International Commercial Terms

(or)
Incoterms ® 2010

What they mean

&
how to use them

5/8/2023 1
 History
Initially created in 1936 by the International Chamber of Commerce (ICC) and have been
periodically revised (Incoterms® 2010 is the 8th revision)
Generally applicable for approximately 10 years
Reflect world-wide trade practices, revised as practices change

Incoterms® 2010 was represented by 8 individuals from various countries/areas of the

world
$ Met 11 times in person
$ Received over 2000 suggestions in first request
$ Refined suggestions over 4 proposals
$ Controlling source document written in British English and translated into 35+
languages later

Incoterms 2020 is the most current version but 2010 is still being followed

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 What are Incoterms ® 2010?
Began January 1, 2011
Consisting of 11 terms
o Four (4) terms were deleted and two (2) new terms were created
Available worldwide through 100 International Chamber of
Commerce National Committees
o The terms aren’t law; no laws that require their use and are not
all inclusive
o Country neutral – they don’t favor one country over another
o Self-contained – all information that determines responsibility
and risk are in one place

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 Key Definitions
What is Delivery?
As defined in Incoterms® 2010, “it is used to indicate where the risk
of loss of or damage to the goods passes from the seller to the buyer”

You must know your contract and your Incoterm® 2010

Note: A Purchase Order and a matching Acknowledgement will
constitute a “contract” if there isn’t a separate stand-alone contract
related to the transaction

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 Transportation Definitions
Pre-carriage: Inland transportation on the seller’s side
• Domestic: From the place where the shipment starts to any
subsequent transportation carriage
• International: From the place where the shipment starts to the
departure point on the seller’s side

Main Carriage:
• Domestic: Subsequent transportation beyond pre-carriage
• International: Transportation from the point of departure on the
seller’s side to the arrival point on the buyer’s side

On-carriage:
• Domestic: Subsequent transportation beyond main carriage
• International: Transportation from the arrival point on the buyer’s
side

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 Door – to – Door
• Contract of carriage that includes pre-carriage, main-carriage
and on-carriage by the same carrier

Door – to – (Air) Port:

• Contract of carriage including pre-carriage and main-carriage to
airport or ocean port or truck terminal port or rail port

(Air) Port – to – (Air) Port:

• Contract of carriage for main carriage only

(Air) Port – to – Door:

• Contract of carriage including main carriage and on-carriage

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 Type of Transportation
Company A

Company B

Door to Door – one contract for all

carriage (pre-, main, and on-carriage)

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 Company A

Door to Port – contract for pre-carriage

and main-carriage

Company B responsible for arranging

pick up at Arrival Airport

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 Omni-modal: Used with terms that use all modes of
transportation (truck, airplane, vessel, train…)

Marine-restricted: Terms that only apply to carriage by vessel

Shipment Contract: Sales/Purchase contract where the

seller’s responsibility ends when goods are handed over to the
first carrier

Arrival Contract: Sales/Purchase contract where seller’s

responsibility ends when goods have arrived at agreed place

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 Packaging Definitions

1. The packaging of the goods to comply with any

requirements under the contract of sale.
2. The packaging of goods so that they are fit for
transportation.

3. The stowage of the packaged goods within a container or

other means of transport.

Only Definition 1 & 2 are addressed in Incoterms® 2010.

Definition 3 must be addressed within the contract between the
parties.

