DELIVERY METHODS
In international trade, it is important to clearly define the obligations of the buyer and seller regarding issues such as where the goods will be delivered, who will bear or how the costs will be shared, and whether insurance and transportation contracts will be concluded.
One useful resource in this regard is INCOTERMS (International Commercial Terms), published by the International Chamber of Commerce (ICC). INCOTERMS is a set of internationally accepted rules used in contracts between buyers and sellers, outlining their responsibilities.
The latest INCOTERMS 2010 was published by the ICC. According to this, there are 11 delivery terms in international trade, which are divided into two classes.
- Rules covering all modes of transport: EXW, FCA, CPT, CIP, DAT, DAP, DDP
Rules specific to sea and inland waterway transport: FAS, FOB, CFR, CIF
EX WORKS (EXW)
The term "delivery at the seller's premises" means that the seller delivers the goods at the buyer's disposal at their own premises or another designated location (such as a factory, warehouse, or office). EXW represents the minimum obligation for the seller. While FCA (Free Carrier) is more suitable for international trade, this rule is applicable to domestic trade.
Delivery method characteristics: The seller makes the goods available to the buyer at their premises on a predetermined date and notifies the buyer. The buyer takes delivery of the goods from the seller's premises, prepares the necessary documents for export, completes customs procedures, and imports the goods into their own country. From the moment the goods are delivered at the seller's premises, all costs and risks related to the goods are borne by the buyer.
Seller's Obligations: The seller shall prepare the goods in accordance with the contract terms and deliver them to the buyer on the specified date or within the specified timeframe, at the location (factory, warehouse, workplace, etc.) specified in the agreement, unloaded from any means of transport. The seller shall inform the buyer that the goods are ready for delivery. The seller shall assist the buyer in obtaining the necessary export documents. If requested by the buyer, the seller shall arrange for a transportation agent, at the buyer's expense and risk, and send the resulting transport document to the buyer so that they can take delivery of the goods at the destination. The seller is not obligated to enter into a transportation or insurance contract with the buyer. If there is no clearly agreed-upon delivery point and several suitable points exist, the seller may choose the one most convenient for their purposes. The seller shall pay for the costs associated with any necessary inspection procedures (quality control, measurement, weighing, counting, etc.) to ensure the goods are delivered.
Buyer's Obligations: The buyer pays the price of the goods in accordance with the terms of the contract. At their own expense and risk, the buyer is responsible for arranging all necessary administrative and commercial documents, such as licenses, for export and import transactions related to the goods, obtaining the required permits, carrying out customs procedures, and paying customs duties. All risks and costs related to the goods are the buyer's responsibility from the moment the goods are delivered to the seller's premises. The buyer pays the freight charges by arranging with a transport agent for the transportation of the goods. The buyer must provide the seller with the necessary documents and evidence of receipt of the goods. The buyer must pay all pre-shipment inspection costs, including those stipulated by the exporting country.
FREE CARRIER (FCA)
The "No Carrier Charge" rule means that the seller delivers the goods to the carrier or other person designated by the buyer, at the seller's place of business or another designated location.
Characteristics of the delivery method: In this delivery method, the seller completes the delivery process when they transfer the goods to the first carrier at the specified date and place after completing customs procedures. From this point onwards, all costs and risks related to the goods pass to the buyer. Freight charges, like all other expenses, are paid by the buyer.
Seller's Obligations: The FCA rule requires the seller to clear the goods for export to the extent applicable. The seller must obtain all necessary permits for export, prepare all necessary documents for export, and complete customs procedures at their own risk and expense. The seller is not obligated to enter into a contract of carriage or insurance with the buyer. Upon the buyer's request, the seller may arrange with a carrier at the buyer's expense. The goods are delivered to the carrier or under the supervision of the carrier at the specified date and place. If there is no clearly agreed-upon delivery point and several suitable points exist, the seller may choose the one most convenient for their purposes. All costs and risks up to the time of delivery are the seller's responsibility. The seller must pay for any costs associated with any necessary inspection procedures (quality control, measurement, weighing, counting, etc.) and pre-shipment inspection costs ordered by the exporting country authorities. The seller shall provide the buyer with the standard proof of delivery at their own expense.
Buyer's Obligations: The buyer pays the price of the goods in accordance with the contract terms. The buyer takes delivery of the goods on the specified date and place. From that point onwards, all costs and risks belong to the buyer. The buyer is responsible for obtaining the necessary import documents or permits and paying customs duties and charges. The buyer arranges with a shipping agent and pays the freight charges. The buyer must pay all mandatory pre-shipment inspection costs, excluding those ordered by the exporting country authorities.
