INCOTERMS® Presented By :

Anish Kumar

WHAT DOES INCOTERM STAND FOR ? The word INCOTERM is an abbreviation for International Commercial Terms which provide a common set of rules used for defining the responsibilities of sellers and buyers in the delivery of goods under sales contracts.   They are widely used in international commercial transactions.  

A r e they impor tant?

W HY ISTHAT ?B e c a u s e t h e y :Set international rules for commonly used terms in foreign tradeDefine obligations of both parties involved in the transactionDetermine the distribution & transfer of risks regarding the goods delivered from seller to buyerState the clear sharing of expenses between the parties during transport

WH EN AND WHEREDID THEY APPEAR ?First conceived by International Chamber of Commerce (ICC) in 1921 and implemented starting from 1936, since they have been updated 6 times in order to keep pace with the evolution of international trade.

In 1923, a Trade Terms Committee developed the first 6 rules : FOB, FAS, FOT, FOR, Free Delivered CIF and C&F, as the precursor for what would later be known as INCOTERM rules.

I N C O T E R M S 2010 - LATEST REVISIONEntered into force 1st January 2011, containing the following amendments:Reduction from 13 to 11 terms by replacing 4 delivery terms : DEQ, DAF, DES, DDU with 2 new ones : DAT(Delivery at Terminal) and DAP(Delivery at Place)Terms grouped in 2 categories, according to the means of transport used :General all types of transport Special sea & inland waterway

• EXW DAT FAS

• FCA DAP FOB

• CPT DDP CFR

• CIP CIF

HOW I N C O T E R M S EVOLVED1936 EXWFORFASFOBCFRCIFEXQEXS

2000 EXW CIP

FCA DAF

FOB DES

CFR DEQ

CIF DDU

CPT DDP

2010 EXW CIPFCA DAPFAS DATFOB DDPCFRCIFCPT

The Incoterms® Rules

RULES FOR ANY MODES OF

TRANSPORT

EX WORKSEXW means Ex Works and is followed by a named place. EXW means the seller's responsibility is to make the goods available at the seller's premises. The seller is not responsible for loading the goods on the vehicle provided by the buyer, who then bears the full cost involved in bringing the goods from there to the desired destination.

FREE CARRIER FCA means Free Carrier and is followed by a named place. FCA means the seller fulfills its obligation to deliver when it has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place. The exporter has the obligation to deliver the goods into the custody of the carrier or another person (e.g – a freight forwarder) named by the buyer, or chosen by the seller in accordance with the terms of the contract.

CARRIAGE PAID TO CPT means Carriage Paid To and is followed by a named place of destination. CPT means that the seller must pay the freight for the carriage of the goods to the named destination. The risk of loss or damage to the goods and any cost increases transfers from the seller to the buyer when the goods have been delivered to the custody of the first carrier, and not at the ship's rail.

CARRIAGE AND INSURANCE PAID TO CIP - CIP means Carriage And Insurance Paid To and is followed by a named place of destination. for example CIP Boston. CIP has the same incoterm meaning as CPT, but in addition the seller pays for the insurance against loss of damage. The exporter arranges For export clearance and all export formalities.Arranges and pays for all costs for the transportation ‘including insurance’ of the goods up to the agreed point in the named port of destination.

DELIVERED AT TERMINAL DAT – This replaced for sea transportation, the old DES and DEQ. With DAT the seller bears the costs of transport and the risks until the goods are left unloaded at the terminal that the parties had agreed upon. ‘Terminal includes any place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal.’

DELIVERED AT PLACE“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.

DELIVERED DUTY PAID DDP - means Delivered Duty Paid and is followed by a named place of destination. The seller has to pay the costs involved in shipping the goods as well as the costs and risks of carrying out customs formalities. The seller pays the duty and the buyer has to pay any additional costs caused by its failure to clear the goods for import in time. DDP should not be used if the seller is unable to obtain an import license.

Special sea &

inland waterway

FREE ON BOARD FOB - FOB means Free On Board and is followed by the named port of shipment.

With FOB the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement.

The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ship's rail, i.e. off the dock and placed on the ship. The seller pays the cost of loading the goods.

COST AND FREIGHTCFR means Cost and Freight and is followed by a named port of destination. CFR requires the seller to pay the costs and freight necessary to bring the goods to the named destination, but the risk of loss or damage to the goods, as well as any cost increases, are transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. Insurance is the buyer's responsibility.

COST, INSURANCE AND FREIGHTCIF means Cost, Insurance and Freight and is followed by a named port of destination. It is exactly the same as CFR except that the seller must in addition procure and pay for the buyer’s insurance. This is applicable only to maritime transport.

FREE ALONGSIDE SHIPFAS means Free Alongside Ship and is followed by a named port of shipment. FAS means the seller is responsible for the cost of transporting and delivering goods alongside a vessel in a port in his country. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. This term is only applicable for sea or inland waterway transport.