INCOTERMS

Group 2 – Banking 59

Doan Thi Thu Trang Pham Minh Tuan

Duong Quynh Trang Mai Anh Tuan
Truong Huyen Trang Pham Thi Hanh Van
Bui Tuan Trung
CONTENTS
1 Overview 3 Important notes

2 Incoterms 2010 4 Case study

Overview of
Incoterms
1. Definition
01
2. History
3. Purpose
1. Definition

“Incoterms” = International commercial terms

A set of 11 individual rules

- The responsibilities of sellers and buyers for the
sale of goods in international transactions
- Clarifies the tasks, costs and risks to be borne by
buyers and sellers
3. Purposes
Explain common trade conditions in foreign trade

Divides responsibilities, costs, and risks in the delivery process

from seller to buyer. Determine:

- Appropriate allocation of costs

- The place and time when the ownership of the goods is
transferred
- Party is responsible for hiring vehicles, clearing customs
and buying insurance
- The mode and time of delivery of documents on goods

Provide and supplement information

Avoid losses and misunderstandings, disputes
Incoterms 2010
1. Rules for any modes or modes of
transport
2. Rules for sea and inland waterway
transport
02
3. Responsibilities and obligations
of seller and buyer
RULES FOR ANY MODE OR MODES OF TRANSPORT
EXW – Ex Works

- The seller or supplier makes the goods available to the

buyer at a named place (factory or warehouse)
- The buyer is responsible for loading the goods onto a
vehicle; for all export procedures; for onward transport and
for all costs arising after collection of the goods
 The maximum responsibility on the buyer in terms of the
shipping risks, costs, and duties
 FCA – Free Carrier
- The seller delivers the export-cleared goods to the carrier or another person
nominated by the buyer at the seller’s premises or another named place

- The risk transfer point: The place of delivery which affects who is responsible for
loading and unloading
+ The named place is under the supplier or seller’s control  the seller is responsible for
loading and unloading
+ Delivery at another location  the buyer is responsible for loading and unloading

 The parties are well advised to specify as clearly as possible the point within the
named place of delivery
 CPT – Carriage Paid to
- The seller is responsible for arranging
carriage to the named place, but not for
insuring the goods to the named place

- The risk transfer point: where the goods are

taken in charge by a carrier

- The seller must contract for and pay the costs

of carriage necessary to bring the goods to the
named place of destination
 CIP – Carriage and Insurance Paid to
- The seller is responsible for arranging
carriage to the named place, and also for
insuring the goods to the named place

- The risk transfer point: where the goods are taken in charge by a carrier
- The seller must contract for and pay the costs of carriage necessary to bring the
goods to the named place of destination

- The seller also contracts for insurance cover

against the buyer’s risk of loss of or damage to
the goods during the carriage
 The buyer should note that under CIP the
seller is required to obtain insurance only on
minimum cover
 DAT – Delivered at Terminal
- The seller is responsible for arranging
carriage and for delivering the goods,
unloaded from the arriving conveyance,
at the named place

- ‘Terminal’ can be any place – a quay, container yard, warehouse or transport hub

- The risk transfer point: when the goods have been unloaded
 This is the only rule that requires the seller to unload
the goods in order to complete delivery

- The buyer is responsible for import clearance and

any applicable local taxes or import duties
 DAP – Delivered at Place
- The seller is responsible for arranging
carriage and for delivering the goods,
ready for unloading from the arriving
conveyance, at the named place

 An important difference from Delivered At Terminal DAT, where the seller is

responsible for unloading

- The risk transfer point: when the goods are

available for unloading  unloading is at the
buyer’s risk

- The buyer is responsible for import clearance

and any applicable local taxes or import duties
 DDP – Delivered Duty Paid
- The seller is responsible for arranging
carriage and delivering the goods at the
named place, cleared for import and all
applicable taxes and duties paid (VAT,
GST)
- The risk transfer point: when the goods are made available to the buyer, ready for
unloading from the arriving conveyance

