INCOTERMS : INternational COmmercial TERMSINCOTERMS define the mutual obligations of seller and buyer arising from the movement of goods under an international contract from the standpoint of risks, costs and documents UNCTAD, 1990

What are they?Set of international rules for the interpretation of the most commonly used foreign trade terms

Why are they Important?Reduce the uncertainty caused by trade practices in different countries.Simplify the negotiations involved in international commerce.Ensure common understanding of obligations

The CategoriesIncoterms CodeEx worksEXWFree carrierFCAFree alongside shipFASFree on boardFOBCost & freightCFRCost, insurance & freightCIFCarriage paid toCPTCarriage and insurance paid toCIPDelivered at frontierDAFDelivered ex shipDESDelivered ex quayDEQDelivered duty unpaidDDUDelivered duty paidDDPE TermsF TermsC TermsD Terms

The Steps of Global Logistics MainInternational Transportation4Handling InboundCustomsClearanceDutiesFinalTransportationUnloading Packing LoadingPreliminaryTransportationCustoms Clearancefor ExportHandlingOutboundInsurance123567891011

Acronym (named location)GoodsSellers RiskSellers CostPRE -CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearanceAcronym dictates mode and where the lines are drawn

E Terms: Departure EXW (named place)Under E-terms, the seller minimizes his risk by only making the goods available at his own premises.

EXW = Ex WorksThe seller fulfills his obligation to deliver when he has made the goods available at his premises to the buyer.The seller is not responsible for loading the goods on the vehicle provided by the buyerThe seller is not responsible for clearing the goods for export, unless agreed.The buyer bears all costs and risks involved in taking the goods from the sellers premises to the desired destination.

Group F: Main Carriage Not Paid by Seller FAS - Free Alongside Ship FCA - Free CArrier FOB - Free On BoardUnder F-terms, the seller arranges and pays for pre-carriage in the country of export. Including export clearance under FCA and FOB

FAS (named port of shipment)GoodsSellers RiskSellers CostPRE-CARRIAGEMAIN CARRIAGEON-CARRIAGEBUYERExport ClearanceImportClearanceSELLERBuyer export documents nominates carrier, contracts carriage pays freightSeller delivers goods alongside ship evidence of delivery

FCA (named place)GoodsSellers RiskSellers CostPRE-CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearanceBuyer nominates carrier, contracts carriage pays freightSeller clears export customs, delivers goods to carrier evidence of delivery

FOB (named port of shipment)GoodsSellers RiskSellers CostPRE-CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearanceBuyer nominates carrier, contracts carriage pays freightSeller clears export customs, delivers and loads goods on ship evidence of delivery

Group C: Main Carriage Paid by Seller CFR - Cost & FReight CIF - Cost, Insurance & Freight CPT - Carriage Paid To CIP - Carriage & Insurance Paid toUnder C-terms, the seller arranges and pays for the main carriage but without assuming the risk of the main carriage.

CFR (named port of destination)GoodsSellers RiskPRE-CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearanceSellers Cost

CIF (named port of destination)GoodsSellers RiskPRE-CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearanceSellers Cost + Insurance

Ocean vs OtherOcean TermsOther TermsCFRCPTCIFCIP

Group D: Arrival DAF - Delivered At Frontier DES - Delivered Ex Ship DEQ - Delivered Ex Quay DDU - Delivered Duty Unpaid DDP - Delivered Duty PaidUnder D-terms, the sellers cost/risk is maximized because he must make the goods available at the agreed destination. Including import clearance under DEQ and DDP

DAF (named place)GoodsSellers RiskSellers Cost PRE-CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearance

DES (named port of destination)GoodsSellers RiskSellers Cost PRE-CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearance

DEQ (named port of destination)GoodsSellers RiskSellers Cost PRE-CARRIAGEMAIN CARRIAGEON-CARRIAGESELLERBUYERExport ClearanceImportClearance

Ocean vs OtherOcean TermsOther TermsDESDDUDEQDDP

Quick Quiz

IncoTerms & Price

Sourceswww.wto.orgwww.icc.orgUNCTAD at United NationsLocal Chambers of CommerceInternational Chamber of Commerce - New York City Office