Inco Terms

INCOTERMS
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INCOTERMS 2000
• Published by International chamber of Commerce in
1936.
• Used in International commercial transactions.
• Purpose is to provide a set of international rules for the
interpretation of the most commonly used trade terms.
• Used to divide transaction cost and responsibilities
between buyer and seller

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Incoterms – Purpose and Scope
• Pricing terms, shipping terms, sales terms.

• Apply to international trade.
• Define the rights and obligation of the
parties to the contract of sale with respect
to the delivery of goods sold.

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Four Groups of Incoterms
1) “E” group
2) “F” group
3) “C” group
4) “D” group

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EXW
EX WORKS (…named place)
• The “E”-term is the term in which the

seller’s obligation is at its minimum.
• The seller makes the goods available at
his premises.
• The buyer is responsible for all charges.

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EXW
Ex Works …(named place)
SELLER BUYER
Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Exporter Documents at named Port of Ship Port of named place of Documents Importer
Premises Formalities place of: Shipment Rail Arrival destination: Formalities Premises
Frontier/ Plane Frontier/
Terminal/ Ship’s Ship’s Terminal/Quay
Quay Rail Rail
Seller’s Buyer’s Risks
Risks
Seller’s Buyer’s Cost

Cost

Page 6
Incoterms
• The “F” –terms require the seller to deliver

goods for carriage as instructed by the buyer.
• FCA
• FAS
• FOB

Page 7
FCA
FREE CARRIER (named place)
• Seller delivers when goods, cleared for export,

to the carrier nominated by the buyer at a named
place.
• Term may be used irrespective of the mode of
transport.
• Seller obligated to load goods on arriving
vehicle if it arrives at the seller’s premises.
• Seller not obliged to unload goods from his
vehicle.

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FCA
Free Carrier… (named place)
SELLER BUYER

Premises Form alities place of: Shipment Rail Arrival destination: Form alities Premises
Quay Rail Rail
Seller’s Risks Buyer’s
Risks
Seller’s Cost Buyer’s Cost

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FAS -FREE ALONGSIDE SHIP
(…named port of shipment)
• The seller must place the goods alongside the

ship at the named port
• Seller obliged to clear goods for export.
• The buyer bears all costs and risks of loss or
damage to the goods from that moment.
• Terms can be used for sea or inland waterway
transport only.

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FAS
Free Alongside…(named place)
SELLER BUYER

Quay Rail Rail
Risks

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FOB – FREE ON BOARD
(…named port of shipment)
• The seller must load the goods on board the

ship nominated by the buyer, cost and risk being
divided at ship's rail.
• The buyer bears all costs and risks of loss or
damage to the goods from that point.
• Term can be used for sea or inland waterway
transport only.

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FOB
Free On Board… (named port of shipment)
SELLER BUYER
Seller/ Export Delivered Loading O nboard Discharging Delivery at Import Buyer/

Exporter Docum ents at nam ed Port of Ship Port of named place of Documents Importer
Premises Formalities place of: Shipment Rail Arrival destination: Form alities Premises
Terminal/ Ship’s Ship’s Terminal/Q uay
Q uay Rail Rail
Risks

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Incoterms 2000
• The “C” –terms require the seller to

contract for carriage at his expense – to a
specified point.
• CFR
• CIF
• CPT
• CIP

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CFR – COST AND FREIGHT
(…named port of destination)
• Seller must pay the costs and freight to bring the

goods to the port of destination but the buyer
bears the risk of loss and additional costs
occurring after delivery.
• Term can be used for sea or inland waterway
transport.
• If intent is not to deliver goods across the ship’s
rail, use CPT

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CFR
C ost and F reigh t … (n am ed p ort of d estin ation )
SELLER BUYER
S eller/ E xp ort D elivered L o ad in g O n b oard D isch argin g D elivery at Im p ort B u yer/

E xporter D ocu m en ts at nam ed P ort of S h ip P ort of n am ed p lace o f D ocu m en ts Im po rter
P rem ises F orm alities p lace of: S h ip m en t R ail A rrival d estination : F orm alities P rem ises
Fron tier/ Plan e F ron tier/
T erm in al/ S h ip ’s Sh ip ’s T erm in al/Q u ay
Q u ay R ail R a il
S eller’s R isk s B u yer’s R isk s
S eller’s C ost B u yer’s C ost

