4442a4f066e6fb99fe2a/dgr61-addendum1-en.pdf. And for singapore’s procedures for dangerous goods declaration, please refer to: https://www.mpa.gov.sg/web/portal/home/port-of-singapore/operations/hazardous-cargo-information/declaring-dangerous-goods