Incoterms® 2020: everything you need to know

What are Incoterms®?

The Incoterms® are written agreements between you and your business partner abroad. There are several types, and which one is right for your situation depends on which type of transport you use, where the goods - and the liability for any damages - are transferred from seller to buyer, and so on. Before you choose an Incoterms® rule, you need to know how the goods will be transported, and how much of the obligations you want to take on. And, of course, if your business partner agrees. This article offers an explanation, examples, and the most important obligations for buyers and sellers per Incoterms® rule.

The Incoterms® were drawn up by the International Chamber of Commerce (ICC). They are revised every 10 years. The latest version is from 2020 and contains 11 Incoterms®:

• Ex Works (EXW) 
• Free Car rier (FCA)
• Free Alongside Ship (FAS)
• Free On Board (FOB)
• Carriage Paid To (CPT)
• Carriage and Insurance Paid To (CIP)
• Cost and Freight (CFR)
• Cost Insurance and Freight (CIF)
• Delivered At Place (DAP)
• Delivered at Place Unloaded (DPU)
• Delivered Duty Paid  (DDP)
• Outside the scope of the Incoterms®

Ex Works (EXW)

The Incoterms® rule Ex Works (EXW) imposes the fewest obligations on the seller. All they have to do is have their goods ready for the buyer at an agreed location, often their business premises, workshop, or storage space.

Obligations for the buyer

EXW is an 'unfriendly' Incoterms® rule for the buyer, because they have to arrange the entire transport themselves. They bear all costs associated with transport to the final destination. They also bear the risk of loss or damage to the goods from the moment they receive the goods at the agreed location. This location, where the risk transfers from seller to buyer, is also referred to within Incoterms® as the ‘place of delivery’ (under EXW usually the seller's premises). The buyer is even responsible for loading the goods into the vehicle. Because a carrier has limited liability on the basis of international transport agreements, the buyer would be wise to take out transport insurance.

EXW and mode of transport

You can agree on EXW for all modes of transport (by road, water, rail, and air). In the Netherlands, EXW is known as ‘Af fabriek’.

Export to countries outside the EU

EXW is not suitable for export shipments. Suppose the seller is established in the Netherlands and the buyer in a country outside the EU. With EXW, the buyer is responsible for the export declaration at Dutch Customs. This is not practical. Since 1 October 2020, the exporter listed in the export declaration must be established in the EU. The buyer from outside the EU will therefore have to find another party in the EU, such as a logistics service provider or customs broker, to act as an exporter for the export declaration.

The buyer is also responsible for arranging an export licence or other export documents, if necessary.

VAT 0% rate

Applying the VAT 0% rate requires extra attention. A Dutch seller of products to a country outside the EU may invoice 0% VAT to their customer outside the EU. To do so, they must be able to demonstrate that the goods have left the EU. Because the buyer is responsible for the export declaration with customs, it is difficult for the seller to prove the export. They then depend on the buyer (or logistics service provider) to provide proof of export, known as Confirmation of Exit. Is the export not sufficiently demonstrated? In that case, the Dutch Tax and Customs Administration will consider the transaction a domestic delivery. This means the seller has to pay Dutch VAT.

Advice: minimum FCA

Especially when doing business with suppliers or customers outside the EU, it is advisable to agree at least on the  Incoterms® rule Free Carrier (FCA) instead of EXW. With FCA, the seller is responsible for arranging export formalities and all export documents. They are also responsible for loading the goods into the transportation vehicle at the agreed location.

This makes FCA a suitable alternative to EXW. Because the main transport is arranged by the buyer, while the seller can demonstrate that their goods have left the EU and can therefore rightly invoice 0% VAT to the buyer.

EXW and international payments

EXW is difficult to combine with the international payment methods Letter of Credit (L/C) and documentary collection. With these methods, payment takes place on the basis of the presented commercial documents. The seller must deliver these documents to their bank. The bank then forwards these to the buyer's bank.

An example of a commercial document is a transport document. At EXW, the seller is not responsible for arranging the transport. The seller may therefore not have a transport document. And if this is missing, they run the risk that the bank will not pay out.

State EXW in agreements

Have you agreed on EXW? State this in the agreement with your business partner abroad as follows: 'EXW (followed by the agreed place of delivery) Incoterms® (annual version)'.

