INT E R NA T IO NA L

C OMME R C IA L T E R MS
INT E R NA T IONA L C OMME R C IA L T E R MS
INT R O D UC T IO N AND
H IS T O R Y
INC O T E R MS

These are internationally accepted

commercial terms defining the
respective roles and
responsibilities (including costs) of
the buyer and seller in the
arrangement of transportation and
other obligations.

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 B ackground - Introduction
 Incoterms are the most commonly accepted terms
of sale in international business
 Incoterms have been adopted by most countries
 Defines the responsibilities and risks for transactions.
 They are used as part of the overall sales agreement.
 Published and developed by the International Chamber
of Commerce (ICC)

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International C hamber O f
C ommerce
The International Chamber Of Commerce (ICC) is an
international Organization that works to promote and
support global trade
and globalization.

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 History And R evisions
 First established in 1936 as a set of international rules
for the interpretation of trade terms.

 Amendments and additions were later made in

1953, 1967, 1976, 1980, and 1990 and presently
in 2000 in order to bring the rules in line with current
international trade practices.

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 R eas ons O f R evision O f
INC O T E R MS
 Need to adapt them to contemporary commercial
practices.
 More use of electronic data interchange.
 Meeting the changing needs of business
 Changed transportation techniques
 To establish a cut off point to show where the
exporter's responsibility ends and where the importers'
begins.
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 S cope and P urpos e
 Commercial terms defining the roles of the buyer and
seller in the arrangement of international
transportation and other responsibilities related to the
international shipment of tangible goods.
 Provides a set of international rules for the
interpretation of the most commonly used trade terms
in foreign trade
 Limited to matters relating to the obligations of the
parties with respect to the delivery of the goods sold
 Incoterms deal only with the relation between the
sellers and buyers under the contract of sale

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 S cope and P urpos e
 Incoterms deal with a number of identified obligations
imposed on the parties such as
 Seller’s obligation to place the goods at the disposal
of the buyer, or
 Hand them over for carriage, or
 Deliver them at a destination, and
 The distribution of risk between the parties
 Obligations to clear the goods for export and import
 Packing of the goods
 Buyer’s obligation to take delivery

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 W hy Incoterms?
 Incoterms are international rules accepted by
governments, legal authorities and practitioners
worldwide
 Reduces or removes uncertainties arising from differing
interpretations of shipping terms in different countries.
 Reference to a proper Incoterm in a contract clearly
defines each party’s obligations, costs and risks in the
international transaction and reduces the risk of legal
complications.
 They can assist in defining what costs the purchase
price includes (e.g. prepaid international freight,
prepaid duties, insurance, etc.), and clarify the risks &
liabilities.
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 Main F unctions
 Eliminate barriers caused by distance, language, and
local business practices
 Eliminate uncertainties and different interpretations of
trade terms on a world-wide scale
 Provide universally accepted vocabulary
 Reduce risk of misunderstanding, disputes, and
litigation
 Facilitate international commercial exchanges
 Define the importer’s and exporter’s costs, risk and
obligations regarding delivery of the goods

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 C ommon T erms
 Shipper:
The term “shipper” signifies both the person handing
over the goods for carriage and the person who makes
the contract with the carrier: however, these two
“shippers” may be different persons.
 Usual:
what persons in the trade usually do and this practice
will then be the guiding light.

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 C ommon T erms
 Ship and Vessel:
In the terms intended to be used for carriage of goods
by sea, the expressions “ship” and “vessel” are used as
synonyms
 Carrier:
Any party who arranges for the primary transportation
by truck, plane, ship, rail, etc.

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 C ommon T erms
 Pre-carriage:
 Initial transport of goods from the seller to the main
carrier
 Usually by truck, rail, or inland waterway
 Main carriage:
 Primary transport of goods
 Longest part of the journey & from one country to
another
 Usually by sea or air, but may be by truck, or rail
 On-carriage:
 Transportation from arrival point in the destination
country to buyer, which can be by any mode

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 C ommon T erms
 Delivery:
The term delivery is used in two contexts in Incoterms:
 The seller bringing the goods to the named point
 Traditional sense of the buyer receiving the goods

 Customs clearance:
Clearing the goods for export or import means
 Paying the duties, taxes and administrative costs
 Performing administrative matters related to:
 Clearance and Customs formalities
 Import and/or export regulations
 Typically, the Shipper (exporter) clears the goods
for export the Buyer (importer) clears the goods for
import
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INT E R NA T IONA L C OMME R C IA L T E R MS

