International

finance
Submitted To: Prof Javaid Malik
Submitted By:
Rahat Arshad EMBA F14-007
Awaisia Abbasi
EMBA-F14-031

Umer Abbas
EMBA-F14-063
Nazeer Ahmad
EMBA-F14-026

INCOTERMS : International Commercial

TERMS
INCOTERMS define the mutual obligations of
seller and buyer arising from the movement
of goods under an international contract from
the standpoint of risks, costs and documents
UNCTAD, 1990

INCOTERMS : International
Commercial TERMS
Universally

recognised set of definitions of

international trade terms
Recognised by courts and other authorities
Define the trade contract responsibilities and
liabilities between buyer and seller
Updated regularly to keep pace with changes
and developments in international trade

What are they?

Set of international rules for the
interpretation of the most commonly
used foreign trade terms

Why are they Important?

Reduce

the uncertainty caused by trade

practices in different countries.
Simplify the negotiations involved in
international commerce.
Ensure common understanding of obligations

Purpose of Incoterms
Designed

for Parties to a Contract

Provides a set of international rules for
foreign trade
Reduces uncertainties
Avoids different interpretations in
different countries
Additional costs and time can be
avoided

THE SELLERS
OBLIGATIONS
A1 Provision of goods in conformity with the contract
A2 Licenses, authorizations and formalities
A3 Contract of carriage and insurance
A4 Delivery
A5 Transfer of risks
A6 Division of costs
A7 Notice to the buyer
A8 Proof of delivery, transport document or equivalent
electronic message
A9 Checking packaging marking
A10 Other obligations

THE BUYERS OBLIGATIONS

B1 Payment of the price
B2 Licenses, authorizations and formalities
B3 Contract of carriage
B4 Taking delivery
B5 Transfer of risks
B6 Division of the costs
B7 Notice to the seller
B8 Proof of delivery, transport document of equivalent
electronic message
B9 Inspection of goods
B10 Other obligations

Scope of Incoterms
Incoterms is limited:
To

rights and obligations of the parties to contract of sale with

respect to the delivery of the goods sold.
Do

not deal with the consequences of breach of contract

Pprimarily

intended for use where goods are sold for delivery

across national boundaries, hence international commercial terms
Can

be used in contracts for sale of goods directly.

The Categories
Incoterms
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

Ex works
Free carrier
Free alongside ship
Free on board
Cost & freight
Cost, insurance & freight
Carriage paid to
Carriage and insurance paid to
Delivered at frontier
Delivered ex ship
Delivered ex quay
Delivered duty unpaid
Delivered duty paid

Code

EXW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
DAF
DES
DEQ
DDU
DDP

E Terms
F Terms

C Terms

D Terms

Structure
Group

E Departure
EXW Ex Works (.............named place)
Group

F Main carriage unpaid

FCA Free Carrier (.............named place)
FAS

Free Alongside Ship (.........named port of

shipment)

FOB

Free On Board (............named port of shipment)

Structure
Group

C Main carriage paid

CFR

Cost and Freight (...........named port of destination)

CIF
Cost, Insurance & Freight (.....named port of destination)
CPT Cost Paid To
(...........named port of destination)
CIP Carriage and Insurance paid to ( .named place of
destination)
Group
DAF

D Arrival

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)

The Terms
The E Term is the term in which sellers
obligation is at its minimum

The F Term require the seller to deliver as

instructed by the buyer

The C Term require the seller to contract for

carriage at his expense

The D Term signifies arrival contracts

The Steps of Global

Logistics
Customs Clearance
for Export

2
1

Loading

Preliminary
Transportation

Handling
Outbound

Packing

6
Insurance
Customs
Clearance
Duties

11
Unloading

10
Final
Transportation

Main
International
Transportation

8
Handling
Inbound

E Terms: Departure
EXW (named place)

Under E-terms, the seller minimizes his risk by only

making the goods available at his own premises.
SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE -CARRIAGE
Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

EXW = Ex Works
The seller fulfills his obligation to deliver when he has
made the goods available at his premises to the buyer.
The seller is not responsible for loading the goods on
the vehicle provided by the buyer
The seller is not responsible for clearing the goods for
export, unless agreed.
The buyer bears all costs and risks involved in taking
the goods from the sellers premises to the desired
destination

FCA
"Free Carrier" means that the seller fulfils his
obligation to deliver when he has handed
over the goods, cleared for export, into the
charge of the carrier named by the buyer at
the named place or point.

FCA (named place)

Seller
clears export customs,
delivers goods to carrier
evidence of delivery
SELLER

Export
Clearance

Import
Clearance

BUYER

Goods

PRE-CARRIAGE

MAIN CARRIAGE

ON-CARRIAGE

Sellers Risk
Sellers Cost

Buyer
nominates carrier,
contracts carriage
pays freight