Example (for a Dutch exporter): "EXW Fabrieksstraat 5, Utrecht, Netherlands, Incoterms® 2020".

Free Carrier (FCA)

Under the Incoterms® rule Free Carrier (FCA) the seller has slightly more obligations than under the Incoterms® rule Ex Works (EXW). A seller only needs to hand over their goods to (the carrier of) the buyer at an agreed location – often their business premises or an external location, such as a (group) warehouse or a terminal in the seaport of departure. From that moment on, the buyer bears all costs related to transport and the risk of loss or damage to the goods. When exporting shipments to a country outside the EU, the seller is responsible for the export declaration to customs. Buyer and seller are free to take out transport insurance for the part of the transport for which they are liable.

FCA and mode of transport

You can agree on FCA for all modes of transport (by road, water, rail, and air). In the Netherlands, FCA is known as ‘Vrachtvrij tot Vervoerder’.

FCA: A and B

FCA has 2 variants:

FCA-A

Transfer of risk and costs from seller to buyer takes place at the moment that the seller has loaded their goods at their premises or place of business onto the transportation vehicle of the buyer or the carrier engaged by the buyer. Within Incoterms®, the place where the risk transfers from seller to buyer is referred to as the ‘place of delivery’. Under FCA-A, that is the seller's premises or place of business. FCA-A often occurs with full container loads (FCL).

FCA-B

Under FCA-B the seller transports their goods to an external location, for example to a group warehouse or to the port of departure.

For smaller deliveries (Less than Container Load / LCL) it is possible to combine goods in a container with goods from other companies. This merging usually takes place at an external location, such as a consolidation warehouse. In this case, the transfer of risk and costs from seller to buyer takes place after arrival of the non-unloaded transport vehicle arranged by the seller at the external location (this is the place of delivery). The buyer is then responsible for unloading the arriving transport vehicle from the seller, and then loading the goods into the container at the external location. The seller bears the costs and risk of the pre-transport, which means the transport from their company to the external location.

Under FCA-B it is also possible for the seller to deliver a full container of goods (FCL) to a terminal in the seaport of departure. Here too, the transfer of risk and costs from seller to buyer takes place after arrival at the terminal of the non-unloaded transport vehicle arranged by the seller.

Export to countries outside the EU

Is the destination of the goods outside the European Union (EU)? In addition to taking care of the export declaration at customs, the seller is also responsible for arranging an export licence and other export documents, if necessary. For import into the country of destination, the buyer arranges the customs formalities and the payment of any import taxes. If necessary, the buyer also applies for local import documents (such as an import licence).

FCA or EXW

If you do business internationally, FCA is more suitable than EXW. Under FCA, the seller is responsible for arranging export formalities and any export documents. Under EXW, this is the responsibility of the buyer. This is impractical and in some cases impossible. EXW makes the buyer responsible for loading the goods into the vehicle at the agreed location (usually the seller's premises). In practice, it often happens that the driver does not load the goods into the vehicle, but that the seller or their staff does. In that case, FCA is practically already taking place.

FCA and international payments

FCA is difficult to combine with the international payment methods Letter of Credit (L/C) and documentary collection. With these methods, payment takes place on the basis of the presented commercial documents. The seller must deliver these documents to their bank. The bank then forwards these to the buyer's bank.

An example of a commercial document is a transport document. In the case of maritime transport, the bank often asks for an on-board bill of lading. This is the shipping company's proof that the goods are aboard the departing ship. The seller is normally unable to provide this document, because the seller is not involved in the loading of the ship under FCA. After all, they are not responsible for arranging the sea transport. The seller may therefore not have a transport document. If this is missing, they run the risk that the bank will not pay out.

Since the revision of FCA in the 2020 version of the Incoterms®, the buyer and seller can tackle this problem by agreeing that the buyer instructs their carrier to issue an on-board bill of lading to the seller. This option allows the seller to still meet the bank's requirement to submit an on-board bill of lading when paying via L/C or documentary collection. If the buyer and seller want to arrange matters this way, they must include this in the agreement.

State FCA in agreements

Have you agreed on FCA? State this in the agreement with your business partner abroad as follows: 'FCA (followed by exact agreed place of delivery) Incoterms® (annual version)'.

