LESSON 4: ENTRY MODES IN IBT
RULES FOR ANY MODE OR
 Exporting – direct sale of goods/services in
another country.
 Best-known method of entering a foreign
market.
 Licensing – normally intangible.
 Requires very little investment & can
provide high ROI.
 Franchising – the rules for how the
franchisee carries out business are strict.
 Joint Venture – consists of 2 companies
establishing a jointly-owned business.
FOREIGN DIRECT INVESTMENT – directly
invest in facilities in a foreign market.
 Requires a lot of capital to cover costs
such as premises, technology, & staff.
INTERNATIONAL TRADE TERMS
International Chamber of Commerce (ICC)
 Provides a set of international rules
commonly used terms of delivery in foreign
trade.
 Is the world business organization, enabling
businesses to secure peace, prosperity &
opportunity for all.
 Represent business interests @ the highest
lvls of intergovernmental decision-making.
International Commercial Terms (Incoterms)
(1936)
 It delineates the responsibilities of the seller
to the buyer.
 A component or part of a quotation for the
foreign buyer.
 Can be used irrespective of the mode of
transport selected & the number of mode
transport employed.
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MODES OF TRANSPORTATION
1. Ex-Works Factory (EXW) – seller is
responsible for the goods only inside/within
the factory premises.
 The responsibility for the goods is
transferred to the buyer once they pick it
up from the seller’s factory.
 The seller is NOT responsible for
loading the goods on a ship, in an
airplane, etc.
2. Free Carrier (FCA) – a trade term in which
the seller of goods is responsible for
delivering those goods to a destination
specified by the buyer.
 “free” means the seller has an obligation
to deliver goods to a named place for
transfer to a carrier.
3. Carriage Paid To (CPT), named place or
port of destination – the seller delivers the
goods @ their expense to a carrier or another
person nominated by seller.
4. Carriage and Insurance Paid To (CIP),
named place or port of destination – seller
pays freight and insurance.
 The risk of dmg or loss to the goods
being transported transfers from the
seller to the buyer as soon as the goods
are delivered.
5. Delivered @ Terminal (DAT) – the seller
has already delivered when the goods are
unloaded from the arriving.
 Terminal – a place, whether covered or
not, such as quay, warehouse, container
yard, rail, or cargo terminal.
6. Delivered @ Place (DAP) – seller agrees to
pay all cost & suffer any potential losses of
moving goods sold to a specific location.
 the buyer is responsible for paying
import duties and any applicable taxes.
7. Delivered Duty Paid (DDP), named place
of destination – seller assumes all of the
responsibility, risk, & costs associated w/
RULES FOR SEA & INLAND
WATERWAY TRANSPORT
transporting goods until the buyer receives
or transfers them @ the destination port.
1. Free Alongside Ship (FAS), named ocean
port of shipment – stipulates that the seller
must arrange for goods to be delivered to a
designated port & next to a specific vessel
for easier transfer.
 Only used for less than container load
(LCL) shipments.
2. Free Onboard Vessel (FOB), named ocean
port of shipment – used to indicate who is
 liable for goods damaged or destroyed
during shipping.
 “FOB origin/Shipping Point” – the
buyer is @ risk once the seller ships the
product.
 “FOB Destination” – the seller retains
the risks of loss until the goods reach the
buyer.
3. Cost and Freight (CFR), named ocean
port of shipment – ocean shipments that are
not containerized.
 The seller is required to arrange the
carriage of goods by sea to a port of
destination & provide the buyer w/ the
dox necessary to obtain them from the
carrier.
 Seller is NOT responsible for procuring
marine insurance against the risk of loss
or dmg to the cargo during transit.
4. Cost, Insurance, and Freight (CIF),
named ocean port of shipment – represents

4 MOST COMMONLY USED

INCOTERMS IN THE PH

the charges paid by a seller to cover the CIF

of a buyer’s order while the cargo is in
transit.
 Ex-Works Factory
 Free on Board Port of Shipment
 Cost & Freight Port of Destination
 Cost, Insurance & Freight Port of
Destination
 all orders placed during production &
post-production prior to loading goods to
the buyer.
 Ensures on-time delivery.

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