DEPARTMENT OF TRADE & INDUSTRY

20 November, 2013

CB Araceli B. Requinto, MCA

Certified UNESCAP Trainer

INCOTERMS

RULES

Are the International Chamber of

Commerce (ICC) rules for the use of
domestics and international trade terms
Are key commercial tools developed
and maintained by ICC and used in
certain contract for the sale of goods all
over the world.
They define the responsibilities of
buyers and sellers for the delivery of
goods under sales contracts and
determine how costs and risks are
allocated.

INCOTERMS

RULES

PURPOSE
Deals with a number of identified
obligations imposed on the parties
such as: Sellers obligation
to place the goods at the disposal
of the buyer or
hand over for carriage or
deliver them at destination and
with the distribution of risk between
parties in these cases.

INCOTERMS

RULES

PURPOSE
Deals with the obligations
to clear the goods for export and
import,
the packing of the goods,
the buyers obligation to take
delivery
as well as the obligation to provide
proof that the respective obligations
have been duly fulfilled.

INCOTERMS

RULES

Updated 7 times to keep pace

with the development of
international trade
First devised in 1936 (1953,
1967, 1976, 1980)
INCOTERMS 1990 was a popular
standard
INCOTERMS 2000
Currently, INCOTERMS 2010

INCOTERMS 2000
GROUP E
Ex-Works (named place)
GROUP F (Main Carriage Unpaid)
FAS Free Alongside Ship (named port of shipment)
FCA Free Carrier (named port of shipment)
FOB Free on Board (named port of shipment)
GROUP C (Main Carriage Paid)
CFR Cost and Freight (named port of destination)
CIF Cost, Insurance and Freight (named port of
destination
CPT Carriage Paid To (named place of destination)
CIP Carriage Insurance Paid To (named place of
destination)
GROUP D (Arrival)
DAF Delivered at Frontier (named place)
DES Delivered Ex-Ship (named port of destination)
DEQ Delivered Ex-Quay (named port of destination)
DDU Delivered Duty Unpaid (named place of destination)
DDP Delivered Duty Paid (named place of destination)

INCOTERMS

RULES

ADVANTAGES

They follow trade practices rather

than attempt to direct it.
Since they are not law, they can
be revised as needed to suit major
changes in the way business is
done.

INCOTERMS

RULES

BENEFITS TO TRADERS
Helps to prevent misunderstandings in
international trade contracts.
Helps the contracting parties to clarify beyond
doubt
which party to the contract is responsible for
goods in transit at particular stages of their
journey and
who is responsible for important tasks such as:
managing export and import clearance and
arranging the insurance of the goods.

INCOTERMS

RULES

MISCONCEPTIONS

Frequently misunderstood as applying

to the contract of carriage rather than
to the contract of sale
They are sometimes wrongly assumed
to provide for all the duties which
parties may wish to include in a
contract of sale.

FOUR (4) PILLARS

DELIVERY
Where and when has the seller fulfilled his
obligation to deliver the goods?
DOCUMENTS
Who has to provide what documents or
equivalent EDI messages?
RISKS
Who bears the risk of loss of, or damage to
the goods?
COSTS
Who pays for what?

INCOTERMS

RULES

WHAT DOES INCOTERMS DOES NOT COVER

Ownership title/title to the goods

Payment obligation
(when/how/what security/against
what documents)
Vessel requirements
Force majeure
Termination
Insolvency

INCOTERMS

RULES

Do not constitute a complete

contract of sale.
PROVIDE convenient,
internationally recognized
rules for the sale of goods

INCOTERMS

RULES

WHY REVISIONS OF INCOTERMS?

GLOBAL DEVELOPMENT
Customs Free Zones
Electronic communications
Changes to transport
practices
Security for movement of
goods

INCOTERMS

RULES

WHAT ARE THE

MAIN CHANGES IN
INCOTERMS 2010?