Example (for Dutch exporter) for FCA-A: ‘FCA (A) Fabrieksstraat 5, Utrecht, Netherlands, Incoterms® 2020’.

Example (for Dutch exporter) for FCA-B: ‘FCA (B) Groupageweg 10, Rotterdam, Netherlands, Incoterms® 2020’.

Free Alongside Ship (FAS)

The Incoterms® rule Free Alongside Ship (FAS) means that the seller delivers as soon as they deposit the goods in the agreed shipping port, next to the ship specified by the buyer. In practice, this means that the seller delivers the goods to the quay, or to a barge located next to the outgoing ship. From that moment on, the buyer bears the costs related to the transport and the risk of loss or damage to the goods during transport. So the buyer is also responsible for loading the outgoing ship from the quay or from the barge. Specify the exact loading site in the purchase agreement, because that is where the risk transfers. Buyer and seller are free to take out transport insurance for the part of the transport for which they are liable.

FAS and mode of transport

You can only agree on FAS for water transportation (seas and inland waterways). In the Netherlands, FAS is known as ‘Vrachtvrij Langszij Schip’.

FAS not for container shipments

FAS is especially suitable for the transport of bulk goods (such as grain) or general cargo (products that are not stacked in a container, such as cars). For this type of cargo, it is easier to check the condition of the goods at the time the seller deposits them on the quay (or onto a barge). This is not possible with goods that are in a container, because the container is already loaded and closed at an earlier time. That is why the Incoterms ® rule Free Carrier (FCA) is more suitable for container shipments.

Export to countries outside the EU

If the destination of the goods is outside the European Union (EU), the seller must arrange the export declaration with customs. In addition, the seller is responsible for arranging an export licence or other export documents, if necessary. For import into the country of destination, the buyer arranges the customs formalities and the payment of any import taxes. If necessary, the buyer also applies for local import documents (such as an import licence).

FAS and international payments

FAS is difficult to combine with the international payment methods Letter of Credit (L/C) and documentary collection. With these methods, payment takes place on the basis of the presented commercial documents. The seller must deliver these documents to their bank. The bank then forwards these to the buyer's bank.

An example of a commercial document is a transport document such as a Bill of Lading (B/L) for maritime transport. The seller is normally unable to provide this document because under FCA they are not responsible for arranging the transport by sea. The seller may therefore not have a transport document. If this is missing, they run the risk that the bank will not pay out.

State FAS in agreements

Did you agree on FAS? State this in the agreement with your business partner abroad as follows: 'FAS (followed by agreed shipping port) Incoterms® (annual version)'.

Example (for Dutch exporter): ‘FAS Rotterdam (possibly supplemented with a specific location in the port of Rotterdam), Netherlands, Incoterms® 2020’.

Free On Board (FOB)

Under the Incoterms® rule Free on Board (FOB) the seller bears the risk of loss or damage to the goods. They also bear the risk of all costs up to the time they deliver the goods on board the ship specified by the buyer at the agreed port of shipment. From that moment on, the buyer bears the costs and the transport risk. The buyer and seller are free to take out transport insurance for the part of the transport for which they are liable.

FOB and mode of transport

You can only agree on FOB for water transportation (seas and inland waterways). In the Netherlands, the FOB is known as ‘Vrachtvrij aan boord’.

FOB not for container shipments

FOB is especially suitable for the transportation of bulk goods (such as grain) or general cargo (products that are not stacked in a container, such as cars). For this type of cargo, it is easier to check the condition of the goods at the time the seller unloads them on board the ship. This is not possible for goods that are in a container, because the container is already loaded and closed at an earlier stage. For container shipments, the Incoterms® rule Free Carrier (FCA) is more suitable.

Export to countries outside the EU

If the destination of the cargo is outside the European Union (EU), the seller must arrange the export declaration with customs. The seller is also responsible for arranging an export licence or other export documents, if necessary. For the import into the country of destination, the buyer will arrange customs formalities and the payment of any import taxes. The buyer also applies for local import documents (for example, an import licence) if necessary.

FOB and international payments

FOB does not go well with the international payment methods Letter of Credit (L/C) and documentary collection. With these payment methods, payment takes place on the basis of the commercial documents presented. The seller should deliver these documents to their bank. The seller’s bank then forwards them to the buyer's bank.

