Incoterms

Presenter: Host:

Laurie Turnbull, CCLP Catherine Viglas, CAE

Supply Chain Consultant President & CEO
Cole International CITT

CITT Webinar Series

Incoterms
Disclaimer
This material has been prepared for
discussion purposes only and is not
intended as professional advice
regarding selection of Incoterms or other
issues affecting liability, obligations or
responsibilities, of buyers and sellers
regarding the international sale of
goods.

CITT Webinar Series 2

Incoterms
International Trade is Confusing!
Who pays charges for?
$ $ $ $ $ $ $ $ $ $

Seller Buyer

$ $ $ $ $ $ $ $ $ $

Who bears risk of loss or damage?

CITT Webinar Series 3

Incoterms and International Trade

Protection Transfer
from loss or of cost
and risk
damage
Marine Incoterms
Insurance

Choice of
Transfer
jurisdiction
of title
(law) and
venue
Contracts
Of Sale CISG

FOB
Domestic
freight
term

CITT Webinar Series 4-9

Incoterms
Shipping Terms of Sale

FOB AFTD INCOTERMS UCC

1700s 1919-1985 1936 – 2010 1952-2004
Marine (Including (Current (Including
Payment ‘FOB’ Version) ‘FOB’
Term Terms) Terms)

CITT Webinar Series 5

Incoterms - What are They?

Incoterms were developed by the

International Chamber of Commerce
(ICC) in 1936 to:
• Provide a set of standardized rules for
interpreting commonly used terms in
international trade
• Eliminate misunderstandings, disputes,
and litigation that can occur when buyers
and sellers are unaware of different
trading practices in foreign countries

CITT Webinar Series 6

Incoterms - What Do They Do?

Incoterms provide information to the

Buyer and Seller regarding:
• The carriage of goods from Seller to Buyer
• Export and import Customs clearance
• The division of costs and risks
• The obligations to give notice
• The obligations to provide documentation

CITT Webinar Series 7

Incoterms
• Three words that often cause confusion
under Incoterms:

Ownership
• “Delivery” can • Risk of ownership
occur in a (i.e. the need for
foreign Port • Incoterms cargo insurance)
exclude
ownership
Delivery Risk

• These issues should be clarified in the

Buyer and Seller’s “contract of sale”

CITT Webinar Series 8

Incoterms Buyer/Seller
Contract of
Sale

Conditions Condition Jurisdiction Breach of

of the sale Incoterm of the goods Payment Ownership / Venue contract

May not all be covered in Purchase Order terms and conditions

Which is why
carriers should
never
recommend
an Incoterm!

CITT Webinar Series 9-5

Incoterms

• Incoterms are terms of the international

contract of sale, not the contract of carriage
• Incoterms were developed by the
International Chamber of Commerce to assist
Buyers and Sellers in international trade, they
are not “law”
• Incoterms 2010 consists of eleven terms for
use in international trade…

CITT Webinar Series 10

Incoterms

Incoterms 2010 can

be sorted into two
Multimodal Terms
groups:
1. Those designed for EXW DAT
multimodal shipping FCA DAP M

(i.e. any mode: CPT DDP

ocean, truck, rail, air) CIP
and… Ocean Terms
2. Those designed only FAS CFR O
for marine (ocean) FOB CIF
shipping

CITT Webinar Series 11

Incoterms
Incoterms 2010
“E” Terms (Buyer bears all costs & risks)
• EXW - Ex Works (named place of delivery) M

“F” Terms (Buyer pays “main freight”)

• FCA - Free Carrier (named place of delivery) M

• FAS - Free Alongside Ship (named port of O

shipment)
• FOB - Free On Board (named port of O

shipment)

CITT Webinar Series 12

Incoterms
Incoterms 2010
“C” Terms (Seller pays “main freight”)
• CPT - Carriage Paid To (named place of
destination) M

• CIP - Carriage and Insurance Paid To (named place

of destination) M

• CFR - Cost and Freight (named port of destination) O

• CIF - Cost, Insurance and Freight (named port of O
destination)

CITT Webinar Series 13

Incoterms
Incoterms 2010
“D” Terms (Seller bears all costs & risks):
• DAT - Delivered at Terminal (named terminal at M

port or place of destination)

• DAP - Delivered at Place (named place of M

destination)
• DDP - Delivered Duty Paid (named place of M

destination)

CITT Webinar Series 14

 Incoterms 2010: Transfer of Costs (to the Buyer)
[ Multimodal Terms ][ Ocean Terms ]