INCOTERMS

RULES

1) REMOVAL OF FOUR (4) TERMS FROM

INCOTERMS 2000

The following terms were removed

DAF, DES, DEQ and DDU
Introduction of two (2) new terms
DAP Delivered at Place
DAT Delivered at Terminal
These terms may be used
irrespective of the agreed mode of
transport

INCOTERMS

RULES

2) CREATION OF TWO (2) CLASSES OF

INCOTERMS

Rules for
sea and
inland
waterway
FAS
FOB
CFR
CIF

Rules for any

modes of transport
(sea, road, air, rail)
EXW
FCA
CPT
CIP
DAP
DAT
DDP

INCOTERMS

RULES

3) ADAPTED
RULES

For both
domestic
and
international
trade

4) ELECTRONIC
RECORDS

Buyer and Sellers

obligations to provide
contractual
documentation may
now be by electronic
record if agreed
between parties or
customary

INCOTERMS

RULES

5) INSTITUTE CARGO CLAUSES

If an INCOTERM requires
one party to obtain
insurance
Amended to reflect the
changes to the Institute
Cargo Clauses.

INCOTERMS

RULES

CIF: SELLERS COST AND OBLIGATIONS

INSURANCE
Obligations to obtain cargo insurance have
been updated, to reflect changes to the
Institute Cargo Clauses since Incoterms 2000.
New rules clarify: under CIF terms, seller must
obtain cover complying with at least the
minimum cover provided by Clause C of
the Institute Cargo Clauses, or any similar
clauses.
Where required by the buyer, the seller must
also procure additional cover, such as that
provided by Institute Cargo Clauses A or
B, or Institute War or Strike Clauses.

INSTITUTE CARGO CLAUSES

Set of terms for cargo

insurance policies voluntarily
adopted as standard terms by
many international marine
insurance organizations,
including the Institute of
London Underwriters and the
American Institute of Marine
Underwriters.

INSTITUTE CARGO CLAUSES

Institute Cargo Clause A

widest insurance coverage
Institute Cargo Clause B
more restrictive coverage
Institute Cargo Clause C
most restrictive coverage

INSTITUTE CARGO CLAUSES

Not an exact replacement of the old clauses
Some companies may still use the old clauses
Counter parts of the new cargo clauses
NEW
Institute Cargo Clauses

OLD
Cargo Clauses

All Risks (A.R.)

With Average (W.A.)

Free of Particular Average

(F.P.A.)

OLD INSTITUTE CARGO CLAUSES

ALL RISKS

WITH AVERAGE
(WITH PARTICULAR
AVERAGE)

FREE OF
PARTICULAR
AVERAGE

Covers all risks of

physical loss or
damage from any
external causes
irrespective of
percentage.
If the assured
wishes to be covered
against the risks of
war, strikes, riots and
civil commotions
the insurer deletes
the exclusions

Covers against
total loss and partial
loss caused by the
perils of the sea (i.e.
the vessel has been
stranded, sunk,
burnt or been in
collision with other
vessels or external
substances other
than water, such
as ice.

Covers against
total loss.
When partial loss
is specifically
covered in the
policy, it is
reasonable from the
insurer only if the
loss is the result of
the carrying vessel
being stranded,
sunk or burnt, on
fire or in collision.

NEW INSTITUTE CARGO CLAUSES

Risks covered and the Exclusions

Institute Cargo Clauses

Risks covered
Risks not covered (or exclusions)

A B C

Loss or damage to the subject matter insured proximately

caused by [in Clauses (A)] and reasonably attributable to [in
Clauses (B) and (C)]
Fire or explosion

Vessel or craft stranded, sunk, burnt or capsized

Land conveyance overturned or derailed

Collision or contact of vessel, craft or conveyance with any

external object except water

Discharge of cargo at port of distress

INCOTERMS

RULES

6) SECURITY
Issues of security of goods/vessels
Many countries now require
heightened security checks
Incoterms Rules now require that
both parties are obliged to provide
all necessary information (i.e. chain
of custody information) in order to
obtain import/export clearance.

INCOTERMS

RULES

7) TERMINAL HANDLING CHARGES

When Seller is required to arrange

and pay for the carriage of the
goods to an agreed destination
(CIP, CPT, CFR, CIF, DAT, DAP and
DDP)
It may be the case that terminal
handling charges are passed on
to the buyer as part of the
contractual price of the goods?

INCOTERMS

RULES

8) STRING SALES
Refers to multiple sales of goods during
transit down a string.
INCOTERMS rule was modified to provide
that: the seller in the middle of a string has
an obligation to procure goods shipped
and not to ship the goods.
Under rules: FCA, CPT, CIP, FAS, FOB, CFR
and CIF the Sellers obligation to contract
for the carriage of goods has been amended
to allow the seller to procure a contract of
carriage.