CARRIAGE PAID TO (CPT)
The "Carriage Paid" rule means that the seller will deliver the goods to a carrier or other person of their choosing at a designated place (if no such place has been agreed upon by the parties), and the seller is obliged to conclude the necessary transportation contract and pay the transportation costs for bringing the goods to the specified destination.
When the CPT rule is used (just like the CIP, CFR, or CIF rules), the seller fulfills their delivery obligation not when the goods arrive at the destination, but when they are handed over to the carrier in accordance with the relevant rule.
Characteristics of the delivery method: This delivery method is particularly used in multimodal transport. The seller is responsible for paying the freight charges up to the destination. From the moment the goods are handed over to the first carrier, all risks and costs other than freight related to the goods pass to the buyer.
Seller's Obligations: The seller prepares the goods in accordance with the contract terms. The seller prepares the necessary documents for use in the buyer's country. The seller completes customs procedures. The seller contracts with a shipping agent and pays the freight charges to the port of destination. From the moment the goods are handed over to the first carrier, the seller is relieved of all risks and costs related to the goods. The seller informs the buyer of the delivery and the probable arrival date. The seller must pay for the costs related to the necessary control procedures (quality control, measurement, weighing, counting, etc.) and the costs of pre-shipment inspection ordered by the exporting country authorities in order to ensure the goods can be delivered.
Buyer's Obligations: The buyer pays the price of the goods in accordance with the terms of the contract. The buyer completes customs procedures by preparing the customs documents for import. The buyer pays customs duties. All costs and risks related to the goods, excluding freight, from the moment the goods are delivered to the first carrier, belong to the buyer. The buyer also bears any customs costs that may arise due to transit transportation. If not included in the freight cost, the buyer pays the unloading costs and receives the endorsed bill of lading from the agent. The buyer must pay all mandatory pre-loading inspection costs, except those ordered by the exporting country authorities.
CARRIAGE AND INSURED PAID TO (CIP)
The "Carriage and Insurance Paid" rule means that the seller will deliver the goods to a carrier or other person of their choosing at a designated place (if no such place has been agreed upon by the parties), and the seller is obliged to conclude a contract of carriage and pay the carriage costs to bring the goods to the specified destination.
When the CIP rule is used (just like the CPT, CFR or CIF rules), the seller fulfills their delivery obligation not when the goods arrive at the destination, but when they are handed over to the carrier in accordance with the relevant rule.
Characteristics of the delivery method: In this delivery method, the seller brings the goods to the port of loading, assuming the insurance premium, freight, loading costs, and risks. The seller negotiates and secures the necessary arrangements with a shipping agent. The seller informs the buyer that the goods specified in the sales contract have been loaded on the specified date and at the specified location. The seller arranges for the most limited scope of transportation insurance suitable for the type of goods loaded, by paying the insurance premium. However, if the buyer wishes to obtain insurance against extraordinary risks (strikes, war, natural disasters, etc.), they can request an expanded insurance coverage from the seller, provided they pay the premium themselves. This insurance is arranged by the seller for an additional 10% of the value of the goods.
Seller's Obligations: The seller must prepare the goods in accordance with the terms of the contract. The seller must obtain all necessary permits for export, prepare all necessary documents for export, and complete customs procedures, bearing all risks and expenses themselves. The seller is also responsible for preparing the necessary documents for use in the buyer's country. The seller will contract with a shipping agent and pay the freight charges to the port of destination. The seller will insure the goods at their own expense. They must provide the buyer with the insurance policy or other proof of insurance coverage. The seller is relieved of all associated risks and costs from the moment they hand over the goods to the first carrier. From this point onwards, all costs and risks related to the goods, excluding freight and insurance premiums, belong to the buyer. The seller will notify the buyer of delivery and the probable arrival date.
DELIVERED AT TERMINAL (DAT)
The "Delivered at Terminal" rule means that the seller delivers the goods by placing them at the buyer's disposal, unloaded from the arriving carriage, at the designated terminal at the designated destination or port. The term terminal encompasses any place, open or covered, such as a dock, warehouse, container yard, or road, rail, or air cargo station. If the parties intend for the seller to bear the loss and costs associated with the transportation and handling of the goods from the terminal to a location other than the terminal, then the DAP or DDP rules should be used.