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CIF – COST, INSURANCE AND FREIGHT
(…named port of destination)
• The seller pays the costs and freight necessary to bring

goods to port of destination, but the buyer bears the risk
of loss and additional costs occurring after delivery.
• The seller procures marine insurance, against buyer’s
risk of loss.
• Term can be used for sea or inland waterway transport.
• If intent is not to deliver goods across the ship’s rail, use
CIP.

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C IF
C ost, In su ran ce an d F reigh t … (nam ed p ort of d estination)
SELLER BUYER
S eller/ E xp ort D elivered L o ad in g O n b oard D isch argin g D elivery at Im p ort B u yer/

E xporter D ocu m en ts at nam ed P ort of S h ip P ort of n am ed p lace o f D ocu m en ts Im po rter
P rem ises F orm alities p lace of: S h ip m en t R ail A rrival d estination : F orm alities P rem ises
Fron tier/ Plan e F ron tier/
T erm in al/ S h ip ’s Sh ip ’s T erm in al/Q u ay
Q u ay R ail R a il
S eller’s B u yer’s R isk s
R isk s
S eller’s B u yer’s C ost

C osts

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CPT – CARRIAGE PAID TO (…named
place of destination)
• Seller delivers the goods, cleared for export, to

the carrier.
• The seller pays the costs of carriage necessary
to bring goods to named destination, but the
buyer bears the risk of loss and additional costs
occurring after delivery.
• Term may be used irrespective of mode of
transport.

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CPT
Carriage Paid To …(named port of destination)
SELLER BUYER

Quay Rail Rail
Risks
Seller’s Cost Buyer’s

Costs

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CIP – CARRIAGE AND INSURANCE PAID
TO (…named place of destination)
• Seller delivers the goods, cleared for export, to the

carrier.
• The seller pays the costs of carriage to named
destination, but the buyer bears the risk of loss and
additional costs occurring after delivery.
• The seller procures insurance against buyer’s risk of
loss.
• Term may be used irrespective of mode of transport.

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CIP
Carriage and Insurance Paid To …(named port of destination)
SELLER BUYER

Quay Rail Rail
Seller’s Risks Buyer’s Risks

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Inco terms 2000
• The “D” –terms require the seller to take the

goods all the way to destination at the border or
within the country of import.
• DAF
• DES
• DEQ
• DDU
• DDP

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DAF – DELIVERED AT FRONTIER (…
named place)
• This term can be used when the goods are transported

by rail and road.
• The seller pays for transportation to the named place of
delivery at the frontier.
• The buyer arranges for customs clearance and pays for
transportation from the frontier to his factory.

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DAF
Delivered At Frontier…(named place)
SELLER BUYER

Quay Rail Rail
Risks

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DES – DELIVERED EX SHIP (…named port
of destination)
• Where goods are delivered ex ship, the passing of risk
does not occur until the ship has arrived at the named
port of destination and the goods made available for
unloading to the buyer.
• The seller pays the same freight and insurance costs as
he would under a CIF arrangement.
• The seller has agreed to bear not just cost, but also Risk
and Title up to the arrival of the vessel at the named port.
• Costs for unloading the goods and any duties, taxes,
etc… are for the Buyer.
• Term used only for delivery by sea.

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DES
Delivered exShip…(named port of destination)
SELLER BUYER

Quay Rail Rail
Risks

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DEQ – DELIVERED EX QUAY (…named
port of destination)
• This is similar to DES.

• The passing of risk does not occur until the goods have
been unloaded at the port of destination.
• Seller bears all costs and risks to bring goods to the
named port of destination and discharging the goods on
the quay.
• Term used only for delivery by sea.

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DEQ
Delivered Ex Quay…(named port of destination)
SELLER BUYER

Quay Rail Rail
Risks

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DDU – DELIVERED DUTY UNPAID (…
named place of destination)
• Seller delivers the goods to the buyer to the named

place of destination in the contract of sale
• Seller bears all costs and risks (except duty) to bring
goods to the named place of destination.
• Term may be used irrespective of mode of transport.
• If delivery is to take place at the port, quay or on board a
vessel, DES or DEQ should be used.