Commercial documents include, for example, transport documents such as a Bill of Lading (B/L) for water transport. Normally, the seller cannot supply this document because they are not responsible for arranging the water transport. In the absence of this document, there is a risk that the bank will not pay out.

State FOB in agreements

Have you agreed on FOB? State this in the agreement with your business partner abroad as follows: 'FOB (followed by agreed port of shipment) Incoterms® (annual version)'.

Example (for Dutch exporter): 'FOB Rotterdam, the Netherlands, Incoterms® 2020'.

Carriage Paid To (CPT)

The Incoterms® rule Carriage Paid To (CPT) means that the risk of loss or damage to goods passes to the buyer when the seller hands them over to their carrier at their premises or at another agreed loading site. The seller arranges and pays for the transport and associated costs up until the agreed destination.

CPT and mode of transport

CPT is mainly used for the transportation of goods in containers. You can agree on CPT for all forms of transport (by road, water, rail, and air). In the Netherlands, CPT is known as 'Vracht Betaald tot'.

Transfer of transport risk and costs

The transfer of the transport risk and costs from the seller to the buyer takes place at different times:

1. Place of delivery

There can be several successive carriers, for example: road transport in the seller's country, then sea transport to the buyer's country, and finally road transport to the destination in the buyer's country. In that case, the transfer of risk takes place at the time that the goods are loaded in-/onto the first carrier's transport vehicle. This then counts as the place of delivery. The buyer and seller are free to take out transport insurance for the part of the transport for which they are liable.

2. Place of destination

The seller arranges the transport to the agreed destination and bears the costs related to that transport. For this purpose, the seller enters into a transport contract. Usually, the place of destination is in the buyer's country. But another destination is also possible, for example the country a buyer designates for the goods to be delivered. The seller also bears the costs of unloading at the destination, unless the transport contract specifies otherwise. The buyer pays any costs related to customs clearance in the country of destination and any import taxes. They also pay any costs of transit after the goods have arrived at their destination.

Export to countries outside the EU

If the destination of the goods is outside the European Union (EU), the seller must arrange the export declaration with customs. The seller is also responsible for arranging an export licence or other export documents, if necessary. For import into the country of destination, the buyer will take care of customs formalities and the payment of any import taxes. The buyer also applies for local import documents (such as an import licence) if necessary.

CPT and international payments

If you agree on CPT, you can use several payment methods, including a Letter of Credit (L/C) or documentary collection.

State CPT in agreements

Have you agreed on CPT? State this in the agreement with your business partner abroad as follows: 'CPT (followed by agreed place of destination) Incoterms® (annual version)'.

Example (for a Dutch exporter): 'CPT 319 Company Street, New York City (NY), USA, Incoterms® 2020’.

Carriage and Insurance Paid To (CIP)

The Incoterms® rule Carriage and Insurance Paid To (CIP) is very similar to CPT. The risk of loss or damage to the goods passes from the seller to the buyer when the seller hands over the goods to their carrier at their premises or at another agreed loading site. The seller arranges and pays for the transport and associated costs to the agreed destination.

CIP and mode of transport

CIP is mainly used for the transport of goods in containers. CIP can be agreed on for all forms of transport (by road, water, rail, and air). In the Netherlands, CIP is known as ‘Vracht en Verzekering Betaald tot’.

Transfer of transport risk and costs

As goes for CPT, the transfer of the transport risk and costs from the seller to the buyer takes place at different times:

1. Place of delivery

The transfer of risk of loss or damage to the goods from seller to buyer occurs when the seller hands over the goods to the carrier engaged by them. In the sales contract, it is important to clearly specify the location where the seller delivers the goods to the carrier. This location is the place of delivery.

There can be several successive carriers, for example: road transport in the country of the seller, then sea transport to the country of the buyer, and finally road transport to the destination in the country of the buyer. In that case, the transfer of risk takes place at the time that the goods are loaded in-/onto the transport vehicle of the first carrier. This then counts as the place of delivery.

2. Place of destination

The seller arranges transport to the agreed destination and bears the costs related to such transport. For this purpose, the seller enters into a transport contract. Usually, the place of destination is in the buyer's country. But another destination is also possible, for example the country a buyer designates for the goods to be delivered. The seller also bears the costs of unloading at the destination, unless the transport contract specifies otherwise. The buyer pays any costs associated with customs clearance in the country of destination and any import taxes. The buyer also pays any costs of transit after the goods have arrived at their destination.