The characteristics of the delivery term: DAT means that the goods are provided (delivered) to the buyer at the destination for unloading by the means of transport, replacing the previous DEQ clause, and unlike DEQ, it can be used for multimodal transport. In other words, DAT means that the goods are left at the buyer's disposal at a terminal point determined by the buyer and seller (this point may be a port, customs warehouse, or the buyer's factory), with the unloading costs borne by the seller. All customs procedures, costs, taxes, duties, and charges arising at customs are the responsibility of the buyer. It is a term that replaces the abolished terms DAF, DES, and DDU. The seller assumes the costs of transporting the goods to the designated location/the risk of damage related to the terminal.
Seller's Obligations: The seller must prepare the goods in accordance with the terms of the contract. The seller must obtain all necessary permits for the export of the goods and complete all necessary customs procedures for the export or transit through another country prior to delivery. The seller must enter into a contract of carriage for the carriage of the goods to the designated terminal at his own expense. The seller is not obligated to enter into an insurance contract with the buyer. The seller must deliver the goods on the agreed date, at the agreed terminal at the destination or port, by unloading them from the arriving carriage and placing them at the buyer's disposal. If no specific terminal has been agreed upon, the seller may choose the terminal most suitable to his purpose at the agreed destination or port. The seller shall pay all costs relating to the goods up to the time of proper delivery, and, to the extent applicable, all customs clearance costs and all duties, taxes and other charges payable for export prior to delivery of the goods as described above, and all costs relating to transit through any country.
DELIVERED AT PLACE (DAP)
The "Delivery at Designated Place" rule means that the seller delivers the goods by placing them at the buyer's disposal at the designated destination without unloading them from the arriving transport vehicle.
The characteristics of the delivery term: DAP means that the goods are provided (delivered) to the buyer at a specified point for unloading by the means of transport. DAP has replaced the previous DAF, DES, and DDU. In other words, DAP means that the goods are left on the transport vehicle at the buyer's disposal, ready for unloading at the unloading location (a port pier, customs point, airport) determined by the buyer and seller. All customs procedures, costs, taxes, duties, and fees arising at customs are the responsibility of the buyer. The seller assumes the costs of transporting the goods to the specified location/the risk of damage related to terminals.
Seller's Obligations: The seller must prepare the goods in accordance with the terms of the contract. The seller must obtain all necessary permits for the export of the goods and complete all necessary customs procedures for the export or transit through another country prior to delivery. The seller must enter into a contract of carriage for the transportation of the goods to the designated terminal at his own expense. The seller is not obligated to enter into an insurance contract with the buyer. The seller must deliver the goods to the buyer on the agreed date, at the destination, and, if applicable, at the agreed point, ready for unloading from the arriving vehicle. The seller shall pay all costs relating to the goods up to the time of proper delivery, and, to the extent applicable, all customs clearance costs and all duties, taxes and other charges payable for export prior to delivery of the goods as described above, as well as any transit costs through another country.
Buyer's Obligations: The buyer pays the price of the goods in accordance with the terms of the contract. To the extent applicable, the buyer shall obtain all necessary import permits or other official authorizations and complete all customs procedures for the import of the goods, at their own risk and expense. All costs relating to the goods are the responsibility of the buyer from the moment of delivery of the goods as described above. Except where the contract of carriage stipulates that these costs shall be borne by the seller, the buyer shall be responsible for all costs relating to the goods.
The seller pays the necessary costs for unloading the goods from the arriving transport vehicle so that they can be received at the designated destination.
DELIVERED DUTY PAID (DDP)
The "Delivered Duty Paid" rule means that the seller delivers the goods by placing them at the buyer's disposal, customs cleared for import and ready for unloading on the arriving carriage at the designated destination.
Delivery terms and characteristics: This delivery term is based on the same principles as the DDU delivery term; however, in the DDP delivery term, the seller is also obliged to pay customs duties. The seller transfers the goods in a manner indistinguishable from a local seller in the buyer's country. If the parties wish for the buyer to bear all risks and costs related to customs clearance for import, the DAP Rule should be used.
