FOREIGN TRADE OPERATION

CHAPTER 1: INCOTERMS
1. Incoterms was first published 1936. Till now, there have been 8 revisions: 1953,
1967, 1976, 1980, 1990, 2000, 2010, 2020.
2. Some notice when using Incoterms:
• Only applicable to tangible goods
• How to quote in a international sale contract: Rule + Place of delivery +
Version of Incoterms
• Incoterms is not law so the latest version doesn’t deny the former one,
that means both parties have the right to choose the suitable version that
suits their need and adapts to trade practice.
• Incoterms just relates to terms of delivery, so it can’t replace sale
contract, shipping contract, insurance policy, etc.
• Incoterms 2020’s rules have four main following changes compared to
Incoterms 2010:
o “loaded on board” B/L at FCA rule
o Insurance: CIF (C), CIP (A)
o DAT change into DPU
o Using personal mean of transport instead of signing a shipping
contract with the third party.
3. There are seven things we should refer when talk about one rule:
 Mode of transport applied
 Any mode of transport (including multimodal transport): ExW, FCA, CPT, CIP,
DAP, DPU, DDP
 Only applicable to sea and inland waterway transport: FAS, FOB, CFR, CIF
 Custom clearance (export custom and import custom)
 ExW: The buyer does both export and import custom
 FCA, CPT, CIP, DAP, DPU, FAS, FOB, CFR, CIF: The seller does export
custom and the buyer does import custom
 DDP: The seller does both export and import custom
 Main carriage/ freight
 ExW, FCA, FAS, FOB: The buyer hire/ book a shipping slot with a carrier
 CPT, CIP, CFA, CIF, DAP, DPU, DDP: The seller hire/ book a shipping slot with
a carrier
 Place of delivery
 ExW, FCA, FAS, FOB: in the exporting country
 CPT, CIP, CFA, CIF, DAP, DPU, DDP: in the importing country
 Loading and unloading:
Commonly, there are three sections in the whole shipping journey
Decide whether the seller or the buyer will do this task?
First section (in the Main route ( onto and Third section (in the
exporting country) out of the main mean of importing country)
transport)
Loading Unloading Loading Unloading Loading Unloading
ExW Buyer Buyer Buyer Buyer Buyer Buyer
FCA
CPT
CIP
DAP
DPU
DDP
FAS
FOB
CFR
CIF

 Point of risk transfer

 FCA, CPT, CIP: when the cargo is delivered to the first carrier (in the exporting
country)
  FOB, CFR, CIF: when the cargo is on board the vessel at the port of loading (in the
exporting country)
 ExW, FAS, DAP, DPU, DDP: the point of risk transfer is the place of delivery
 Insurance
 Seller’s obligation: CIF, CIP
 Upon request and consideration: ExW, FCA, FAS, FOB, CPT, CFR, DAP, DPU,
DDP
So:

As a role of an exporter, use the words or phrases given along with suitable math symbols to
make right equations:
“+” “ –“
Loading Unloading Export Import
Insurance Risks Inland transport Carriage Freight
FCA (seller’s premise) = EXW + Export Custom Clearance + Loading (on to first carrier in
the country of export) + Risks
FCA (Another place) = EXW + Export Custom Clearance + Loading (on to first carrier in
the country of export) + Inland transport to a nominated place in the country of export +
Risks
CPT = FCA + Inland transport + Carriage
CIP = CPT + Insurance
DAP = CIP + Unloading out of the main carrier + Inland transport (if any) in the country of
import + Risks
DPU = DAP + Unloading cargo out of local transportation in the country of import + Risks
DDP = DAP + Import custom clearance
DDP = DPU + Import custom clearance - Unloading cargo out of local transportation in the
country of import
FAS = FCA + Inland transport in the country of export to the wharf/alongside ship.
FOB = FAS + Loading onto vessel + Risks
CFR = FOB + Freight + Risks (mainly due to change in exchange rate and booking rate –
chủ yếu thay đổi tỷ giá và chính sách giá cước của hãng tàu do biến động nhiên liệu)
CIF = CFR + Insurance
4. Some equations to remember:
CIF = (FOB + F)/(1- R) (Các bạn dùng công thức tổng quát này tính cho thuận lợi hơn)
R is the insurance rate according to the insurance policy
I = CIF x R
I is the insurance premium
DDP = CFR + Loading out of the main carrier (at the port of discharge) + inland transport
in the importing country + Import custom (tax and fee)
Note: do custom clearance means complete both documentation and financial responsibilities
(pay tax and fee as well)