INCOTERMS

RULES

CARRIER

For the purposes of the

Incoterms 2010 rules, it
means the party with
whom carriage is
contracted.

INCOTERMS

RULES

RULES FOR ANY MODE

of
TRANSPORT

INCOTERMS
ExWorks

RULES

Means the seller delivers when it places the

goods at the disposal of the buyer at the
sellers premises or at another named place
(i.e. works, factory, warehouse, etc.)
Seller does not need to load the goods
to any collecting vehicle, nor does it need
to clear the goods for export, where such
clearance is applicable.
May be use irrespective of the mode of
transport selected and may be used
where more than one mode of transport is
employed.
It is suitable for domestic trade, while FCA
is usually more appropriate for
international trade

INCOTERMS
FCA

RULES

Means that the seller delivers the goods,

cleared for export, to the carrier
nominated by the buyer at the named place.
If delivery occurs at the sellers
premises, the seller is responsible for
loading.
If delivery occurs at any other place, the
seller is not responsible for unloading.
If the buyer nominates a person other
than a carrier to receive the goods, the
seller is deemed to have fulfilled his
obligation to deliver when goods are
delivered to that person.

INCOTERMS
FCA

Buyers
Designated/
Carrier Place

RULES

Means that the seller delivers the goods,

cleared for export, to the carrier
nominated by the buyer at the named place.
If delivery occurs at the sellers
premises, the seller is responsible for
loading.
If delivery occurs at any other place,
the seller is not responsible for
unloading.
If the buyer nominates a person other
than a carrier to receive the goods, the
seller is deemed to have fulfilled his
obligation to deliver when goods are
delivered to that person.

INCOTERMS

RULES

CPT/CIP: SELLERS COSTS AND OBLIGATIONS

Sellers
Factory/
Whse

First Carriers
Premises

Means that the seller delivers the

goods to the carrier nominated by
him but the seller must in addition pay
the cost of carriage (and insurance
under CIP term) necessary to bring
the goods to the named destination.
If subsequent carriers are used for
the carriage to the agreed destination,
the risk passes when the goods have
been delivered to the first carrier.
Seller is required to clear goods for
export.

INCOTERMS
Sellers
Factory/
Whse

NAMED PLACE OR
PORT OF
DESTINATION

RULES

DELIVERED AT PLACE (DAP)

Delivery occurs at the named place of
destination, ready for unloading (not
unloaded).
Similar to the former DAF, DES and DDU
terms.
Can be used for any, multimodal or
maritime transport, as the arriving
vehicle can be a ship
The named destination can be a port.
Goods are delivered with the seller
bearing all risks and costs (other than
import costs where applicable) to the
named destination.

INCOTERMS
Sellers
Factory/
Whse

RULES

DELIVERED AT TERMINAL (DAT)

Delivery occurs at the named place
of destination, at the buyers
disposal unloaded from the arriving
vehicle.
Similar to DEQ Terms.
Can be used for any multimodal
transport
Named place of delivery can be a
port
Goods are delivered with the seller
bearing all risks and costs (other
than import costs where applicable)
to the named destination.

INCOTERMS

RULES

RULES FOR SEA

AND INLAND
WATERWAY

INCOTERMS
Sellers
Factory/
Whse.

RULES

SELLERS COSTS & OBLIGATIONS

Clears the goods

for export

Pays all the costs till cargo is

placed alongside ship at
quay or lighter
Port of
Loading

F
A
S

INCOTERMS
Sellers
Factory/
Whse

RULES

FOB/CFR/CIF

INCOTERMS
2000 Seller
delivers when
goods passed
the ships
rail of the
carrying
vessel at the
named port of
shipment
cleared for
export.

INCOTERMS
2010 Seller
delivers when
goods are
delivered on
board the
carrying
vessel at the
named port of
shipment,
cleared for
export.

INCOTERMS

RULES
FOB/CFR/CIF

FOB/CFR/CIF may not be

appropriate where goods are
handed over to the carrier before
they are on board the vessel, for
example goods in containers, which
atypically delivered at a terminal.
In such circumstances, the FCA
or CPT or CIP rule should be
used.