Seller's Obligations: The DDP Rule outlines the maximum obligation for the seller. The seller prepares the goods in accordance with the contract terms. The seller prepares the necessary documents for use in their own country and the buyer's country. The seller completes the export and import customs procedures. The seller must enter into a transportation contract for the goods to be transported to the designated terminal at their own expense. The seller is not obligated to enter into an insurance contract with the buyer. The seller provides the carrier and pays the freight charges. All costs and risks related to the goods until delivery belong to the seller. Delivery is made at the place and date specified in the buyer's country, including payment of customs duties. Unless explicitly agreed otherwise in the sales contract, VAT and all other taxes payable on import are the responsibility of the seller.
Buyer's Obligations: The buyer pays the price of the goods and takes delivery of them in accordance with the terms of the contract. The buyer bears all costs related to the goods from the moment they are delivered as intended. The buyer has no obligation to pay the seller any pre-shipment inspection costs ordered by the authorities of the exporting or importing country.
FREE ALONGSIDE SHIP (FAS)
The "Free Alongside the Ship" rule means that the seller delivers the goods at the designated loading port, alongside the ship chosen by the buyer (e.g., on a quay or barge). In cases where the goods are in containers, it is common for the seller to deliver the goods to the carrier at a terminal rather than alongside the ship. In such cases, this rule is not applicable, and the FCA rule should be used.
Delivery terms and conditions: In this delivery method, the seller is responsible for bringing the goods to the side of the ship. If the goods are at the ship's dock, they are delivered to the loading point. If the ship is anchored offshore, they are delivered to the side of the ship using barges. From the moment of delivery, the risks of loss or damage to the goods belong to the buyer. From this point onwards, all costs and freight related to the goods are borne by the buyer. In this delivery method, all export-related documents are prepared by the buyer. Customs procedures are also handled by the buyer. This delivery method should not be chosen if the buyer company cannot act as an exporter in this country.
Seller's Obligations: The seller prepares the goods in accordance with the terms of the contract. Upon the buyer's request, and at the buyer's expense and risk, the seller assists the buyer in obtaining the necessary administrative and commercial documents required in the buyer's country. The seller is not obligated to enter into a contract of carriage or insurance with the buyer. Delivery is completed by bringing the goods to the designated port on the specified date, alongside the vessel previously designated by the buyer. From this point onwards, all costs and risks related to the goods pass to the buyer. Upon the buyer's request, the seller arranges for the preparation of the loading document, at the buyer's expense, and sends it to the buyer so that they can take delivery of the goods at the port of destination. The seller also makes the necessary notifications without delay. To the extent applicable, the seller must pay the costs of customs clearance necessary for export and all duties, taxes, and other charges payable for export.
Buyer's Obligations: The buyer pays the price of the goods in accordance with the contract terms. The buyer prepares the necessary documents related to export and import, and pays all customs fees. The buyer arranges with the shipping agent and informs the seller of the approximate arrival time of the ship at the loading port. The buyer takes delivery of the goods ready for loading. From this point onwards, all costs and risks belong to the buyer. The buyer must pay all mandatory pre-loading inspection costs, except for those ordered by the exporting country authorities.
FREE ON BOARD (FOB)
The "Free on Board" rule means that the seller delivers the goods at the designated port of loading, on the vessel chosen by the buyer, or in any other manner. This rule may not apply to cases where the seller delivers the goods to the carrier at a terminal before loading them onto the vessel. For example, this is common when the goods are in containers. In such cases, the FCA rule should be used.
Delivery terms and conditions: Under this delivery method, the seller loads the goods onto a vessel provided by the buyer at the specified date and location. Any damage, loss, or expenses incurred after the goods have passed over the ship's railing (deck) are the buyer's responsibility. The seller prepares all necessary export documents and completes customs procedures before delivering the goods.
Seller's Obligations: The seller prepares the goods in accordance with the contract terms. Loads the goods onto the vessel provided by the buyer at the specified port on the specified date. The seller is not obligated to enter into a carriage contract or insurance contract with the buyer. The seller prepares the necessary documents for use in the buyer's country and completes customs procedures. The seller notifies the buyer of the loading. The seller prepares the transportation document and other necessary documents for use in the buyer's country and sends them to the buyer according to the payment method. Any damage or loss that may occur to the goods until they pass the ship's railing (deck) is the seller's responsibility. To the extent applicable, the seller must pay the costs of customs clearance necessary for export and all duties, taxes, and other charges payable for export.