EXW FCA CPT CIP DAT DAP DDP FAS FOB CFR CIF
Ex Works Free Carriage Paid Carriage, Delivered at Delivered at Delivered Free Free On Cost & Cost,
Carrier To Insurance Terminal Place Duty Paid Alongside Board Freight Insurance &
Paid To Ship Vessel Freight
Services Multimodal C / Multimodal C / Multimodal C / Multimodal C / Multimodal C / Multimodal C / Multimodal

Warehouse
Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
storage

Warehouse
Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
labour

Export
Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
packing

Loading
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
charges

Inland Buyer/
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
freight Seller

Terminal
Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
charges

Forwarder’s
Buyer Buyer Seller Seller Seller Seller Seller Buyer Seller Seller Seller
fees

Loading on
Buyer Buyer Seller Seller Seller Seller Seller Buyer Seller Seller Seller
vessel

Ocean/air
Buyer Buyer Seller Seller Seller Seller Seller Buyer Buyer Seller Seller
freight

Charges on
arrival at Buyer Buyer Seller Seller Seller Buyer Seller Buyer Buyer Buyer Buyer
destination

Duty, taxes
& customs Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Buyer Buyer Buyer
clearance

Inland
delivery to Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Buyer Buyer Buyer
destination

C = Recommended for containerized shipments 15

Incoterms
Incoterms 2010

7 Incoterms
for
Multimodal
Shipments…

CITT Webinar Series 16

Incoterms

EXW: Ex Works (named place of delivery)

Multimodal
Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”) Terms:
EXW
FCA
CPT
CIP
Multimodal Term DAT
Port of DAP
Berlin Mississauga
Bremerhaven DDP
Export/Import Customs: Buyer’s obligation for export and import
Freight Charges Buyer (from Seller’s dock)
Insurance: Seller has no obligation to the Buyer to provide insurance
Transfer of Risk: At Seller’s dock (Consider cargo insurance!)
•This term should not be used if the Buyer is unable to arrange export customs clearance
•Buyer’s obligation to load the goods (i.e. this term is intended for bulk shipments)
•Not recommended for containerized shipments (use FCA)

CITT Webinar Series 17-2

Incoterms
FCA: Free Carrier (named place of delivery)
Multimodal
Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”) Terms:
EXW
FCA
CPT
CIP
Multimodal Term DAT
DAP
FORWARDER DDP

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Buyer from the “named place”
Insurance: Seller has no obligation to the Buyer to provide insurance
Transfer of Risk: Upon delivery to the first carrier (Consider cargo insurance!)

Recommended for containerized shipments

CITT Webinar Series 18

Incoterms
CPT: Carriage Paid To (named place of destination)
Multimodal
Transfer of Risk to Buyer Transfer of Cost to Buyer Terms:
(i.e. Seller “delivers”) EXW
FCA
CPT
CIP
Multimodal Term DAT
DAP
FORWARDER DDP

Export/Import Customs: Seller’s obligation for export /Buyer’s obligation for import
Freight Charges: Seller to named place of destination
Insurance: Seller has no obligation to the Buyer to provide insurance
Transfer of Risk: Upon delivery to the first carrier (Consider cargo insurance!)

Recommended for containerized shipments

CITT Webinar Series 19

Incoterms
CIP: Carriage and Insurance Paid To
(named place of destination)
Multimodal
Transfer of Risk to Buyer Transfer of Cost to Buyer Terms:
(i.e. Seller “delivers”) EXW
FCA
CPT
CIP
Multimodal Term DAT
DAP
FORWARDER DDP

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Seller to named place of destination
Insurance: Seller procures insurance for the Buyer (on “minimum cover”)
Transfer of Risk: Upon delivery to the first carrier (Consider exclusions in the
Seller-procured insurance policy!)
Recommended for containerized shipments

CITT Webinar Series 20

Incoterms
DAT Delivered at Terminal
(named terminal at port or place of destination)
Multimodal
Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”) Terms:
EXW
FCA
CPT
CIP
Multimodal Term DAT
DAP
DDP
Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import
Freight Charges: Seller to named terminal at place of destination
Insurance: Seller has no obligation to the Buyer to provide insurance
Transfer of Risk: Upon delivery, unloaded, at a named terminal at the
named port or place of destination (Consider cargo
insurance!)
Recommended for containerized shipments

CITT Webinar Series 21

Incoterms
DAP Delivered at Place
(named place of destination)
Multimodal
Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”) Terms:
EXW
FCA
CPT
CIP
Multimodal Term DAT
DAP
DDP

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Seller to named place of destination
Insurance: Seller has no obligation to the Buyer to provide insurance
Transfer of Risk: Upon delivery, not unloaded, at a named place of
destination (Consider cargo insurance!)
Recommended for containerized shipments