INCOTERMS

RULES

Comparison Between CPT& CFR/CIP&CIF

SELLERS COSTS and OBLIGATIONS

CPT/CIP
SELLER
Manufacturing
Packing for Export
Handling and loading
(LCL cargo) or stuffing
into the container van
(FCL cargo)

CFR/CIF
SELLER
Manufacturing
Packing for
Export
Handling and
loading (LCL
cargo) or stuffing
into the container
van (FCL cargo)

INCOTERMS

RULES

Comparison Between CPT& CFR/CIP&CIF

SELLERS COSTS and OBLIGATIONS

CPT/CIP
SELLER
Pays the freight
charges necessary
to bring the goods
to the named
place of
destination.

CFR/CIF
SELLER
Pays the freight
charges
necessary to
bring the goods
to the named port
of destination.

INCOTERMS

RULES

Comparison Between CPT& CFR/CIP&CIF

SELLERS COSTS and OBLIGATIONS

CPT/CIP
BUYER
Responsible for
the payment of
duties, taxes and
other charges
due to the
government.

CFR/CIF
BUYER
Responsible for
the payment of
duties, taxes
and other
charges due to
the government.

INCOTERMS

RULES

Comparison Between CPT& CFR/CIP&CIF

SELLERS COSTS and OBLIGATIONS

CPT/CIP
BUYER
Bears the risk
and costs in
carrying out
customs
formalities.

CFR/CIF
BUYER
Bears the risk
and costs in
carrying out
customs
formalities.

INCOTERMS R RULES
COSTS/DUTIES OF SELLER UNDER INCOTERMS 2010
Loading
on truck
(carrier)

ExportCustoms
declaration

Carriage
to port
of export

Unloading
of truck
in port
of export

Loading
charges
in port
of
export

Carriage
to port
of import

Unloading
charges
in
port of
import

Loading
on truck
in port
of import

Carriage
to place of
destination

EXW

No

No

No

No

No

No

No

No

No

FCA

Yes

Yes

Yes

No

No

No

No

No

FAS

Yes

Yes

Yes

Yes

No

No

No

FOB

Yes

Yes

Yes

Yes

Yes

No

CFR

Yes

Yes

Yes

Yes

Yes

CIF

Yes

Yes

Yes

Yes

DAT

Yes

Yes

Yes

DAP

Yes

Yes

CPT

Yes

CIP
DDP

Insurance

Import
customs
clearance

Import
taxes

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

Yes

No

No

No

No

No

No

Yes

Yes

No

No

No

Yes

No

No

Yes

Yes

Yes

Yes

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

INCOTERMS

RULES

COSTS/DUTIES OF BUYER UNDER INCOTERMS 2010

Loading
on truck
(carrier)

ExportCustoms
declaration

Carriage
to port
of export

Unloading
of truck
in port
of export

Loading
charges
in port
of
export

Carriage
to port
of import

Unloading
charges
in
port of
import

Loading
on truck
in port
of import

Carriage
to place of
destination

EXW

YES

YES

YES

YES

YES

YES

YES

YES

YES

FCA

NO

NO

NO

YES

YES

YES

YES

YES

FAS

NO

NO

NO

NO

YES

YES

YES

FOB

NO

NO

NO

NO

NO

YES

CFR

NO

NO

NO

NO

NO

CIF

NO

NO

NO

NO

DAT

NO

NO

NO

DAP

NO

NO

CPT

NO

CIP
DDP

Insurance

Import
customs
clearance

Import
taxes

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

YES

NO

YES

YES

YES

No

YES

YES

NO

NO

YES

YES

YES

NO

YES

YES

NO

NO

NO

NO

YES

YES

YES

YES

YES

NO

NO

NO

NO

NO

NO

NO

YES

YES

YES

NO

NO

NO

NO

NO

NO

NO

NO

YES

YES

YES

NO

NO

NO

NO

NO

NO

NO

NO

NO

NO

YES

YES

NO

NO

NO

NO

NO

NO

NO

NO

NO

YES

NO

NO

Transfer of Risk from Seller to Buyer

CIF
On
Board

CFR
FOB

INCOTERMS R 2010

Transport & Insurance Paid

Ready for
unloading, but
not unloaded
from the
carrying vehicle

Transport Paid

Loading
Port

Destination
Port

BUYER

SELLER

DAP

FAS
EXW
FCA
CPT
CIP

Sellers Place/Buyers
Designated/Carriers Place

Transport Paid
Transport & Insurance
Paid

DAT
Unloaded
from the
carrying
vehicle

DDP

INCOTERMS

RULES
FOB

EX-WORKS

Manufacturing
cost
Packing
Marking
Labeling
Administrative
Expenses
Manufacturers
Profit