 This rule places the maximum obligation on the seller

 The only rule that requires the seller to take responsibility
for import clearance and payment of taxes and/or import
duty
 RULES FOR SEA AND INLAND WATERWAY TRANSPORT
FAS – Free Alongside Ship
- The seller delivers when the goods are
placed alongside the vessel (e.g., on a
quay or a barge) nominated by the buyer
at the named port of shipment

- The goods are cleared for export by the seller

- The risk transfer point: when the goods are

alongside the ship
 the buyer bears all costs from that moment
onwards
 FOB – Free On Board
- Definition: the seller delivers the
goods, cleared for export, on board the
vessel nominated by the buyer at the
named port of shipment

- The goods are cleared for export by the seller

- The risk transfer point: when the goods are on

board the vessel
 the buyer bears all costs from that moment
onwards
CFR – Cost and Freight

- The seller delivers the goods on board the vessel

- The risk transfer point: when the goods are on

board the vessel

- The seller must contract for and pay the costs and
freight necessary to bring the goods to the named
port of destination
 CIF – Cost, Insurance and Freight
- The seller delivers the goods on board the
vessel
- The risk transfer point: when the goods are
on board the vessel

- The seller must contract for and pay the costs and freight necessary to bring the
goods to the named port of destination

- The seller also contracts for insurance cover

against the buyer’s risk of loss of or damage to
the goods during the carriage
 The buyer should note that under CIF the
seller is required to obtain insurance only on
minimum cover
Responsibilities and obligations of seller and buyer
Important
notes about 03
Incoterms
Important notes about Incoterms
- Incoterms are not compulsory
- The name of the version applied need to be clearly mentioned in the sale
contract
- Only determine the time to transfer goods risks
=> Other contents should be clearly agreed in
other terms of the contract
- Each party can negotiate to increase or reduce
their rights and responsibilities
Case study of
Incoterms 04
Question
Nowadays, in Vietnam, export enterprises often choose Group F (FOB) and import
enterprises usually choose Group C (CIF). Why?

Due to the low negotiating position of Vietnam, the choice of conditions is decided by
the importer

Due to the weak capacity of exporters, they do not fully

understand the benefits of exporting Group C,
especially new businesses because they do not know
clearly how to hire ships and buy insurance for goods.

Due to the underdeveloped transport company of

Vietnam, the quality is still low, making exporters not
assured. In addition, transportation costs are high
compared to other countries
Case Study 1

Vietnam-Ship Company sells dried lychees to China through Lang Son

border gate, China requires that Vietnam-Ship Company delivers goods
to China on the trucks at the border; the transporting and hiring trucks to
the specified point on the border are undertaken by Vietnamese
company, while the unloading goods from trucks to the delivery point is
undertaken by the Chinese side.

In this case, which rule should be used?

 DDP
Case Study 2
A Vietnamese company exports frozen shrimps to Japan. Japanese company requests
delivery at Kobe port. The unloading goods is undertaken by Japanese company.
Vietnamese company only needs to deliver goods to Kobe port safely.

In this case, which rule should be

used?

 CFR
 Case Study 3
Corporation ABC, a company based in Kobe city, is exporting goods to
their customer in Ho Chi Minh city, Vietnam. Goods are 60 motorbikes
Choose an appropriate Incoterm used in below situations:
(a) After completing export procedures and delivering goods to the carrier at the
port of Kobe, the seller is out of duty  FCA
(b) The buyer fully agrees to the conditions in (a) but asks the seller to hire the
vehicle, pay the freight and contract for insurance to bring the goods to Saigon
port  CIP

(c) The seller delivers the goods safely to the buyer's warehouse but the buyer
does import procedures. The buyer is responsible for unloading the goods  DAP
(d) The seller makes the goods available to the buyer at their own factory. The
buyer is responsible for their collection and their onward journey  EXW
THANK YOU
F O R

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