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 Questions to Ask?
# Who furnishes the goods?
# Who packages the goods in a manner suitable for shipment (export)?
# Who moves the goods from the seller’s factory to a port, airport, or border
crossing in the seller’s country?
# Who arranges for export clearance in the seller’s country (if applicable)?
# Who arranges for main carriage (international transportation) from the
departure port to the arrival port?
# Who pays for main carriage?
# Who insures the shipment?
# Who arranges for import clearance?
# Who pays import duties?
# Who pays for on-carriage from the arrival port to the delivery destination?
# Who arranges and pays for country-specific documentation (e.g., consular
invoices, inspection reports, licenses)?
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 What Incoterms® 2010 Does?
Divides up tasks, responsibilities, costs and risks to
deliver goods from seller to buyer
# If used correctly, no duplication of effort between seller &
buyer
# Acts as signposts for who needs to have additional contracts
(i.e., with vessel steamship line, inland trucking company, etc.)
to complete transaction
# If something goes wrong, clearly defines responsibilities based
on where the goods were in the transportation chain of
delivery
Defines mode of transportation by their use
# 4 Terms are for Marine-Restricted for sea & inland waterway
transport only
# 7 Terms are for Omni-modal use with all modes of
transportation
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 What Incoterms® 2010 Does not?
$ Automatically Apply
$ Determine When Ownership Changes
$ Identify when Revenue is Recognized
$ Does not determine remedies for breach of contract
$ Provide relief from obligations/exemptions from liability in unexpected or
unforeseeable situations
$ Address Payment issues
o Tells you that the buyer must pay, but not when or where
$ Specifically task a party with container stowage obligations

$ Address more than one contract

o TWO Contracts
 Between the seller and their supplier and
 Between the seller and the buyer
• Incoterms® 2010 could be the same or different in each contract
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 Incoterms® 2000 vs Incoterms® 2010
EXW – Ex Works EXW – Ex Works

FCA – Free Carrier

FCA – Free Carrier
FAS – Free Alongside Ship
FAS – Free Alongside Ship
FOB – Free On Board
FOB – Free On Board

CFR – Cost and Freight

CIF – Cost, Insurance & Freight CFR – Cost and Freight
CPT – Carriage Paid To CIF – Cost, Insurance & Freight
CIP – Carriage & Insurance Paid To CPT – Carriage Paid To
CIP – Carriage & Insurance Paid To
DEQ – Delivered Ex Quay
DES – Delivered Ex Ship
DAT – Delivered At Terminal
DAF – Delivered at Frontier
DAP – Delivered At Place
DDU – Delivered Duty Unpaid
DDP – Delivered Duty Paid DDP – Delivered Duty Paid

Omni-Modal
Marine Restricted
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 Group Term Definitions

F – Terms
C – Terms
D – Terms

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F-Group Terms
Considered to be “Shipment Contracts”
Considered Buyer Friendly

Seller
# Handles Export Clearance
# Handles Pre-carriage
# Named Place on Seller’s Side

Buyer
# Contracts for Main Carriage
# In charge of Carrier (and
usually forwarder) selection
# Control over Freight Costs
# Control of Documentation
16
C-Group Terms
Considered to be “Shipment Contracts”
Considered Seller Friendly
Seller
# Contracts for Main Carriage
Buyer
# In charge of carrier (and
# Named Place is on Buyer’s
usually forwarder) selection
side
# Handles pre-carriage
# Has risk of loss while goods
# Has control over freight
are in transit with carrier
costs
selected and paid for by seller
# In control of documentation
# Must rely heavily on Seller for
# Passes risk of loss (delivers)
data elements required for
to Buyer prior main carriage
ocean shipments such as
# Handles export clearance
Importer Security Filing
(known as ISF or 10+2)
17
D-Group Terms
Considered to be “Arrival Contracts” Buyer
# Named Place on Buyer’s
Seller
side
# Contracts for Main Carriage
# Must rely heavily on Seller
# In charge of carrier (and usually
for data elements
forwarder) selection
required for ocean
# Handles pre-carriage
shipments such as
# Has control over freight costs
Importer Security Filing
# In control of documentation
(known as ISF or 10+2)
# Passes risk of loss (delivers) to
# Undertakes less risk than
Buyer at freight arrival point
in “C” terms
# Handles export clearance
# Better for Buyer to use if
# Seller may have revenue
inexperienced, or does
recognition issues since
not have good
“delivery” occurs on arrival side,
relationship with carriers
meaning revenue is recognized
only upon arrival 18
 Omni-Modal Incoterms® 2010