Transport insurance mandatory

CIP differs from CPT, because the seller is obliged to take out transport insurance for the buyer. This insurance covers the transport between the place of delivery to the first carrier and the agreed place of destination. If this transport insurance is insufficient, the buyer still bears the risk of loss or damage to the goods. The seller must ensure that the buyer can claim this transport insurance directly with the insurer in the event of damage.

Under Incoterms® 2020, the seller is obliged to take out transport insurance with comprehensive coverage that corresponds to the Institute Cargo Clauses (A). The Institute Cargo Clauses (A) provides all-risk coverage. The seller and the buyer are free to agree on a more limited coverage by mutual consent. The Institute Cargo Clauses (A) do not cover damage caused by war, strikes, or riots. This requires additional insurance. This also applies to damage due to inherent defects and delays.

Export to countries outside the EU

If the destination of the goods is outside the European Union (EU), the seller must arrange the export declaration with customs. The seller is also responsible for arranging an export licence or other export documents, if necessary. For import into the country of destination, the buyer will arrange customs formalities and the payment of any import taxes. The buyer also applies for local import documents (for example, an import licence) if necessary.

CIP and international payments

If you agree on CIP, you can make use of various payment methods. These include a Letter of Credit (L/C) or documentary collection.

State CIP in agreements

Have you agreed on CIP? State this in the agreement with your business partner abroad as follows: ‘CIP (followed by the agreed place of destination) Incoterms® (annual version)'

Example (for Dutch exporter): 'CIP 319 Company Street, New York City (NY), USA, Incoterms® 2020’.

Cost and Freight (CFR)

Under the Incoterms® rule Cost and Freight (CFR) the seller bears the risk of loss or damage to the goods until such time as they deliver them on board the ship at the specified port of shipment. The seller arranges and pays for the transport and associated costs to the agreed port of destination.

CFR and mode of transport

You can only agree on CFR for transport by water (sea and inland waterways). In the Netherlands, CFR is known as ‘Kostprijs en Vracht’.

CFR not for container shipments

CFR is especially suitable for the transport of bulk goods (such as grain) or general cargo (products that are not stacked in a container, such as cars). For this type of cargo, it is easier to check the condition of the goods at the time the seller unloads them on board of the ship. This is not possible for goods that are in a container, because the container is already loaded and closed at an earlier stage. For container shipments, the Incoterms® rule Carriage Paid To (CPT) is more suitable. Under CPT, inspection of goods is possible at the location where the container is loaded.

Transfer of transport risk and costs

The transfer of the transport risk and costs from the seller to the buyer takes place at different times:

1. Place of delivery

The seller bears the risk of loss or damage to the goods until they place the goods on board the ship at the agreed port of shipment. This counts as the place of delivery. From that moment on, the buyer bears the transport risk.

Along the transport route, there might be successive transport with several ships. In that case, the transfer of risk occurs at the time the goods are placed on board the first ship, unless the buyer and seller agree on another place of delivery.

Example: the seller delivers the goods on board a small ship in a domestic port. This ship sails via inland waterways to an outbound seaport. There the goods are transferred from the small ship to the outbound, seagoing ship. Transfer of risk occurs when the seller has unloaded the goods on board the small vessel (first ship) in the inland port. This is the place of delivery. In their contract, the buyer and seller may agree on another place of delivery, such as the seaport where the goods are taken on board the outbound seagoing ship. Buyer and seller are free to take out transport insurance for the part of the transport for which they are liable.

2. Port of destination

The seller arranges transport to (a spot/location in) the agreed port of destination and bears the costs related to that transport. For this purpose, the seller enters into a transport contract. They also bear the costs of unloading in the port of destination, unless the transport contract specifies otherwise. The buyer pays any costs associated with customs clearance in the country of destination and any import taxes. They also pay the costs of transport from the port of destination to the place of destination inland.

It is important to specify the exact spot in the agreed port of destination, both in the contract with the buyer and in the contract with the carrier. Up to that point, the costs are for the seller's account.