D es criptions
INCOTERMS 2000
Incoterms
2000

" E” Term “D” Terms

“F” Terms “C” Terms

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 INC O T E R MS 2000
Incoterms
2000

“F”
“E” Term “C” Terms “D” Terms
Terms

FCA CFR
DAF DES
ExW CIF
FAS FOB

CPT DEQ DDU DDP

CIP
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The Thirteen Incoterms
 EXW – Ex Works
 FCA – Free Carrier
 CPT – Carriage Paid To
 DAF – Delivered at
Frontier
 DDU – Delivered Duty
Unpaid  CIP – Carriage and
Insurance Paid
 DDP – Delivered Duty Paid  DES – Delivered Ex Ship
 DEQ – Delivered Ex Quay
 FAS – Free Alongside Ship
 FOB – Free Onboard
 CFR – Cost and Freight
 CIF Cost, insurance,
freight
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EXW “EX-WORKS” (…named place)
The seller delivers when he places the goods at the
disposal of the buyer at the seller’s own premises or
another named place (works,factory,warehouse etc)
not cleared for export and not loaded on any collecting
vehicle.

Multimodal

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 Oblig ations of
S eller and B uyer

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 Obligations
Parts 1 – 10 A = Seller’s Obligation
B = Buyer’s Obligation
A1. Provision of goods in conformity with the contract
The seller must provide the goods and the commercial invoice, or
its equivalent electronic message, in conformity with the contract
of sale and any other evidence of conformity which may be
required by the contract.

B1. Payment of the price

The buyer must pay the price as
provided in the contract of sale.

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Obligations
A2. Licenses, Authorizations and Formalities
The seller must render the buyer, at the latter’s request, risk
and expense, every assistance in obtaining, where applicable,
any export license or other official authorization necessary for
the export of the goods.

B2. Licenses, Authorizations

and Formalities
The buyer must obtain at his own risk
and expense, any export or import
license or other official authorization
and carry out where applicable all
custom formalities for the export of
the goods.
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 Obligations
A3 .Contracts of Carriage and Insurance

NO OBLIGATION

B3 .Contracts of Carriage and Insurance

NO OBLIGATION

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Obligations
A4. Delivery
The seller must place the goods at the disposal of the buyer at
the named place of delivery, not loaded on any collecting
vehicle on the specified date and time.
If no date/time and place is specified ???

B4. Taking delivery

The buyer must take delivery of the
goods ….

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Obligations
A5. Transfer of risks
The seller must ……. bear all risks of loss of or
damage to the goods until such time as they have
been delivered…..

B5. Transfer of risks

The buyer must….. bear all risks of loss of or damage to the goods
 From the time they have been delivered….
 From the agreed date /expiry of any period fixed for taking
delivery that arise due to his failure to notice on time.

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 Obligations
A6. Division of costs
The seller must ……. pay all costs
relating to the goods until such time
as they have been delivered…..

B6. Division of costs

The buyer must pay all costs,relating to the goods
 From the time they have been delivered….
 Additional costs
 Duties, taxes and other charges
 Custom formalities

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Obligations
A7. Notice to the Buyer
The seller must give the buyer
sufficient notice as to when and where
the goods will be placed at his
disposal.

B7. Notice to the Seller

The buyer must, whenever he is entitled to determine the
time within an agreed period and/or the place of taking
delivery, give the seller sufficient notice thereof.

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Obligations
A8. Proof of delivery, transport document
or equivalent electronic message

No obligation

B8. Proof of delivery, transport

document or equivalent electronic
message
The buyer must, provide the seller with
appropriate evidence of having taken delivery.

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 Obligations
A9. Checking-packaging-marking
 Checking operations
 Checking quality

 Measuring

 Weighing

 Counting

 At his own expense packaging to the extent that the circumstances

relating to the transport (modalities, destination) are made kno wn
to the seller before contract of sale is concluded.
 Packing marked appropriately.
B9. Inspection of goods
Pre-shipment inspection inclusive of inspection mandated by
authorities of the country of export.

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Obligations
A10. Other Obligations
 At buyer’s expense and risk every assistance in
obtaining necessary documents.
 At buyer’s request necessary information for procuring
insurance.
B10. Other Obligations
 Pay all cost and charges in obtaining the necessary
documents.
 Reimburse those incurred by the seller in rendering his
assistance.

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