Incoterms

Group 1
 Introduction
What are Incoterms?
International Commerce Terms, are standard trade
definitions most commonly used in international sales
contracts which are devised and published by the
International Chamber of Commerce.
Developed by the International Chamber of Commerce
(headquartered in Paris, France)
Introduced in 1936 and updated several times up to 2000

Most recent (eighth) edition is Incoterms 2010, effective

from 1 January 2011
A set of rules governing key terms applicable to
international trade
A well-established shorthand to describe those terms
 What are the 2010
Incoterms? E: Departure
EXW- Ex Works
F: Main carriage unpaid
4 groups E, F, C and D FCA- Free Carrier
and in all 13 main terms, FAS- Free Alongside Ship
FOB- Free On Board
- Group E is EXW (the C: Main carriage paid
most pro-seller term) CFR- Cost and Freight
- Group F terms make CIF- Cost, Insurance and Freight
CPT- Carriage Paid To
buyer liable for main CIP- Carriage and Insurance Paid To
carriage D: Arrival
- Group C terms make DAF- Delivered At Frontier
DES- Delivered Ex Ship
seller liable for main DEQ- Delivered Ex Quay
carriage DDU- Delivered Duty Unpaid
- Group D terms make the DDP- Delivered Duty Paid

seller liable for arrival

 Introduction
The Terms

The E Term is the term in which sellers

obligation is at its minimum
The F Term require the seller to deliver as
instructed by the buyer
The C Term require the seller to contract for
carriage at his expense
The D Term signifies arrival contracts
 Introduction
Purpose of Incoterms
Designed for Parties to a Contract
Provides a set of international rules for
foreign trade
Reduces uncertainties
Avoids different interpretations in different
countries
Additional costs and time can be avoided
 Advantages & Disadvantages of
Incoterms
Advantages of Incoterms
Speed of negotiation
Common understanding
Well designed mechanism
Substantial caselaw applying various circumstances
Comprehensive
Efficient and effective shorthand
Disadvantages of Incoterms
Can be misapplied/misunderstood by users
Require active consideration of some potentially tricky
issues
Other than the above, none that we have yet come across
(but were still looking)!
 EXW - Ex Works
Goods available only at sellers premises.
Buyer: loads the goods on truck or container at the
sellers premises, and takes into account the
subsequent costs and risks.
 FCA - Free Carrier
Delivery at the specified point of departure: the sellers
premises or a named cargo terminal / railroad station
Buyer: main carriage/freight, cargo insurance and other
costs and risks
 FAS - Free Alongside Ship
Seller: places the goods alongside the ship at the
named port, loaded at his expense.
Buyer: pays loading fee, main carriage/freight, cargo
insurance and other costs risks.
 FOB - Free On Board
Delivery of goods on board the vessel at the port of
origin is at the sellers expense.
Buyer is responsible for loading fee, main
carriage/freight, cargo insurance and other costs
risks.
 CFR - Cost and Freight
Seller: pays the costs and freight to bring the
goods to the port of destination.
Risk: transferred once the goods have crossed the
ships rail.
 CIF - Cost Insurance and Freight

Used exactly the same way as CFR except that

Seller: must in addition procure and pay for insurance
for the cargo insurance and delivery of goods to the
port of destination
Buyer: responsible for the import customs clearance &
other costs and risks

Insurance
 CPT - Carriage Paid To
Seller delivers the goods at the named place of
destination at his expense.
Buyer assumes the cargo insurance, import customs
clearance, payment of customs duties and taxes,
and other costs and risks.
Risk transferred at the delivery of goods
 CIP - Carriage & Insurance Paid To

Seller delivers the goods on the ship. On board, the

risk is transferred to the buyer.
Buyer is accountable for the import customs
clearance, payment of customs duties and taxes,
and other costs and risks until goods reach their
final destination.