Export to countries outside the EU

If the destination of the goods is outside the European Union (EU), the seller must arrange the export declaration with customs. The seller is also responsible for arranging an export licence or other export documents, if necessary. For the import into the country of destination, the buyer will arrange customs formalities and the payment of any import taxes. The buyer also applies for local import documents (such as an import licence) if necessary.

Import from China

LCL shipments, or Less than Container Load shipments, consist of bundled goods in one container from different suppliers. It may happen that Chinese forwarders of LCL shipments charge importers unexpected costs on arrival. This is the so-called China Import Service Fee (CISF). A Chinese supplier will then receive compensation from a Chinese forwarding agent if this forwarding agent is allowed to arrange the transport for the supplier. The importer ultimately pays this fee. Do you want to prevent this as an importer? Then engage a Dutch forwarding agent who arranges the transport from China. Also agree a different Incoterms® rule with the Chinese seller, for example, FCA or FOB. Even though FOB is less suitable for container transport.

CFR and international payments

If you agree on CFR, you can make use of various payment methods. These include a Letter of Credit (L/C) or documentary collection.

State CFR in agreement

Have you agreed on CFR? State this in the agreement with your business partner abroad as follows: ‘CFR (followed by the agreed port of destination) Incoterms® (annual version)'

Example (for Dutch exporter): 'CFR Singapore, Tanjong Pagar Terminal, Incoterms® 2020’.

Cost Insurance and Freight (CIF)

The Incoterms® rule Cost Insurance and Freight (CIF) is similar in content to CFR. The seller bears the risk of loss or damage to the goods until the moment they deliver them on board the ship at the agreed port of shipment. The seller arranges and pays for the transport and associated costs up to the agreed port of destination.

CIF and mode of transport

You can only agree on CIF for water transport (across seas and inland waterways). In the Netherlands, CIF is known as ‘Kostprijs, Verzekering en Vracht’.

CIF not for container shipments

CIF is especially suitable for the transport of bulk goods (such as grain) or general cargo (products that are not stacked in a container, such as cars). With this type of cargo, it is easier to check the condition of the goods at the time that the seller deposits them on board of the ship. This is not possible with goods that are in a container, because the container is already loaded and closed at an earlier stage. That is why the Incoterms® rule Carriage and Insurance Paid To (CIP) is more suitable for container shipments. Under CIP, inspection of goods is possible at the location where the container is loaded.

Transfer of transport risk and costs

The transfer of the transport risk and costs from the seller to the buyer takes place at different times:

1. Place of delivery

The seller bears the risk of loss or damage to the goods until they place the goods on board the ship at the agreed port of shipment. This is the place of delivery. From this moment on the buyer bears the transport risk.

Along the transport route, there might be successive transport with several ships. In that case, the transfer of risk occurs at the time the goods are placed on board the first ship, unless the buyer and seller agree on another place of delivery.

Example: the seller delivers the goods on board a small ship in a domestic port. This ship sails via inland waterways to an outbound seaport. There the goods are transferred from the small ship to the outbound, seagoing ship. Transfer of risk occurs when the seller has unloaded the goods on board the small vessel (first ship) in the inland port. This is the place of delivery. In their contract, the buyer and seller may agree on another place of delivery, such as the seaport where the goods are taken on board the outbound seagoing ship.

2. Port of destination

The seller arranges transport to (a spot/location in) the agreed port of destination and bears the costs related to that transport. For this purpose, the seller enters into a transport contract. They also bear the costs of unloading in the port of destination, unless the transport contract specifies otherwise. The buyer pays any costs associated with customs clearance in the country of destination and any import taxes. They also pay the costs of transport from the port of destination to the place of destination inland.

It is important to specify the exact spot in the agreed port of destination in the contract with the buyer, and in the contract with the carrier. Up to that point, the costs are for the seller's account.

Transport insurance

CIF differs from CFR, because the seller is obliged to take out transport insurance for the buyer. This insurance covers water transport between the port of shipment and the port of destination. If the insurance coverage is not sufficient, the buyer still bears the risk of loss or damage to the goods. The seller must ensure that the buyer can claim this transport insurance directly with the insurer in the event of damage.

