Incoterms are the official rules published by the International Chamber of Commerce in order to interpret trade terms. They have been used worldwide for over 60 years, and they are essential for an undisturbed conduct of international trade. The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide, and are included into contracts of sale, which minimizes the possibility of misunderstanding leading to legal complications.
Incoterms rules and terms deal with the relationship between buyer and seller, and one of the most important parts is the delivery parity which determines when the responsibility and the risks in selling goods are handed from seller to buyer. Since 2010, the number of parities has been reduced from 13 to 11, so at the moment, the following parities are used:
The buyer takes over the goods and responsibility at the seller’s factory, and the seller does not bear any costs.
The seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the named place.
The seller bears all costs of transport to named place of destination. However, risk transfers to the buyer when handing goods over to the first carrier.
The seller bears all costs, including insurance, to the named destination point. For the seller, this parity is the same as CIF, with an additional obligation of paying for the insurance. However, in this case too, risk passes when the goods are handed over to the first carrier.
This is a new parity, introduced in 2010, which says that the seller delivers the goods when it is unloaded from the carrier and available for the buyer at the named terminal. The term „terminal“ is related to any space arranged for the unloading of goods. The seller bears all costs and risks included in bringing the goods to the named terminal and unloading the goods at the terminal.
The goods are available for the buyer at the time of arrival at the named place of destination, while it is still in the carrier and unloaded. The seller bears all costs and risks for carriage to the named place.
The seller pays all costs of transport and bears all risks in bringing the goods to the destination, including import duties and taxes.
The seller must place the goods, ready for shipping, alongside the ship at the named port. The seller must also clear the goods for export and prepare all documents necessary for transport.
The seller must load the goods on board the vessel nominated by the buyer. The goods must be cleared for export. The seller bears all costs and risks, including the insurance.
The seller must pay the costs and freight to bring the goods to the port of destination. The insurance is paid by the buyer. However, risk is transferred to the buyer once the goods are loaded on the vessel.
Exactly the same as CFR except that the seller must in addition pay for the insurance to the port of destination.