Insurance
 DAF - Delivered At Frontier
Delivery of goods is done at the specified point at the
frontier at the seller's expense.
Buyer is responsible for the import customs
clearance, payment of customs duties and taxes.
The transfer of risk is made at the frontier
 DES - Delivered Ex Ship
Seller assumes expenses linked to the delivery of
goods. At the arrival of the ship, the risk is
transferred to the buyer.
Buyer is accountable for the unloading fee, import
customs clearance, payment of customs duties and
taxes, cargo insurance, and other costs
 DEQ - Delivered Ex Quay
Delivery of goods is done to the quay of the port at the
seller's expense. He is also responsible for the import
customs clearance and payment of customs duties
and taxes at the buyer's end.
Buyer assumes the cargo insurance and other costs
and risks
 DDU - Delivered Duty Unpaid
Delivery of goods and the cargo insurance to the final
destination, which is often the project site or buyer's
premises, is done at the seller's expense.
Buyer is responsible for the import customs clearance and
payment of customs duties and taxes
 DDP - Delivered Duty Paid

Seller is responsible for most of the expenses, which

include the cargo insurance, import customs
clearance, and payment of customs duties and
taxes at the buyer's end, and the delivery of goods
to the final point at destination, which is often the
project site or the buyer's premises.
It is a door to door delivery.
Risk is transferred when the goods are delivered
 Conclusion

Incoterms cannot be applied by themselves to

a variety of situations, of medium of transports,
technologies....
They must be supplemented by additional
details adapted to these particular case.
Define the geographical points where the
transfers of risks and expenses will take place.
 Introduction
THE SELLERS OBLIGATIONS
A1 Provision of goods in conformity with the contract
A2 Licenses, authorizations and formalities
A3 Contract of carriage and insurance
A4 Delivery
A5 Transfer of risks
A6 Division of costs
A7 Notice to the buyer
A8 Proof of delivery, transport document or equivalent
electronic message
A9 Checking packaging marking
A10 Other obligations
 Introduction
THE BUYERS OBLIGATIONS
B1 Payment of the price
B2 Licenses, authorizations and formalities
B3 Contract of carriage
B4 Taking delivery
B5 Transfer of risks
B6 Division of the costs
B7 Notice to the seller
B8 Proof of delivery, transport document of equivalent
electronic message
B9 Inspection of goods
B10 Other obligations
 Introduction
Scope of Incoterms
Incoterms is limited:
To rights and obligations of the parties to contract of sale
with respect to the delivery of the goods sold.

Do not deal with the consequences of breach of contract

Primarily intended for use where goods are sold for

delivery across national boundaries, hence international
commercial terms

Can be used in contracts for sale of goods directly.

 Introduction
Structure

Group E Departure
EXW Ex Works (.............named place)

Group F Main carriage unpaid

FCA Free Carrier (.............named place)
FAS Free Alongside Ship
(.........named port of shipment)
FOB Free On Board
(............named port of shipment)
 Introduction
Structure
Group C Main carriage paid
CFR Cost and Freight (...........named port of destination)
CIF Cost, Insurance & Freight (.....named port of destination)
CPT Cost Paid To (...........named port of destination)
CIP Carriage and Insurance paid to
( .named place of destination)

Group D Arrival
DAF Delivered at Frontier (..........named place)
DES Delivered Ex Ship (...........named port of destination)
DEQ Delivered Ex Quay (........named port of destination)
DDU Delivered Duty Unpaid (...named place of destination)
DDP Delivered Duty Paid (.........named place of destination)
 Introduction
Any mode of transport

Group E EXW Ex Works (...............named place)

Group F FCA Free Carrier (................named place)
Group C
CPT Cost Paid To (............named port of destination)
CIP Carriage and Insurance paid to
(..........named place of destination)
Group D
DAF Delivered at Frontier (............named place)
DDU Delivered Duty Unpaid (..........named place of destination)
DDP Delivered Duty Paid (..........named place of destination)
 Introduction
Mode of transport and the appropriate Incoterm
Maritime and inland waterway transport only
Group F
FAS Free Alongside Ship (............named port of shipment)
FOB Free On Board (............named port of shipment)
Group C
CFR Cost and Freight (............named port of destination)
CIF Cost, Insurance & Freight (............named port of destination)
Group D
DES Delivered Ex Ship (............named port of destination)
DEQ Delivered Ex Quay (............named port of destination)