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INCOTERMS 2010
Import

ITS Training 2005-2013

About INCOTERMS 2010

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INCOTERMS stands for International Contract of Terms

There are 11 terms on total, which are internationally-recognized contract
terms.
Updated every 10 years, INCOTERMS 2010 came into force on 1 January
2011, replacing INCOTERMS 2000.
They define responsibilities for the seller (shipper) and buyer (consignee)
for these purposes:
Costs who pays which charges.
Risk where does the risk transfer from the seller to the buyer?

(The definition of risk can be found on the next slide.)

INCOTERMS are an important part of the contract between seller and
buyer, and should there be any disputes, they will be relied upon in a court
of law.
ITS Training 2005-2013

Transfer of Risk the definition

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Throughout this lecture we shall be referring to the transfer of risk. This slide will
explain the main points to consider.
International Trade (all forms of transport) contain a limited liability, which
effectively means the carrier may only be responsible for a small percentage of the
value of the goods lost or damaged.
The INCOTERM decides which party takes the risk and from which point.
There are however two INCOTERMS that require mandatory insurance, these are
CIF & CIP.
On all other INCOTERMS, it is advisable to
obtain marine insurance cover.
If you do not arrange marine insurance on your
goods, and they become damaged or lost court
action becomes necessary to resolve a dispute.
ITS Training 2005-2013

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Quotation
High Quality Supplies, we Boulevard Place, New York 1923-0072
Freight Quotation
Date: 2nd January 201X

Reference: 0109

Quotation to: ABC Imports

101 High Street
Birmingham B6 2LG
Re: 5000 Plastic Bottles Cat No. B9662
We are pleased to submit the following price based upon

DAP Birmingham
Subject to INCOTERMS 2010
Product
Freight

$25295
$ 2500

Subject to our terms and conditions

ITS Training 2005-2013

Where terms are stated in a quotation,

they are known as express terms.
Format and content of quotations
differ between organizations.
Some parts of the quotations contents
are obvious, others are less so.
Where terms are clearly stated in a
quotation, you are likely to avoid
disputes at a later date.

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Structure
INCOTERMS follow a particular structure

Sea terms

Any Mode

Any Mode

FAS

Ex Works

DAT

FOB

FCA

DAP

CFR

CPT

DDP

CIF

CIP

ITS Training 2005-2013

Overseas Country Regulations

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Example 1

It is always the responsibility of the

seller for packing & marking.
The seller therefore has to take into
consideration overseas country
regulations.

Australia
You must not use any wood or straw as
packing material, unless treated to
Australian standards

Example 2

Here are two examples of packing and

marking regulations.

ITS Training 2005-2013

USA
You must ensure that the country of
origin is shown in English on all four
sides of the boxes, this may be in
addition to any other language.

Ex Works

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(Named Place)

The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
Buyers Risk
Risk transfers when the goods are made available to the
driver (prior to loading) at the collection point.
The Buyers Responsibilities Are...
Arrange both export and import licence and customs
formalities.
Arrange to pay freight charges from the sellers
warehouse to the final destination.
Recommend Marine Insurance.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for any mode of

transport

Summary
Charges from loading to
discharge are for buyers
account.
Buyer responsible for
export customs and
formalities.
Buyer appear on the bill
of lading as Shipper.

FCA - Free Carrier, e.g. FCL

(Named Place)

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The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
The seller is responsible for loading the goods onto the vehicle.
Obtain export licences and deal with export customs formalities.
Buyers Risk
Risk transfers when the goods are loaded on board the vehicle
at the point of collection.
Suitable
Suitablefor
forany
anymode
modeofof
transport
transport

This example is for direct collections only.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

The Buyers Responsibilities Are...

Obtain any Import licence and deal with
import customs formalities.
Arrange to pay freight charges from the
agreed collection point to the final
destination.
Recommend Marine Insurance.

FCA - Free Carrier e.g. LCL

(Named Place)

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The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
Obtain export licences and deal with export customs formalities.

Buyers Risk
Risk transfers when the vehicle arrives at the
consolidation point (prior to unloading).
Suitable for any mode of
transport

This example is consolidated goods only.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

The Buyers Responsibilities Are...

Obtain any Import licence and deal with
import customs formalities.
Arrange to pay freight charges from the
agreed collection point to the final
destination.
Recommend Marine Insurance.