The seller must take out a transport insurance policy with a minimum coverage that corresponds to the Institute Cargo Clauses (C). The Institute Cargo Clauses (C) provides coverage in the event of fire, explosion, stranding, sinking, capsizing, collision, unloading cargo in a port of refuge, general average sacrifice, and throwing overboard. The seller and the buyer are free to agree on a higher level of coverage by mutual consent, for example coverage based on the Institute Cargo Clauses (A) or (B). The Institute Cargo Clauses do not cover damage caused by war, strikes, or riots. For this, an additional insurance is required. This also applies to damage due to inherent defects and delays.

Export to countries outside the EU

If the destination of the goods is outside the European Union (EU), the seller must arrange the export declaration with customs. The seller is also responsible for arranging an export licence or other export documents, if necessary. For the import into the destination country, the buyer will arrange customs formalities and pay any import taxes. The buyer also applies for local import documents (such as an import licence) if necessary.

Import from China

LCL shipments, or Less than Container Load shipments, consist of bundled goods in one container from different suppliers. It may happen that Chinese forwarders of LCL shipments charge importers unexpected costs on arrival. This is the so-called China Import Service Fee (CISF). A Chinese supplier will then receive compensation from a Chinese forwarding agent if this forwarding agent is allowed to arrange the transport for the supplier. The importer ultimately pays this fee. Do you want to prevent this as an importer? Then engage a Dutch forwarding agent who arranges the transport from China. Also agree a different Incoterms® rule with the Chinese seller, for example, FCA or FOB. Even though FOB is less suitable for container transport.

CIF and international payments

If you agree on CIF, you can use several payment methods, including a Letter of Credit (L/C) or documentary collection.

State CIF in agreements

Have you agreed on CIF? State this in the agreement with your business partner abroad as follows: 'CIF (followed by the agreed port of destination) Incoterms® (annual version)'.

Example (for Dutch exporter): 'CIF Singapore, Tanjong Pagar Terminal, Incoterms® 2020’.

Delivered At Place (DAP)

The Incoterms® rule Delivered At Place (DAP) includes many obligations for the seller. The seller arranges and pays for the transport to the agreed destination. The seller also bears the risk of loss or damage to the goods until they hand them over to the buyer at this agreed place of destination (or place of delivery), not yet unloaded. Since a carrier has limited liability, due to international transport agreements, it may be smart for the seller to take out transport insurance.

DAP and mode of transport

You can agree on DAP for all modes of transport (by road, water, rail, and air). In the Netherlands, DAP is known as 'Geleverd ter Bestemming’.

Place of destination

Under DAP you have various options regarding the agreed place of destination. This could be the buyer's premises in the country of destination, a terminal in the destination country, or another location in the destination country.

For DAP it is important to describe the spot in the agreed place of destination as clearly as possible. This is the place where the risk of loss or damage to the goods transfers from the seller to the buyer (place of delivery).

The buyer bears the costs of unloading at the agreed place of destination, unless the transport agreement between the seller and the carrier states that these costs are covered by the seller. The buyer also bears the risk of loss of or damage to the goods from the time that the goods, not yet unloaded, arrive at the agreed place of destination.

Export countries outside the EU

If the destination of the goods is outside the European Union (EU), the seller must arrange the export declaration with customs. The seller is also responsible for arranging an export licence or other export documents, if required. For the import into the country of destination, the buyer will arrange customs formalities and pay any import taxes. The buyer also applies for local import documents (such as an import licence) if necessary.

DAP and international payments

If you agree on DAP, you can use several payment methods, including a Letter of Credit (L/C) or documentary collection.

State DAP in agreements

Have you agreed on DAP? State this in the agreement with your business partner abroad as follows: 'DAP (followed by agreed place of destination) Incoterms® (annual version)'.

Example (for Dutch exporter): 'DAP 239 Novy Arbat Street, Moscow, Russia, Incoterms® 2020'.

Delivered at Place Unloaded (DPU)

The Incoterms® rule Delivered at Place Unloaded (DPU) includes many obligations for the seller. The seller arranges and pays for the transport to the agreed destination. The seller also bears the risk of loss or damage to the goods until they hand them over to the buyer at that agreed place of destination (or place of delivery). In practice, DPU is DAP including unloading. Because a carrier has limited liability under international transport agreements, it may be wise for the seller to take out transport insurance.

DPU and mode of transport

You can agree on DPU for all modes of transport (by road, water, rail, and air). In the Netherlands, DPU is known as ‘Geleverd ter Bestemming en Gelost’.

