Incoterms??

• Incoterms are standard, internationally recognized

trade terms used in sales contracts to help traders in
different countries understand one another.
• Export documentation requirements often depends
on the Incoterms used.
• “INCOTERMS define the mutual obligations of seller
and buyer arising from the movement of goods
under an international contract from the standpoint
of risks, costs and documents” UNCTAD, 1990
 Why are they Important?

• Reduce the uncertainty caused by trade

practices in different countries.
• Simplify the negotiations involved in
international commerce.
• Ensure common understanding of
obligations
 The Categories

Incoterms Code
E Terms
Ex works EXW
Free carrier FCA
Free alongside ship FAS F Terms
Free on board FOB
Cost & freight CFR
Cost, insurance & freight CIF
Carriage paid to CPT C Terms
Carriage and insurance paid to CIP
Delivered at frontier DAF
Delivered ex ship DES
Delivered ex quay DEQ D Terms
Delivered duty unpaid DDU
Delivered duty paid DDP
 The Steps of Global Logistics
Customs Clearance
for Export
2 3 4
Handling
Loading Outbound
1 Preliminary
Transportation
5
Packing
6
Insurance
Main
Customs International
Clearance Transportation 7
Duties

11 10 9 8

Unloading Final Handling

Transportation Inbound
 Acronym (…named location)
Acronym dictates mode and where the lines are drawn

Export Import
SELLER Clearance Clearance BUYER

Goods

PRE -CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
 E Terms: Departure

 EXW (named place)

Under E-terms, the seller minimizes his
risk by only making the goods available
at his own premises.
Export Import
SELLER Clearance Clearance BUYER

Goods

PRE -CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
 EXW = Ex Works

 The seller fulfills his obligation to deliver

when he has made the goods available at his
premises to the buyer.
 The seller is not responsible for loading the
goods on the vehicle provided by the buyer
 The seller is not responsible for clearing the
goods for export, unless agreed.
 The buyer bears all costs and risks involved in
taking the goods from the seller’s premises to
the desired destination.
Group F: Main Carriage Not
Paid by Seller

 FAS - Free Alongside Ship

 FCA - Free CArrier
 FOB - Free On Board

Under F-terms, the seller arranges and

pays for pre-carriage in the country of
export. Including export clearance under
FCA and FOB
FAS (…named port of shipment)
Seller
• delivers goods alongside ship
• evidence of delivery

Export Import
SELLER BUYER
Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk
Buyer
• export documents
• nominates carrier,
Seller’s Cost
• contracts carriage
• pays freight
Seller
FCA (…named place)
• clears export customs,
• delivers goods to carrier
• evidence of delivery

Export Import
SELLER BUYER
Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Buyer
Seller’s Cost • nominates carrier,
• contracts carriage
• pays freight
 FOB (…named port of shipment)
Seller
• clears export customs,
• delivers and loads goods on ship
• evidence of delivery

Export Import
SELLER BUYER
Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Buyer
Seller’s Cost
• nominates carrier,
• contracts carriage
• pays freight
 Group C: Main Carriage
Paid by Seller

 CFR - Cost & FReight

 CIF - Cost, Insurance & Freight
 CPT - Carriage Paid To
 CIP - Carriage & Insurance Paid to

Under C-terms, the seller arranges and

pays for the main carriage but without
assuming the risk of the main carriage.
CFR (…named port of destination)

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
CIF (…named port of destination)

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost + Insurance

 Ocean vs Other
• Ocean Terms Other Terms
– CFR CPT
– CIF CIP
Group D: Arrival

 DAF - Delivered At Frontier

 DES - Delivered Ex Ship
 DEQ - Delivered Ex Quay
 DDU - Delivered Duty Unpaid
 DDP - Delivered Duty Paid
Under D-terms, the seller’s cost/risk is maximized because he must make
the goods available at the agreed destination. Including import clearance
under DEQ and DDP
 DAF (…named place)

Export Import
SELLER Clearance Clearance BUYER

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
 DES (…named port of destination)

Export Import
SELLER Clearance Clearance BUYER

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
 DEQ (…named port of destination)

Export Import
SELLER Clearance Clearance BUYER

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
Ocean vs Other

 Ocean Terms Other Terms

 DES DDU
 DEQ DDP
Quick Quiz
IncoTerms & “Price”