International Commercial Terms

(INCOTERMS)

ICC Official Rules for Interpretation of Trade Terms

*

1
 Background to the presentation

• The topic of Inco Terms is complicated yet interesting.

• Inco Terms are used in the international trade.

• Inco Terms are official rules of ICC

• To understand Inco Terms it is essential to have a fair

idea of international trade.

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 Activity to move a cargo from one country to other.

• Inland Transportation, Loading & Unloading, Overseas

transportation, Storage, documentation, Payment of goods,
Clearance, Risk coverage, Handing over taking over of cargo.
• Each of the above activity is an independent one and is performed
by separate organization who has special manpower and equipment
to cater the requirement.

• The involvement of various organizations at different level demand for determination of the
following:

• What will be the point of delivery?

• Who will pay the cost at different stages?

• How the risk element shall be determined?

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 Purpose of Incoterms

• Rules for the interpretation of trade

terms in foreign trade

• Reduce misunderstanding, disputes &

litigation.

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 Scope
Rights and obligations of the parties to the contract of sale with
respect to the delivery of “tangible” goods sold
and
NOT including “intangibles” such as computer software etc.

5
 Misconceptions
• Incoterms apply to contract of carriage rather than
to the contract of sale.

• Incoterms assumed to provide for all the duties

which parties may wish to include in a contract of
sale.

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Structure of Incoterms

PART E PART F PART C PART D

DEPARTURE MAIN MAIN ARRIVAL

CARRIAGE CARRIAGE
UNPAID PAID

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

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Continued
 Structure of Incoterms
• Clause A1 Provision of goods
• Clause A2 Licence, authorization & formalities
• Clause A3 Contract of carriage and insurance
• Clause A4 Delivery
• Clause A5 Transfer of risks
• Clause A6 Division of costs
• Clause A7 Notice to the buyer
• Clause A8 Proof of delivery
• Clause A9 Checking – packing - marking
• Clause A10 Other obligations 8
 EXW

Seller Warehouse and Workshop

BUYER
SELLE
R

Marine Port Load Exp Ware

Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 9
ce truck
EXW EX WORKS
• Seller delivers when he places the goods at the disposal of
the buyer at the seller’s premises or another named place
(i.e. works, factory, warehouse, etc.) not cleared for export
and not loaded on any collecting vehicle.

• Min obligation for the seller.

• Buyer has to bear all costs and risks.

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 FCA

SELLER’S
WAREHOUSE

Marine Port Load Exp Ware

Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 11
ce truck
FCA FREE CARRIER

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

carrier nominated by the buyer at the name place.

• Carrier means any person who undertake to perform a contract of

carriage and include a nominee by the buyer.

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 FAS

CUSTOMS AREA OF SELLER’S

PORT

Marine Port Load Exp Ware

Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 13
ce truck
FAS FREE ALONGSIDE SHIP

• Seller delivers when the goods are placed alongside

the vessel at the name port of shipment.

• FAS term requires the seller to clear the goods for

export.

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 FOB

LOADING AREA OF THE SELLER’S

PORT

Marine Port Load Exp Ware

Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 15
ce truck
FOB FREE ON BOARD

• Seller delivers when the goods pass the ship’s rail at

the named port of shipment.

• The FOB term requires the seller to clear the goods

for export.

• The buyer has to bear all costs and risks of loss of or

damage to the goods from that point.

• This term can be used only for sea or inland waterway transport.

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 CFR

BUYER’S PORT

Marine Port Load Exp Ware

Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 17
ce truck
CFR COST AND FREIGHT
(….named port of destination)

• Seller delivers when the goods pass the ship’s rail in the port of shipment.

• Seller to pay the costs and freight for named port of

destination
• the risk of loss of or damage to the goods, as well as any additional
costs due to events occurring after the time of delivery, are
transferred from the seller to the buyer.

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 CIF

BUYER’S PORT

Port Marine Load Exp Ware

chrgs Insrnc of on the house Seller
Forward Inland Lice-nce
on Duties goods Ocean Vessel Storage
er Freight Auth Load Fab
arrival Taxes &
Dlvry / Air Fee from the the
at buyer & Labor
to the Freight Govt. Goods Check Goods
port Terminal
Import plant Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 19
ce truck
CIF COST INSURANCE & FREIGHT
(….named port of destination)

 Seller to pay the costs, freight and marine insurance during the carriage.

 Seller to get insurance on min. cover. for greater cover, buyer to get his
extra arrangement.

 Seller to clear the goods for export.

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 CPT

UNLOADING AREA OF THE BUYER’S PORT

Marine Port Load Exp Ware
Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 21
ce truck
CP CARRIAGE PAID TO
T (…named port of destination)

• The seller deliver the goods to the carrier nominated

by him

• The seller must in addition pay the cost of carriage necessary to bring the goods to the name destination.

• Buyer bears all risks and any other costs occurring

after the goods have been so delivered.