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 1. Ex Works (EXW) + (Named Place)
Named Place is generally Seller’s Location (or where product initially ships
from)
# Delivery – Seller delivers goods when placed at buyer’s disposal at the name
place of delivery
o Goods are packaged
o Goods are NOT LOADED on the collecting vehicle
# Seller Risks – Minimum obligation for seller; once packaged there is a loss of
control over transportation movement, where package is finally received,
how export or import documentation is presented to relevant governments
# Buyer Risks – Buyer bears all costs and risks involved in taking the goods
from the named place
# Carriage: Buyer responsibility to arrange for pre-carriage, main carriage, on-
carriage
# Insurance: Buyer is required to insure goods
# Export/Import Clearance: Buyer must handle all requirements, pay all
associated duties and fees
Note: Should NOT be used when the buyer cannot carry out export requirements
directly or indirectly
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 2. Free Carrier (FCA) + (Named Place)
Named Place is generally:
Seller’s Place of Business
# Seller responsible for having goods available when promised,
packaged to the extent known or agreed, loaded onto collecting
vehicle
# Buyer responsible for pre-carriage, main carriage, on-carriage

Another Location on Seller’s side (i.e., International Airport, Freight

Forwarder Warehouse for consolidation, another location agreed by
Seller and Buyer)
# Seller responsible for having goods available when promised,
packaged to the extent known or agreed, loaded onto collecting
vehicle, pre-carriage
# Buyer responsible for unloading pre-carriage delivering vehicle,
main carriage, on-carriage

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 # Contract of Carriage: Buyer is responsible to make a contract of Carriage,
however if requested or the buyer does not give instruction in due time,
the seller may contract for carriage on usual terms at the buyer’s risk and
expense.

# Risks: Passes to buyer at point of delivery

# Insurance: Contractual agreement

# Export Clearance: Handled by Seller

# Associated Licenses can be obtained and maintained under US Law
# Automated Export System filings can be completed by Seller

# Import Clearance: Handled by Buyer – responsible for the customs

formalities and any duties, fees, other charges due upon importation.

This is the most versatile of the “F” terms.

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 3. Carriage Paid To (CPT) + Named Place (on
Buyer’s Side)
# Delivery: Seller delivers goods to a carrier or another person
nominated by the seller, at an agreed place, for
transportation to the named destination on the Buyer's side,
appropriately packaged
# Carriage: Seller chooses and pays cost of carriage to bring the
goods to the named destination (the final location, not the
destination port)
# Risks: Seller bears all risks and costs incurred until the goods
are delivered to the first carrier on the Seller’s side
# Export Clearance: Handled by Seller
# Import clearance: Buyer responsibility for paperwork and all
costs
# Insurance: Agreement

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 4. Carriage and Insurance Paid To (CIP) +
Named Place (on Buyer’s Side)
# Delivery: Seller delivers goods to a carrier or another person
nominated by the seller, at an agreed place, for
transportation to the named destination on the Buyer's side,
appropriately packaged
# Carriage: Seller pays cost of carriage to bring the goods to the
named destination (the final location, not the destination
port)
# Risks: Seller bears all risks and costs incurred until the goods
are delivered to the first carrier on the Seller’s side
# Export Clearance: Handled by Seller
# Import clearance: Buyer responsibility for paperwork and all
costs
# Insurance: Seller required to obtain minimum coverage

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 5. Delivered at Terminal – (DAT) +
Named Place (Buyer’s side)

# Replaces DEQ Term

# Delivery: Seller delivers goods to named destination terminal
on Buyer’s side, packaged appropriately and unloaded
# Carriage:
# Seller responsible for pre-carriage and main carriage
# Buyer responsible for on-carriage
# Risks: Transfer from Seller to Buyer once goods are unloaded on
buyer’s side at terminal
# Export Clearance: Seller’s Responsibility
# Import Clearance: Buyer’s Responsibility – documentation and
fees associated
# Insurance: Agreement