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DDU
Delivered Duty Unpaid… (named place of destination)
SELLER BUYER
Seller/ Export Delivered Loading O nboard Discharging Delivery at Import Buyer/

Exporter Docum ents at named Port of Ship Port of named place of Documents Importer
Premises Form alities place of: Shipment Rail Arrival destination: Formalities Premises
Terminal/ Ship’s Ship’s Terminal/Q uay
Q uay Rail Rail
Risks

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DDP – DELIVERED DUTY PAID (…
named place of destination)
• Seller delivers goods to the buyer, cleared for import,

and not unloaded, at the named place of destination.
• Seller bears all costs and risks, including import duty, to

bring goods to the named place of destination.
• Term may be used irrespective of mode of transport. If

delivery is to take place at the port, quay or on board a
vessel, DES or DEQ should be used.

Page 32
DDP
Delivered Duty Paid…(named place of destination)
SELLER BUYER

Quay Rail Rail
Risks

Page 33
Letter of Credit
• The letter of credit can also be source of payment for a
transaction, meaning that redeeming the letter of credit
will pay an exporter.
• Letters of credit are used primarily in international trade
transactions of significant value, for deals between a
supplier in one country and a customer in another. In such
cases the International Chamber of Commerce Uniform
Customs and Practice for Documentary Credits applies.
• The parties to a letter of credit are usually
a beneficiary who is to receive the money, the issuing
bank of whom the applicant is a client, and the advising
bank of whom the beneficiary is a client.
Page 34
Document against Payment
The exporter ships the goods, and then gives the documents
(including the bill of lading necessary to claim the goods at the
foreign port) to his bank, which will forward them to a bank in the
buyer's country, along with instructions on how to collect the
money from the buyer.
• Document against Acceptance
Instructions given by an exporter to a bank that the documents

attached to the draft for collection are deliverable to the drawee
only against his or her acceptance of the draft.
•

Page 35
In Summary
• Buyer’s Objective: maximize control of supply chain, use

FOB, FCA, or FAS
• INCOTERMS are negotiable!
• INCOTERMS should appear on all commercial
documents.
• The five terms-DAF,DES,DEQ,DDU and DDP have been
declared obsolete and would be replaced by three new
terms DAT (Delivered at Terminal), DAP (Delivered at
Place), and DDP (Delivered Duty Paid) by Jan 01,2011.

Page 36
THANKS FOR YOUR ATTENTION

Page 37

Inco Terms

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INCOTERMS

Free Powerpoint Templates

Free Powerpoint Templates

• Pricing terms, shipping terms, sales terms.

Free Powerpoint Templates

Free Powerpoint Templates

• The “E”-term is the term in which the

Free Powerpoint Templates

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Buyer’s Cost

Free Powerpoint Templates

• The “F” –terms require the seller to deliver

Free Powerpoint Templates

• Seller delivers when goods, cleared for export,

Free Powerpoint Templates

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Free Powerpoint Templates

• The seller must place the goods alongside the

Free Powerpoint Templates

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Free Powerpoint Templates

• The seller must load the goods on board the

Free Powerpoint Templates

Seller/ Export Delivered Loading O nboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

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• The “C” –terms require the seller to

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• Seller must pay the costs and freight to bring the

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S eller/ E xp ort D elivered L o ad in g O n b oard D isch argin g D elivery at Im p ort B u yer/

S eller’s C ost B u yer’s C ost

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• The seller pays the costs and freight necessary to bring

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S eller/ E xp ort D elivered L o ad in g O n b oard D isch argin g D elivery at Im p ort B u yer/

S eller’s B u yer’s C ost

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• Seller delivers the goods, cleared for export, to

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Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s

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• Seller delivers the goods, cleared for export, to the

Free Powerpoint Templates

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

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• The “D” –terms require the seller to take the

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• This term can be used when the goods are transported

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Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

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Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

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• This is similar to DES.

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