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Submitted to
Prof.Sheily verma
˜ INCOTERMS
˜ EXAMPLE
˜ THIRTEEN INCOTERMS

SUBMITTED BY
ATUL KIRAN
HARISH THAPA
KIRTIKA GOEL
SEEMA SINGH
SHIVANI SINGH
˜ Ô 
  or Ô 




 
 
are a series of international sales terms, published
by International Chamber of Commerce(ICC) and
widely used in international commercial
transactions. These are accepted by
governments, legal authorities and practitioners
worldwide for the interpretation of most commonly
used terms in international trade.
˜ These are the standard terms used in international
trade for
˜ determining which party pays the various extra
costs
˜ involved in shipping goods overseas.
˜ At the end of this lesson, you will be able to:
‡ List the principal incoterms
‡ Understand when responsibility passes from
buyer to seller
˜ When delivering goods from a seller to a buyer,
there are always additional costs involved, over
and above the cost of the goods themselves.
Some of these may apply even when goods are
being delivered in the same country.
˜ However, when shipping overseas these costs are
substantially greater. For example, shipping goods
by sea from Hong Kong to New York is far more
expensive than delivering goods 100 miles from
Birmingham to London.
The main costs involved in shipping goods overseas are:
‡ inland freight ± from factory to port
‡ loading on board
‡ land, sea or air freight
‡ uploading at destination
‡ duty
‡ inland freight ± from port to warehouse
‡ Insurance
˜ These costs have to be met. The question is : who will
pay them,the buyer or the seller?
An example will show why it is important to establish this
when the deal is made.

McGregors, suppliers of finest scotch salmon, win a

major
contract to supply schwarzwald, a Viennese importer,
with 25,000 pounds of smocked salmon.
As this is their first breakthrough into the Austrian
market, mcGregors quote a very keen price, calculated
to bring them a profit of ǧ5,000.
˜ When the order is completed, mcGregors discover
that they have to bear all the costs up to delivery
at Schawarzwald¶s warehouse in Vienna.
˜ The cost of the refrigerated transport and
insurance comes to over ǧ3,000. This leaves a
profit of less than ǧ2,000, far less than originally
anticipated.
˜ Once financing and administration costs are taken
into account, the deal hardly seems worthwhile!
To avoid misunderstandings between buyer and
seller, the international chamber of commerce
has defined a set of standard terms, called
incoterms.
These govern the following costs:
‡ Loading and unloading of goods
‡ Carriage
‡ Insurance
‡ Duty (if applicable)
Incoterms cover two important issues:

1) who bears the costs?

2) when does the responsibility for the goods pass from
the seller to the buyer?

All contracts should clearly state who has responsibility for

which costs. They should also specify what mode of
transport is to be used. In general, air freight, though
speedier, is much more expensive than land or sea
freight.
Some relate to sea and inland waterway transport
only:
‡ 
Free alongside ship« (port of shipment)
‡ Free on board« (port of shipment)
‡
Cost and Freight« (port of destination)
‡
ÔCost, insurance and
freight (port of destination)
‡ 
Delivered Ex ship« (port of destination)
‡  Delivered Ex Quay (port of destination)
‡ Ex works« (location of factory/warehouse)
‡ 
Free carrier« (location of airport/station)
‡
mCarriage Paid to« (place of destination)
‡
ÔmCarriage and insurance Paid to« (place of
destination)
‡  Delivered at Frontier« (name of border crossing)
‡ Delivered duty unpaid«(place of destination)
‡ mDelivered Duty paid« (place of destination)
The six most commonly used incoterms are :
‡ Ex works« (location of factory/warehouse)
‡ 
Free alongside ship« (port of shipment)
‡ Free on board« (port of shipment)
‡
Cost and Freight« (port of destination)
‡
ÔCost, insurance and freight (port of destination)
‡ mDelivered Duty paid« (place of destination)
˜ 
Ex means from. Works means factory, mill or
warehouse, which are the seller¶s
˜ premises. EXW applies to goods available only at the
seller¶s premises. Buyer is responsible
˜ for loading the goods on truck or container at the seller¶s
premises and for the subsequent
˜ costs and risks. In practice, it is not uncommon that the
seller loads the goods on truck or
˜ container at the seller¶s pre4mises without charging loading
fee. N the quotation, indicate the
˜ named place (sellers premises) after the acronym EXW for
example EXW Kobe and EXW
˜ San Antonio.
 

