With the rapid growth in personalized medicine and cell/gene therapy, quick and consistent worldwide shipment of ancillary materials is becoming more critical. Shipping variables (such as temperature maintenance in transit, packing configurations, validations, etc.) are obviously important to consider, but contract terms are often overlooked, causing misunderstandings between the buyer and seller.
Incoterms® are internationally-recognized guidelines that allow sellers and buyers to clearly establish which party is responsible for the costs and risks at each step. The terms cover the entire transaction, from the seller’s warehouse to the buyer’s door, including transportation cost, insurance requirements, import/export, duties, etc. Incoterms® are a “living document” and are updated every 10 years to reflect changes in the global marketplace. Today’s blog will define Incoterms® 2010 and highlight the most common and applicable details pertaining to the ancillary materials industry.
Definitions:
Named Place: The location (City, Country) named in the terms, at which transfer of risk occurs.
Destination: Buyer’s Ship To country
Carriage: Transport from seller to buyer
Carrier: Transportation company
Vessel: Ship or cargo ship.
Incoterms® for Any Mode of Transport
EXW: Ex Works
- Risk and cost transferred at the seller’s loading dock, as soon as the goods are in the carrier’s possession.
- EXW is the only Incoterm® that requires the buyer to handle export from the seller’s country.
FCA: Free Carrier
- Seller is responsible for delivery to the carrier at the Named Place, within the seller’s country. The Named Place can be the seller’s premises.
- Risk and cost transfer to the buyer at the Named Place.
CPT: Carriage Paid To
- Seller arranges and pays for transport to the Named Place at Destination.
- Buyer assumes the risk during transport.
CIP: Carriage and Insurance Paid To
- Seller arranges and pays for transport to the Named Place at Destination.
- Seller is also required to pay for minimum insurance against the buyer’s risk during carriage.
- Buyer assumes the risk during transport.
DAT: Delivered at Terminal
- Seller delivers the goods to the port/terminal at the Destination.
- Risk and cost transfer to the buyer at Destination terminal.
DAP: Delivered At Place
- Seller delivers the goods to the Named Place at Destination, typically buyer premises.
DDP: Delivered Duty Paid
- The seller assumes all cost and risk until the goods are ready to unload at the Destination.
- DDP is the only Incoterm® under which the seller assumes the import duties and customs clearance at Destination.
Incoterms® for Sea and Inland Waterway Transport: Uncommon for ancillary materials due to transit time for oceangoing vessels
FAS: Free Alongside Ship
- Seller handles export and delivery to the port, alongside the vessel.
- Risk and cost transfer to buyer at time of delivery to vessel port.
FOB: Free On Board
- Risk and cost transfer to buyer after the seller’s agent loads the goods onto the vessel at the named place.
- “FOB” is commonly used as a catch-all Incoterm®, to indicate transfer of risk and cost at the named place.
CFR: Cost and Freight
- The seller is responsible for the cost of shipping to the named port at Destination.
- Risk transfers to the buyer once the goods are loaded onto the vessel.
CIF: Cost, Insurance, and Freight
- The seller is responsible for the cost of shipping and insurance to the named port at Destination.
- Risk transfers to the buyer once the goods are loaded onto the vessel.
More information: International Chamber of Commerce: https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-rules-2010/