Port of Loading

Inland Freight
Forwarding Costs
Arrastre Charges
Wharfage Dues
Export Clearance
Charges
Internal Insurance
(if applicable)
Miscellaneous
Charges

CFR/CIF

Port of
Destination

Ocean
Freight
Insurance

INCOTERMS
EX-WORKS

+
Manufacturing
cost
Packing
Marking
Labeling
Manufacturers
Profit

RULES

FCA

DDP
CPT/CIP

Buyers designated
place/ Carriers
Premises

Place of Loading

Container stuffing
Inland Freight
Forwarding Costs
Arrastre Charges
Wharfage Dues
Terminal Handling
Charges
Export Clearance
Charges
Internal Insurance
(if applicable)
Miscellaneous
Charges

Place of +
Destination

Transport
Cost
Insurance

BUYER
Import Duties &
Taxes
Terminal
handling Charges
Brokerage Fee
Arrastre
Charges
Wharfage Dues
Storage/Demurr
age Charges (if
applicable)
Inland Transport
Cost
Insurance (If
applicable)
Miscellaneous
Charges

INCOTERMS

RULES

HOW ARE INCOTERMS 2010 RULES USED?

Commercial Invoice should

state: e.g.
CFR New RYork, USA
Incoterms 2010, rather than
just CFR USA
The registered trademark
symbol should be used when
referring to Incoterms 2010

INCOTERMS

RULES

TIPS ON USING INCOTERMS

2010

REMEMBER: INCOTERMS are not

your prime contract of sale.
Consider terms appropriate to the
goods.
Consider terms appropriate to the
transportation.
Decide who will organize the
transport?
Decide who will organize the
insurance (if required)

INCOTERMS

RULES

TIPS ON USING INCOTERMS

2010

Consider local customs or

practices at the port or place.
Consult the guidance note.
Choose the appropriate Rule.
Specify place as precisely as
possible
Incorporate INCOTERMS into
your contract.

CB ARACELI B. REQUINTO, MCA

Certified UNESCAP Trainer
A practicing Licensed Customs Broker since 1992 with sixteen (16) years experience in a Trading Firm
handling Mining and Construction Equipment as Product Consultant, Administrative and Technical
Assistant to the President which includes Purchasing, Marketing, and Inventory and experience in
customs brokerage industry dates back in 1972.
Former Dean of the College of Customs Administration and Review Director for Customs Brokers
Licensure Examinations of Asian Institute of Maritime Studies (AIMS), PMI Colleges and Lyceum of
Subic Bay, Part-time Faculty Member at DLSU-College of St. Benilde for the Export Management
Program in 2000. Currently, a Special Lecturer for Tariff and Customs subjects at the Lyceum of the
Philippines University under the Customs Administration Department, College of Business
Administration and a Faculty Member of the Graduate School of Asian Institute of Maritime Studies
(AIMS), Pasay City and Reviewer for Customs Brokers Licensure Examination.
Former member of the Board of Directors of the Port Users Confederation, Inc. (PUC) and the
Chamber of Customs Brokers, Inc. (CCBI), Training Director of PUC and for Special Projects of the
Philippine Chamber of Commerce and Industry, Inc. (PCCI).
A regular lecturer of various training institutions such as: the Philippine Trade Training Center (PTTC)
under the Department of Trade and Industry (DTI), Philippine International Seafreight Forwarders
Association (PISFA), Aircargo Forwarders of the Philippines, Inc. (AFPI) and the Purchasing Institute for
Supply Management (PISM). A Faculty Member of De La Salle-College of St. Benilde School of
Professional and Continuing Education (SPACE) and a Certified Trainer on Logistics, Freight
Forwarding and Multimodal Transport Operation by the United Nations Economic and Social
Commission for Asia and Pacific (UNESCAP).
Conducted lectures on INCOTERMS and Export Documentation and Procedures for the Department of
Trade and Industry (DTI)-Small Medium Enterprise (SME) Caravan held in various Regions of the
country and a Certified Trainer for DTIs Information Campaign on Doing Business in Free Trade
Areas.