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6. Delivered at Place (DAP) + Named Place (Buyer’s
Side)
# Previously contained elements of DDU, DAF, DES terms
# Delivery: Seller delivers the goods to the buyer at the named place
on the Buyer’s side, appropriately packaged, but not unloaded
# Carriage: Seller handles all carriage to named place on buyer’s side
# Risks: Transfer from Seller to Buyer once goods are delivered to the
named place on buyer’s side
# Export Clearance: Seller handles
# Import Clearance: Seller handles and pays associated costs
# Insurance: Seller to insure until the buyers place
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 7. Delivered Duty Paid (DDP) +Named Place
(Buyer’s Side)
# Delivery: Seller delivers goods to the Buyer, cleared for
import on the arrival transportation, but not unloaded at the
final destination
# Carriage: Seller handles all carriage to named place on
Buyer’s side
# Risks: Transfer from Seller to Buyer once goods are delivered
to the named place on the Buyer’s side
# Export Clearance: Seller Handles
# Import Clearance: Seller Handles & pays for any charges
associated
# Insurance: Seller to insure until the goods reach buyers place

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 Water Transport Only Incoterms® 2010

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 1. Free Alongside Ship (FAS) +
Named Place (alongside vessel at port on
Seller’s side)
# Delivery: Seller delivers goods to Buyer alongside the
vessel chosen by Buyer at the named port of shipment,
packed appropriately
# Carriage:
# Seller handles pre-carriage
# Buyer handles main carriage and on-carriage
# Risks: Pass from Seller to Buyer once goods are placed
alongside the vessel on Seller’s side
# Insurance: Buyer is required to insure goods
# Export Clearance: Seller Handles
# Import Clearance: Buyer is responsible for requirement
and fees associated
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 2. Free On Board (FOB) +
Named Place (loaded on vessel at a port on the Seller’s
side)
# Delivery: Seller delivers goods to Buyer on board the vessel
chosen by the Buyer at the named port of shipment, packaged
for shipment
# Carriage:
# Seller handles pre-carriage
# Buyer handles main carriage and on-carriage
# Risks: Pass from Seller to Buyer once goods are placed on
board the vessel on the Seller’s side
# Insurance: Buyer takes care of Insurance
# Export Clearance: Handled by Seller
# Import Clearance: Handled by Buyer

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 3. Cost and Freight (CFR) +Named Place (port on
Buyer’s side)
# Delivery: Seller delivers goods packaged for shipment on
board the Seller-designated vessel at the port on Seller’s
side
# Carriage:
# Seller handles pre-carriage and main carriage
# Buyer handles on-carriage following delivery to port on Buyer’s
side
# Risks: Passes from Seller to Buyer once goods are on
board the vessel
# Insurance: Buyer is required to insure the goods
# Export Clearance: Handled by Seller
# Import clearance: Buyer is responsible for the customs
requirements and associated costs (fees, duties, etc.)

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 4. Cost Insurance Freight (CIF) + Named Place
(port on Buyer’s side)
# Delivery: Seller delivers goods packaged for shipment on board
the Seller-designated vessel at the port on Seller’s side
# Carriage:
# Seller handles pre-carriage and main carriage
# Buyer handles on-carriage following delivery to port on
Buyer’s side
# Risks: Passes from Seller to Buyer once goods are on board the
vessel
# Insurance: Seller required to procure minimum coverage against
Buyer’s risk of loss or damage to the goods during carriage
# Export Clearance: Handled by Seller
# Import clearance: Buyer is responsible for the customs
requirements and associated costs (fees, duties, etc.)
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 Price Considerations with Incoterms® 2010
When negotiating a contract, the following are to be
considered cautiously:
Basic Rule of Thumb: The more responsibility the Seller takes
on, the more they must charge the Buyer.
Example: What is the price the Seller should quote for 10
units to be shipped from Thanjavur to Aiken, South Carolina?

# $10,000 EXW, Thanjavur Factory

# $10,200 FOB, Carrier in Chennai
# $10,800 CIF, Newyork Port
# $11,800 DAT, O’Hare Airport
# $12,000 DAP Aiken, South Carolina
# $ 14,000 DDP Aiken, South Carolina

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Incoterms 2020 – Valid until further change
Revised on 1st January 2020