1. The Incoterms approach
Incoterms 2020 allocates obligations between buyer and seller across ten areas, and document obligations are allocated along with the rest.
The four categories: E, F, C, D.
2. The E term
EXW — Ex Works
The seller makes the goods available at its premises.
The seller’s document obligation is minimal: the seller provides whatever assistance the buyer needs to obtain the export documents, at the buyer’s request, risk and cost.
In practice, EXW creates a problem in China: the export declaration requires a Chinese exporter of record, and the buyer has no Chinese entity.
The seller usually ends up declaring the export anyway, which contradicts the term.
3. The F terms
FCA — Free Carrier
The seller delivers to the carrier nominated by the buyer, and clears the goods for export.
The seller handles the export declaration and provides the commercial invoice, packing list and, where required, the export licence.
The buyer handles the main carriage and the import.
FAS — Free Alongside Ship
Similar, delivery alongside the vessel. Sea and inland waterway only.
FOB — Free On Board
The seller delivers on board the vessel nominated by the buyer.
The seller handles export clearance and provides the documents for export.
The bill of lading is issued to the buyer’s arrangement, and the shipper may be the seller or the buyer’s forwarder.
4. The C terms
CFR — Cost and Freight
The seller pays for carriage to the destination port, and the risk passes on loading.
The seller provides the commercial documents, the export clearance and the transport document.
CIF — Cost, Insurance and Freight
CFR plus insurance.
The seller provides the insurance certificate as well.
CIF obligations include a minimum insurance cover of 110 percent of the contract value, in the Institute Cargo Clauses (C) as a default.
CPT and CIP
The same as CFR and CIF but for any mode of transport, with delivery to the carrier rather than on board.
Under CIP, the default insurance cover is Institute Cargo Clauses (A), broader than CIF’s default.
5. The D terms
DAP — Delivered at Place
The seller delivers to the named place, ready for unloading, and does not clear for import.
The seller provides everything up to the destination, and the buyer handles the import declaration.
DPU — Delivered at Place Unloaded
The seller also unloads.
DDP — Delivered Duty Paid
The seller handles the import declaration and pays duty.
In China-to-foreign trade, DDP is frequently used by e-commerce sellers, and it is legally awkward: the seller needs an importer of record in the destination, or an arrangement with one.
6. The document responsibility matrix
Export declaration: seller under FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAP, DPU, DDP. Buyer under EXW, in theory.
Commercial invoice and packing list: seller always.
Certificate of origin: seller always.
Bill of lading: under F terms the buyer arranges carriage, so the shipper arrangement is the buyer’s. Under C and D terms the seller arranges.
Insurance: seller under CIF and CIP. Buyer otherwise.
Import declaration and duty: buyer under all terms except DDP.
Legalization of documents: not allocated by Incoterms.
7. The China-specific wrinkles
EXW and the export declaration
A Chinese exporter cannot avoid the export declaration. EXW is therefore problematic in practice.
DDP and the importer of record
The seller needs a destination-side entity or a fiscal representative.
Certificate of origin under FOB
The buyer arranges carriage, so the bill of lading may name the buyer’s forwarder as shipper. The certificate of origin names the seller as exporter, which is correct, and the two differ, which is normal.
8. Closing view
Incoterms allocate transport, insurance and clearance obligations. They do not allocate document legalization cost, and they create practical problems when the term assumes a structure the parties do not have.
The rule: choose the term that matches who can actually perform each obligation.
*This article is based on Incoterms 2020 published by the International Chamber of Commerce. Parties should confirm the applicable version in their contract.*