Questions:

Q1. What problem do incoterms solve and why would these terms be necessary for international trade?

A1. Incoterms help to solve the problems between buyer and seller which may result in late or lost goods,
additional costs or even legal costs. Incoterms identify costs, risks and obligations between buyer and
sellers. Also, problems may occur when trading internationally due to languages, law and transport
systems. Incoterms help to reduce this problems to a great degree.

Incoterms help in clearing the issues related to responsibility for mode, carrier and routing selection,
responsibility for payment of transportation services, insurance and import duties and responsibility for
compliance with government regulations and financial liability of goods between buyer and the seller.

Q2. Of the four primary Incoterm groups (E, C, F, D), explain the primary transition points for each group
(between the buyer and the seller) of the following responsibilities: Arrangement and payment of ocean
freight, arrangement and payment of insurance, and arrangement for importation to the destination
country. A chart may be provided to best explain these responsibilities however this must be your own
original work. (10 marks)

A2. As shown in excel file Incoterms.xlsx (Incoterms - Logimar Srl, spedizioni internazionali -
international freight forwarders, 2010) the following is the description of 4 primary Incoterm groups:

E-Term- (EXW-Ex Works)Delivery is at the sellers premises or at another agreed point. The seller must
make the goods available to buyer packed and marked for export suitable to mode of transport. Buyer
responsible for loading the goods, payment of freight, arrangement for importation at his place and
arrangement and payment of insurance.

F-Term- Delivery at the buyers first carrier.

FCA two identified delivery points. 1st is sellers premiseswhen seller loads to buyers transport. 2 nd is
when seller delivers to buyers 1st carrier or freight forwarder at their depot. Here buyer has to unload the
goods.

FAS-Sellers transports the goods from their place of business or warehouse, clears the goods from
customs for export, and places goods alongside the vessel at the port of export, where the risk of loss
shifts to the buyer. The buyer is responsible for loading the goods onto the vessel, unless specified
otherwise, and for paying all the costs involved in shipping goods to the final destination in his country.
This includes paying for insurance, freight and importation at home country.

FOB-As soon as the goods cross the "ships-rails" (the ship's threshold) the risk of loss transfers to the
buyer. The buyer must pay for all transportation and insurance costs from that point onwards, and must
clear customs in the country of import or his home country.

C-Term-Delivery at the port or place in the sellers country, but the seller should organize shipment of
goods to the destination point in buyers country.

CFR (Cost and Freight)-The seller, or exporter, is responsible for clearing the goods for export, delivering
the goods past the ships rail at the port of shipment, and paying international freight charges. The buyer
assumes the risk of loss once the goods cross the ship's rail, and must purchase insurance, unload the
goods, clear customs, and pay for transport to deliver the goods to their final destination.

CIF(Cost, Insurance and Freight)- The seller, or exporter, is responsible for delivering the goods onto the
vessel of transport and clearing customs in the country of export. The exporter also is responsible for
purchasing insurance, with the buyer (importer) named as the beneficiary. Risk of loss transfers to buyer
as the goods cross the ship's rail. If these goods are damaged or stolen during international transport, the
buyer owns the goods and must file a claim based on insurance procured by the seller. The buyer must
clear customs in the country of import and pay for all other transport and insurance in the country of
import.

CPT(Carriage Paid To)- The seller, or exporter, clears the goods for export, delivers them to the carrier,
and is responsible for carriage costs to the named place of destination in buyers country. Risk of loss
transfers to the buyer once the goods are transferred to the carrier and the buyer must insure the goods
from that time on. The buyer pays the importation into his home country.

CIP(Carriage and Insurance Paid To)- The seller transports the goods to the port of export, clears
customs, and delivers them to the carrier. From that point onwards the risk of loss shifts to the buyer. The
seller is responsible for carriage and insurance costs to the named place of destination in buyers country.
The buyer is responsible for all costs, and bears risk of loss from that point forward.

D-Terms-Delivery is at the agreed point in the buyers country.

DAT (Delivery at Terminal)-Seller arranges to deliver goods and bear all costs involved while delivering to
destination terminal in buyers country such as airport or sea port. The seller is responsible for off-loading
the cargo at that point. The buyer must pay duties, clear customs, and pay the cost and bear the risk of
loss from that point forward.

DAP (Deliver at Place)-The seller, or exporter, is responsible for all costs involved in delivering the goods
to a named place of destination where the goods are placed at the disposal of the buyer. The buyer, or
importer, assumes the risk of loss at that point and must clear customs, pay duties, and provide inland
transportation and insurance to the final point of destination.

DDP (Delivery Duty Paid) - The seller, or exporter, is responsible for all costs involved in delivering the
goods to a named place of destination and for clearing customs in the country of import. Under a DDP In-
coterm, the seller provides literally door-to-door delivery of goods, including customs clearance in the port
of export and the port of destination. Thus the seller bears the entire risk of loss until goods are delivered
to the buyer's warehouse or premises. (Company, 2017)
 References

Company, T. P. (2017). Understanding Incoterms. Retrieved February 4, 2017, from

http://www.inboundlogistics.com/cms/article/understanding-incoterms/

Incoterms - Logimar Srl, spedizioni internazionali - international freight forwarders. (2010, August 12).
Retrieved February 4, 2017, from http://logimar.it/home/en/tools/incoterms/