CITT Webinar Series 22

Incoterms
DDP Delivered Duty Paid
(named place of destination)
Multimodal
Terms:
Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”)
EXW
FCA
CPT
CIP
Multimodal Term DAT
DAP
DDP
Export/Import Customs: Seller’s obligation for export and import
Freight Charges: Seller to named place of destination
Insurance: Seller has no obligation to the Buyer to provide insurance
Transfer of Risk: Upon delivery to the named place of destination

•This term should not be used if the Seller is unable to arrange import customs clearance
•Recommended for containerized shipments

CITT Webinar Series 23-1

Incoterms
Incoterms 2010

4 Incoterms
for
Marine (Ocean)
Shipments…

CITT Webinar Series 24

Incoterms
FAS Free Alongside Ship
(named port of shipment)
Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”) Ocean
Terms:
FAS
FOB
Ocean Term CFR
CIF

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Buyer from the named port of shipment
Insurance: Seller has no obligation to the Buyer to provide insurance
Transfer of Risk: Upon delivery alongside named vessel (Consider cargo
insurance!)
Not recommended for containerized shipments (use FCA)

CITT Webinar Series 25

Incoterms
FOB Free On Board*
(named port of shipment)
Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”) Ocean
Terms:
FAS
FOB
Ocean Term CFR
CIF

Export/Import Customs: Seller obligated to clear goods for export

Freight Charges: Buyer from the named port of shipment
Insurance: Seller has no obligation to the buyer to provide insurance
Transfer of Risk: When the goods are loaded on board the vessel
(Consider cargo insurance!)
*Not recommended for containerized shipments (use FCA)

CITT Webinar Series 26

Incoterms
CFR Cost and Freight
(named port of destination)
Transfer of Risk to Buyer Transfer of Cost to Buyer Ocean
(i.e. Seller “delivers”)
Terms:
FAS
FOB
Ocean Term CFR
CIF

Export/Import Customs: Seller obligated to clear goods for export

Freight Charges: Seller to named port of destination
Insurance: Seller has no obligation to the buyer to provide insurance
Transfer of Risk: When the goods are loaded on board the vessel (Consider
cargo insurance!)

Not recommended for containerized shipments (use CPT)

CITT Webinar Series 27

Incoterms
CIF Cost, Insurance and Freight
(named port of destination)
Transfer of Risk to Buyer Transfer of Cost to Buyer Ocean
(i.e. Seller “delivers”) Terms:
FAS
FOB
Ocean Term CFR
CIF

Export/Import Customs: Seller obligated to clear goods for export

Freight Charges: Seller to named port of destination
Insurance: Seller arranges insurance for the Buyer (on “minimum cover”)
Transfer of Risk: When the goods are loaded on board the vessel (Consider
exclusions in the Seller-procured insurance policy!)
Not recommended for containerized shipments (use CIP)

CITT Webinar Series 28

Incoterms & Appropriate Modes of Transport
Air Road Rail Ocean *Ocean
Freight Freight Freight Freight* Containers
EXW Yes Yes Yes Yes No
FCA Yes Yes Yes Yes Yes
FAS No No No Yes No
FOB No No No Yes No
CFR No No No Yes No
CIF No No No Yes No
CPT Yes Yes Yes Yes Yes
CIP Yes Yes Yes Yes Yes
DAT Yes Yes Yes Yes Yes
DAP Yes Yes Yes Yes Yes
DDP Yes Yes Yes Yes Yes
Chart provided for illustrative purposes only - Adapted from "UNDP Shipping and Incoterms Practice Guide"
http://www.undp.org/content/dam/undp/documents/procurement/documents/UNDP-Shipping-Guide.pdf
CITT Webinar Series 29
Incoterms
“Which Incoterm Should I Use?”
Comprehensive risk management policies
regarding international trade include review
of:
• Incoterms 2010
• Contracts of sale
• Cargo insurance
www.iccwbo.org

Buyers and Sellers should pick their Incoterm,

not carriers, freight forwarders or Customs brokers.

CITT
4 Webinar Series 30
Incoterms
Webinar Series
Presents:

FOB vs Incoterms
Why Are They Different in North America?

Presented by:
Laurie Turnbull MSc, CCLP
Supply Chain Consultant
Cole International Inc.

March 16, 2017

12:00-1:00 pm EST

CITT Webinar Series

Incoterms
Canada and the EU are entering a new
trade era with CETA, but our largest
trading partner, the U.S., may be taking
a trade approach based on domestic
manufacturing.
More than ever, shippers in Canada
need to have a clear understanding of
the benefits, and drawbacks, of the
North American UCC FOB terms, and
how they differ from Incoterms.

CITT Webinar Series