Buyer's Obligations: The Buyer pays the price of the goods in accordance with the terms of the contract. The Buyer completes customs procedures by preparing the necessary customs documents for import. The Buyer pays customs duties. The Buyer arranges with a shipping agent and pays the freight charges. After the goods pass the ship's rail at the port of loading, all costs and risks related to the goods are the Buyer's responsibility. To the extent applicable, the Buyer must pay all duties, taxes, and costs related to the import of the goods, as well as the costs of transit through any country. The Buyer must pay all mandatory pre-shipment inspection costs, excluding those ordered by the exporting country's authorities.
COSTS AND FREIGHT (CFR)
The "Costs and Freight" rule refers to the seller delivering the goods on board the ship or supplying goods already delivered in this manner. This rule may not be applicable to cases where the seller delivers the goods to the carrier at a terminal before they are loaded onto the ship. For example, this is common when the goods are in containers. In such cases, the CPT rule should be used.
When the CFR rule is used (just like the CIP, CPT or CIF rules), the seller fulfills their delivery obligation not when the goods arrive at the destination, but when they are handed over to the carrier in accordance with the relevant rule.
Characteristics of the delivery method: In this delivery method, the seller assumes all costs and risks, transporting the goods to the port of loading. They handle customs procedures, pay the freight charges, and complete the loading. From this point onwards, all costs and risks related to the goods, excluding freight, belong to the buyer.
Seller's Obligations: The seller prepares the goods in accordance with the contract terms. The seller prepares the necessary documents for use in the buyer's country. The seller completes customs procedures. The seller contracts with a shipping agent and pays the freight charges to the port of destination. The seller must enter into a contract of carriage for the transportation of the goods to the designated terminal, at their own expense. The seller is not obligated to enter into an insurance contract with the buyer. After the goods pass the ship's railing, all costs and risks other than freight are the responsibility of the buyer. The seller informs the buyer of the loading and the probable arrival date. The seller sends the prepared transport document and other necessary documents to the buyer.
Buyer's Obligations: The buyer pays the price of the goods in accordance with the terms of the contract. The buyer completes customs procedures by preparing the necessary customs documents for import. The buyer pays customs duties. The buyer unloads the goods promptly at the port of destination, including paying unloading costs and port charges. The buyer is obliged to pay all costs related to the goods during transport, excluding freight. To the extent applicable, the buyer must pay all duties, taxes, and customs clearance costs related to the import of the goods, and, provided they are not covered by the transport contract, any transit costs through any country. The buyer must pay all mandatory pre-loading inspection costs, excluding those ordered by the exporting country's authorities.
The "Costs, Insurance and Freight" rule means that the seller delivers the goods on board the ship or supplies goods that have already been delivered in this manner. This rule may not be applicable in cases where the seller delivers the goods to the carrier at a terminal before they are loaded onto the ship. For example, this is common when the goods are in containers. In such cases, the CIP rule should be used.
When the CIF rule is used (just like the CIP, CPT or CFR rules), the seller fulfills their delivery obligation not when the goods arrive at the destination, but when they are handed over to the carrier in accordance with the relevant rule.
Characteristics of the delivery method: In this delivery method, the seller brings the goods to the port of loading, assuming the insurance premium, freight, loading costs, and risks. The seller negotiates and secures the necessary arrangements with a shipping agent. The seller informs the buyer that the goods specified in the sales contract have been loaded on the specified date and at the specified location. The seller arranges for the most limited marine transport insurance suitable for the type of goods loaded, by paying the insurance premium. After the goods are loaded onto the ship, all costs and risks except for freight and insurance premiums pass to the buyer.
Seller's Obligations: The seller prepares the goods in accordance with the contract terms. The seller prepares the necessary documents for use in the buyer's country. The seller completes customs procedures. The seller must, at their own expense, enter into a contract for transportation and insurance for the goods to the designated terminal. The seller contracts with a transport agent and pays the freight charges to the port of destination. The seller arranges for insurance of the goods and pays the insurance premium. The seller informs the buyer of the approximate date the goods will arrive at the port of destination. The seller sends the prepared transport document and other necessary documents to the buyer. To the extent applicable, the seller must pay the costs related to customs clearance procedures required for export and all duties, taxes, and other charges payable for export.
Buyer's Obligations: The buyer pays the price of the goods in accordance with the terms of the contract. The buyer completes customs procedures by preparing the necessary customs documents for import. The buyer pays customs duties. The buyer unloads the goods promptly at the port of destination, including paying unloading costs and port charges. All costs incurred after delivery, excluding freight and insurance premiums, are borne by the buyer. The buyer must pay all mandatory pre-loading inspection costs, except those ordered by the exporting country's authorities.