 The delivery of goods on truck, rail car or
container at the specified point (depot) of departure,
which is usually the sellers premises, or a named
railroad station or a
named cargo terminal or into the custody of the carrier,
at seller¶s expense. The point (depot)
at origin may or may not be a customs clearance centre.
Buyer is responsible for the main
carriage/freight, cargo insurance and other costs and
risks.
  
 
 Goods are placed in the dock
shed or at the side of the ship, on the
dock or lighter, within reach of its loading equipment so
that they can be loaded aboard the
ship, at seller¶s expense. Buyer is responsible for the
loading fee, main carriage/freight, cargo
insurance, and other costs and risks In the export
quotation, indicate the port of
origin(loading)after the acronym FAS, for example FAS
New York and FAS Bremen. The
FAS term is popular in the break-bulk shipments and
with the importing countries using their
own vessels.
 


The delivery of goods on the board
the vessel at the named port of origin
(Loading) at seller¶s expense. Buyer is responsible
for the main carriage/freight, cargo insurance and
other costs and risks. In the export quotation,
indicate the port of origin
(loading) after the acronym FOB, for example FOB
Vancouver and FOB Shanghai.



  The delivery of goods to the
named port of destination (discharge) at the
seller¶s expenses. Buyer is responsible for the
cargo insurance and other costs and risks. The
term CFR was formerly written as C&F. Many
importers and exporters worldwide still use
the term C&F.


Ô 

  The cargo insurance and
delivery of goods to the named port
of destination (discharge) at the seller¶s expense. Buyer
is responsible for the import customs
clearance and other costs and risks.
In the export quotation, indicate the port of destination
(discharge) after the acronym CIF,for
example CIF Pusan and CIF Singapore. Under the rules
of the INCOTERMS 1990, the term
CIFI is used for ocean freight only. However, in practice,
many importers and exporters still
use the term CIF in the air freight.



m

The delivery of goods to the
named port of destination (discharge) at the
seller¶s expenses. Buyer assumes the cargo
insurance, import custom clearance, payment of
custom duties and taxes, and other costs and risks.
In the export quotation, indicate the port of
destination (discharge) after the acronym CPT, for
example CPT Los Angeles and CPT Osaka.




Ô 
m

The delivery of
goods and the cargo insurance to the
named place of destination (discharge) at seller¶s
expense. Buyer assumes the importer
customs clearance, payment of customs duties and
texes, and other costs and risks.
In the export quotation, indicate the place of
destination (discharge) after the acronym CIP,
for example CIP Paris and CIP Athens.
   
  The delivery of goods to the
specified point at the frontier at seller¶s
expense. Buyer is responsible for the import custom
clearance, payment of custom duties and taxes, and
other costs and risks.
In the export quotation, indicate the point at frontier
(discharge) after the acronym DAF, for example
DAF Buffalo and DAF Welland.
  
 The delivery of goods on board
the vessel at the named port of
destination (discharge) at seller¶s expense. Buyer
assumes the unloading free, import customs
clearance, payment of customs duties and taxes,
cargo insurance, and other costs and risks.
In the export quotation, indicate the Port of
destination (discharge) after the acronym DES,
for example DES Helsinki and DES Stockholm.
   
The delivery of goods to the
Quay (the port) at the destination at buyer¶s
expense. Seller is responsible for the importer
customs clearance, payment of
customs duties and taxes, at the buyers end. Buyer
assumes the cargo insurance and other
costs and risks. In the export quotation, indicate the
Port of destination (discharge) after the acronym
DEQ, for example DEQ Libreville and DEQ Maputo.
   
The delivery of goods and the
cargo insurance to the final point at
destination, which is often the project site or buyers
premise at sellers expense. Buyer
assumes the import customs clearance, payment of
customs duties and taxes. The seller may
opt not to insure the goods at his/her own risks.
In the export quotation, indicate the point of destination
(discharge) after the acronym DDU
for example DDU La Paz and DDU N¶djamena.
  m
The seller is responsible for most
of the expenses which include the
cargo insurance, import custom clearance, and payment
of custom duties, and taxes at the
buyers end, and the delivery of goods to the final point
of destination, which is often the
project site or buyers premise. The seller may opt not to
insure the goods at his/her own risk.
In the export quotation, indicate the point of destination
(discharge) after the acronym DDP,
for example DDP Bujumbura and DDP Mbabane.