1

Dr. A.K. Sengupta

Former Dean, Indian Institute of Foreign
Trade
2
Category Applicable for sea
transport only
Applicable for all modes of
transport (including water)
E terms:
Departure terms
EXW (Ex works)
F terms:
Shipment terms, main
carriage unpaid
FAS (Free alongside ship)
FOB (Free on board)
FCA (Free carrier)
C terms:
Shipment terms, main
carriage paid
CFR (Cost and freight)
CIF (Cost, insurance, and
freight)
CPT (Carriage paid to)
CIP (Carriage and insurance
paid to)
D terms:
Delivery terms
DES (Delivered ex ship)
DEQ (Delivered ex quay)
DAF (Delivered at frontier)
DDU (Delivered duty unpaid
DDP (Delivered duty paid)
Source: Based on Joshi, Rakesh Mohan, International Marketing, New Delhi, Oxford University Press,
2005, p. 383
3
INCOTERMS
In international transaction a set of terms used:
To describe the rights and responsibilities of the
buyer and seller with regard to
Sale and transport
Uniform interpretation of these commercial terms
(INCOTERMS) defining the cost, risks, and obligations of
buyers and sellers have been developed by International
Chamber of Commerce (ICC) in Paris
4
Incoterms 2000 include a set of 13 terms as under:
EXW (Ex Works) named place
The sellers obligation to deliver goods is complete when he
places the goods at the disposal of the buyer at his own premises
or another place such as factory, warehouse etc. Here the goods
are not cleared for exports

FCA (Free Carrier) named place
Here the sellers obligation to deliver the goods is complete when
he delivers to the carrier nominated by the buyer at the named
place cleared for export
5
FAS (Free Alongside Ship) named port of shipment
The seller delivers the goods by placing them alongside the
vessel at the named port of shipment. The buyer bears all costs
and risks of loss or damage to the goods from that moment

FOB (Free on Board) named port of shipment
Under this term, the seller fulfills his obligation of delivery when
the goods pass the ship rail at the named port of shipment. From
that point onwards the buyer bears all costs and risks. The seller
clears the goods for export

CFR (Cost and Freight) named port of destination
In CFR, the obligation of delivery is fulfilled, when the goods pass,
just as in FOB, the ships rail in the port of shipment. The only
addition is that the seller also pays freight necessary to bring the
goods to the port of destination
6
CIF, - (Cost, Insurance and Freight) named port of destination
Here also the delivery point is, the goods passing the ships rail in
the port of shipment. The seller, however pays the cost and
freight necessary to bring the goods to the port of destination and
also pays the insurance premium. The seller obtains insurance
only for the minimum cover. If the buyer wish to have a greater
cover he would either need to agree with the seller a make his
own extra insurance arrangements.
CIP (Carriage and insurance paid) named place of destination
Seller delivers the goods to a carrier it nominates and also pays
the cost of bringing the goods to the named destination. The
seller also obtains insurance against the buyers risk of loss or
damage during carriage and clears the goods for export
7
CPT (Carriage paid) named place of destination
Seller delivers goods to carrier it nominates and pays cost of
bringing the goods to the named destination. The seller also
clears the goods for export
DAF (Delivered at Frontier) named place
Any mode of transport to a land frontier. The seller delivers
when goods are placed at the buyers disposal on the arriving
means of transport, (not unloaded) cleared for export but not
cleared for import before the customs border of the destination
country
DES (Delivered ex ship) named port of destination
Maritime and inland waterway only; the seller delivers when
goods are at the buyers disposal on board the ship not
cleared for import. The buyer pays discharging costs.

8
DEQ (Delivered quay) named port of destination
Maritime and inland waterway only; the seller delivers when
the goods are placed at the buyers disposal, not cleared for
import, on the dock (quay) at the named port of destination.
The seller pays discharging costs, but the buyer pays for
import clearance
DDU (Delivered Duty Unpaid) named place of destination
Any mode of transport the seller delivers the goods to the
buyer, it is not cleared for import and not unloaded from the
arriving means of transport at the named destination, but the
buyer is responsible for all import clearance formalities and
cost
9
DDP (Delivered duty paid) named place of destination
Any mode of transport; the seller delivers goods to the buyer,
cleared for import (including import licence, duties, and taxes)
but not unloaded from the means of transport

Ex-works (EXW) involves lowest obligation while the DDP
involves highest obligation for a seller
10
The price quotation under various incoterms should include
the expenses as mentioned. For instance, XYZ International,
a Jaipur-based export firm, has to make price quotations for
1000 pieces of greeting cards made from hand-made paper.
The firm decides to offer a unit price of US$5 per piece that
works out to a total price of US$5000. The firm should include
the following expenses while making a price quotation
11
Incoterm Expenses to be included Addition
al cost
(in US$)
Total price to be
quoted
(in US$)
EXW Ex-works Jaipur
Export packing, marking shipping marks
200 5000
FCA Free on carrier at Jaipur station
Carriage and insurance for delivery to railway station by
road transport including insurance
150 5350
FAS Free alongside ship at Kandla. Rail transport to port
(including insurance) and getting goods on the quay
alongside ship
400 5750
FOB Free on board Kandla. Dock dues, loading goods on
board ship. Preparing shipping documents
120 5870
CFR Cost and freight. Sea freight to Singapore (nearest port to
Singapore)
230 6100
CIF Cost, insurance and freight. Sea freight plus marine
insurance (port to port)
100 6200
DES Delivered ex ship at Singapore. Landing charges at
Singapore port
80 6280
DDP Delivery duty paid at Customers warehouse in Singapore
Import duties for 1000 pieces of greeting cards
Transportation
680
40
7000