Place of destination

Under DPU you have several options when it comes to the agreed place of destination. This could be the buyer's premises in the country of destination, a terminal in the destination country, or another location in the country of destination.

When using DPU, make sure to describe the exact spot at the agreed place of destination as clearly as possible. This is the place where the risk of loss or damage to the goods transfers from the seller to the buyer, after the goods are unloaded (place of delivery). It must also be a spot where the seller is actually able to unload the transport vehicle. If unloading is not possible, the seller is advised to agree on DAP instead.

Export to countries outside the EU

If the destination of the goods is outside the European Union (EU), the seller must arrange the export declaration with customs. The seller is also responsible for arranging an export licence or other export documents, if required. For the import into the country of destination, the buyer will arrange customs formalities and the payment of any import taxes. The buyer also applies for local import documents (such as an import licence) if necessary.

DPU and international payments

If you agree on DPU, you can use several payment methods, including a Letter of Credit (L/C) or documentary collection.

State DPU in agreements

Have you agreed DPU? State this in the agreement with your business partner abroad as follows: 'DPU (followed by agreed place of destination) Incoterms® (annual version)'.

Example (for Dutch exporter): 'DPU 239 Novy Arbat Street, Moscow, Russia, Incoterms® 2020'.

Delivered Duty Paid (DDP)

The Incoterms® rule Delivered Duty Paid (DDP) includes the highest number of obligations for the seller. The seller arranges and pays for the transport to the agreed place of destination. They are also responsible for customs clearance and pay any import duties in the country of destination, such as import levies and/or import VAT. They bear the risk of loss or damage to the goods as well, up until the moment they hand them over to the buyer at the agreed place of destination (or place of delivery).

Because a carrier has limited liability on the basis of international transport agreements, it may be wise for the seller to take out transport insurance.

DDP and mode of transport

You can agree on DDP for all modes of transport (by road, water, rail, and air). In the Netherlands, DDP is known as ‘Geleverd Rechten Betaald’.

Place of destination

Under DDP, you have several options when it comes to the agreed place of destination. This could be the buyer's premises in the country of destination, a terminal in the destination country, or another location in the country of destination.

When you use DDP, describe the exact spot at the agreed place of destination as clearly as possible. This is the place where the risk of loss or damage to the goods passes from the seller to the buyer (place of delivery). The buyer bears the cost of unloading at the agreed place of destination, unless the transport contract between seller and carrier states that the cost will be borne by the seller. The buyer also bears the risk of loss or damage to the goods from the time the goods, not yet unloaded, arrive at the agreed place of destination.

Seller arranges export and import

DDP is similar to the Incoterms® rule DAP (Delivered At Place). But DDP goes even further. Are you exporting to a country outside the EU? Then you need to arrange the export declaration and any export documents with customs. You are also responsible for clearing customs in the country of destination. In that case, you bear the costs of customs clearance, plus any import taxes. These include import duties, import VAT, or other local import taxes. You also have to take care of any documents needed to clear the goods, such as an import licence. That’s why DDP is rarely used in commercial transactions.

Does the destination country levy import VAT? If so, the seller must register with the local tax authorities to be able to offset the import VAT, if the country offers this option. However, it is possible to agree with the buyer that the seller will only pay the import duties and not the import VAT or any other local import duties. If so, please state this exclusion clearly in the contract with the buyer. For example, 'DDP Galeão Airport, Rio de Janeiro, Brazil, VAT and other local taxes excluded'.

DDP and international payments

If you agree on DDP, you can use several payment methods, including a Letter of Credit (L/C) or documentary collection.

State DDP in agreements

Have you agreed on DDP? State this in the agreement with your business partner abroad as follows: 'DDP (followed by agreed place of destination) Incoterms® (annual version)'.

Example (for Dutch exporter): 'DDP 239 Novy Arbat Street, Moscow, Russia, Incoterms® 2020'.

Outside the scope of the Incoterms®

Incoterms® do not determine when ownership of the goods passes. Buyer and seller can record this in a retention of title. This means the goods are owned by the seller until the customer has paid. Incoterms® also do not cover intellectual property rights, payment arrangements or breaches of contractual arrangements. Retention of title, payment arrangements and breach of contract can all be described in the general terms and conditions.