Sea Terms for Break Bulk

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The reasons why FAS/FOB/CFR/CIF are only suitable for conventional cargo.
Step 1
Factory Japan.

Step 4
Safely on board in good
order and condition.

Step 2
Drums being transported to
the port.

Step 3
When they arrive at the port
they can be checked for
condition before loading on
to the vessel.
ITS Training 2005-2013

Goods arriving at the

port in a container
cannot be checked as
the insurance risk
transfer.

FAS - Free Alongside Ship

(Named Port of Loading)

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The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Deliver the goods to the named port.

Buyers Risk
Risk transfers when the goods have
been delivered to the port of export.

Not suitable for containerized cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for sea

transport only

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to pay freight charges from the
named port of export (i.e. Felixstowe) to
their final destination.
Recommend Marine Insurance.

FOB - Free on Board

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(Named Port of Loading)

The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed vessel.

Buyers Risk
Risk transfers when the goods are on
the vessel at the port of export, and
from the agreed date.

Not suitable for containerized cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for sea

transport only

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to pay freight charges once the
goods are on-board the export vessel.
Recommend Marine Insurance.

Transfer of Risk

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Under a FOB contract, the Transfer of Risk can happen in two ways.
Risk will transfer from seller to buyer when the goods are on board the vessel at the
port of export and from the agreed date, therefore giving the buyer the greater risk.
If the vessel is delayed, risk will transfer at the agreed date prior to loading onto the
vessel.
The buyer must supply the seller, with sufficient notice, of the vessel name, loading
port and required delivery time.
If the buyer fails to advise these details to the seller, then risk will transfer on expiry of
the agreed delivery period (delivery to the named port)
and therefore the risk will transfer prior to the goods being loaded onto the vessel
ITS Training 2005-2013

CFR - Cost and Freight

(Named Port of Destination)

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The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all freight charges to the port of destination.
The seller may also be responsible for on-carriage if agreed.
Buyers Risk
Risk transfers when the goods are on the
vessel at the port of export.

Not suitable for containerized cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for sea

transport only

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay haulage cost from the named port to
final destination.
Recommend Marine Insurance.

CIF - Cost, Insurance & Freight

(Named Port of Destination)

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all freight charges to the port of destination.
The seller may also be responsible for on-carriage if agreed.
Insurance cover against the buyers risk of loss during carriage.
Buyers Risk
Risk transfers when the goods are on the
vessel at the port of export.

Not suitable for containerized cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for sea

transport only

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay haulage cost from the named port to
final destination.

CPT - Carriage Paid To

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(Named Place of Destination)

The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed destination (including unloading at
destination).
Buyers Risk
Risk transfers when the goods have delivered
to the carrier (on-board the vehicle).

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay any duties, taxes and clearance costs
in the importing (buying) country.
Recommend Marine Insurance.

CIP Carriage, Insurance Paid To coast

(Named Place of Destination)

The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export
licences).
Pay all charges to the agreed destination (including unloading at
destination).
Seller arranges marine insurance on behalf of the buyer.
Buyers Risk
Risk transfers when the goods have delivered
to the carrier (on-board the vehicle).

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay any duties, taxes and clearance costs
in the importing (buying) country.

DAT Delivered at Terminal

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The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed terminal.
Recommend Marine Insurance.
Buyers Risk
Risk transfers when the goods have delivered
to the agreed terminal.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to unload the goods upon arrival at
the terminal.
Pay any duties, taxes and clearance costs in
the importing (buying) country.

DAP Delivered at Place

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The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed destination.
Recommend Marine Insurance.
Buyers Risk
Risk transfers when the goods have delivered
to the agreed destination.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to unload the goods upon arrival at
the buyers warehouse.
Pay any duties, taxes and clearance costs in
the importing (buying) country.

DDP Delivered Duty Paid

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The Sellers Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export and import clearance and deal with other
formalities (including licences).
Arrange Customs Clearance on import.
Pay any duties/taxes (and if agreed local taxes) in the buying country.
Recommend Marine Insurance.
Buyers Risk
Risk transfers when the goods have delivered
to the agreed destination.

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Pay any local import sales taxes.
e.g. VAT, this should however be confirmed
prior to agreeing this INCOTERM
Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

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Conclusion

ITS Training 2005-2013