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 CIP

UNLOADING AREA OF THE BUYER’S PORT

Dlvry to Port Load Exp Ware

Plant chrgs on the house Seller
Forward Inland Lice-nce
Site upon Ocean Vessel Storage
Duties er Freight Auth Load Fab
arrival / Air from the &
Taxes Marine Fee the
& Insrnc of Freight Govt. Goods Labor
Terminal Check Goods
Import of shpmnt Cont. of Exp on
Cstms Charges Export
goods of Carriage Cntry the
Custms Clearan Pack
Mark 23
Clranc ce truck
 CARRIAGE AND INSURANCE PAID
CIP TO
(….named port of destination)

• Seller delivers the goods to the carrier nominated by

him.

• Seller must in addition pay the cost of carriage necessary to bring the goods
to the named destination.

• The seller also has to procure insurance.

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 DAF

FRONTIER OF THE COUNTRY OF

SELLER

Marine Port Load Exp Ware

Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 25
ce truck
 DAF

FRONTIER OF THE COUNTRY OF

BUYER

Marine Port Load Exp Ware

Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 26
ce truck
DA DELIVERED AT
FRONTIER
F (….named places)

Seller delivers the goods when the goods are placed at

the disposal of the buyer on the arriving means of
transport, not unloaded, not cleared for import at the
named point and place at the frontier, but before the
customs border of the adjoining country.

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 DES

UNLOADING AREA OF THE BUYER’S PORT

Marine Port Load Exp Ware
Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 28
ce truck
DE DELIVERED EX SHIP
S (….named port of destination)

• Seller delivers when the goods are placed at the

disposal of the buyer on board the ship, not cleared
for import at the named port of destination.

• The seller has to bear all the costs and risks

involved in bringing the goods to the named port of
destination before discharging.

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 DEQ

UNLOADING AREA OF THE BUYER’S PORT

Marine Dlvry Port Ware

Load Exp
Insrnc to the chrgs on the house
Forward Inland Lice-nce Seller
of plant upon Vessel Storage
Duties Ocean er Freight Auth Load Fab
site &
goods Taxes arrival / Air Fee from the the
& of Freight Govt. Goods Labor
Terminal Check Goods
Import shpmnt Cont. of Exp on
Cstms Charges Export
Custms of Carriage Cntry the Pack
Clearan
Clranc
Mark 30
ce truck
DE DELIVERED EX QUAY
Q (….named port of destination)

• Seller delivers when the goods are placed at the

disposal of the buyer not cleared for import on the
quay (wharf) at the named port of destination.

• The seller has to bear costs and risks involved in

bringing the goods to the named port of destination
and discharging the goods on the quay (wharf).

• The DEQ term requires the buyer to clear the goods

for import and to pay for all formalities, duties, taxes
and other charges upon import.
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 DDU

Customs Clearance Area

for Storage, Appraisement
& Release to the importer

WEST WHARF

UNLOADING AREA OF THE BUYER’S PORT

Marine Port Load Exp Ware
Insrnc chrgs on the Forward Inland Lice-nce house Seller
of Duties upon Ocean Vessel er Freight Auth Storage
Load Fab
goods Taxes arrival / Air Fee from the &
Dlvry the
& of Freight Terminal Govt. Goods Labor
to the Check Goods
Import plant shpmnt Cont. Charges of Exp on
Cstms Export
Custms site of Carriage Cntry the
Clearan Pack
Clranc
Mark 32
ce truck
DDU DELIVERED DUTY UNPAID
(….named place of destination)

• Seller delivers the goods to the buyer, not cleared for import, and not
unloaded from any arriving means of transport at the named place of
destination.

• The seller has to bear the costs and risks involved in brining the
goods thereto, other than, where applicable, any “duty” (which
term includes the responsibility for and the risks of the carrying
out of customs formalities, and the payment of formalities,
customs duties, taxes and other charges) for import in the
country of destination.

• Such duty has to be borne by the buyer as well as any costs and
risks caused by his failure to clear the goods for import in time.
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 DDP

Customs Clearance
Area for Storage,
Appraisement &
Release to the
importer
WEST WHARF
UNLOADING AREA OF THE BUYER’S PORT
Marine Port Load Exp Ware
Insrnc chrgs on the house Seller
Forward Inland Lice-nce
of Duties upon Ocean Vessel Storage Fab
er Freight Auth Load
goods Taxes arrival / Air from the &
Dlvry Fee the
& of Freight Govt. Goods Labor
to the Terminal Check Goods
Import plant shpmnt Cont. of Exp on
Cstms Charges Export
Custms site of Carriage Cntry the Pack
Clearan
Clranc
Mark 34
ce truck
DD DELIVERED DUTY PAID
P (….named place of destination)

• Seller delivers the goods to the buyer, cleared for

import, and not unloaded from any arriving means of
transport at the named place of destination.

• The seller has to bear all the costs and risks involved
in brining the goods thereto including, where
applicable, any “duty” (which term includes the
responsibility for and the risks of the carrying out of
customs formalities and the payment of formalities,
customs duties, taxes and other charges) for import
in the country of destination.

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Thank You
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