Incoterms

Introduction
• Universally recognised set of definitions of
international trade terms
• Recognised by courts and other authorities
• Define the trade contract responsibilities and
liabilities between buyer and seller
• Updated regularly to keep pace with
changes and developments in international
trade
 Introduction
• Devised an published by
the ICC
• WBO ICC introduced
Incoterms in 1936
• Incoterms 2012
• 4 groups E, F, C and D
and in all 13 main terms
E: Departure
EXW- Ex Works
F: Main carriage unpaid
FCA- Free Carrier
FAS- Free Alongside Ship
FOB- Free On Board
C: Main carriage paid
CFR- Cost and Freight
CIF- Cost, Insurance and Freight
CPT- Carriage Paid To
CIP- Carriage and Insurance Paid To
D: Arrival
DAF- Delivered At Frontier
DES- Delivered Ex Ship
DEQ- Delivered Ex Quay
DDU- Delivered Duty Unpaid
DDP- Delivered Duty Paid
 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
 Introduction
THE SELLER’S 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 BUYER’S 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
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
The Terms

• The “E” Term is the term in which seller’s

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
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)
 EXW - Ex Works
Goods available only at seller’s premises.
Buyer: loads the goods on truck or container at the
seller’s premises, and takes into account the
subsequent costs and risks.
 FCA - Free Carrier
Delivery at the specified point of departure: the seller’s
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 seller’s 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
ship’s 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
 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.
 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.