QUESTIONS

1) Briefly describe your understanding why we have Inco terms in international business arrangements? Who
governs the terms?

Governed by the International Chamber of Commerce (ICC), incoterms are broadly recognized around the globe.
They have the same definition within an international business arrangement regardless the companies’
nationality which to a certain extent facilitates global trades.

In addition, the terms help companies to minimize commercials risks by eliminating language issues and
establishing a set of regulations which include mainly among many others shipment and transportation
responsibility as well as the ownership of goods at a given point.

2) Choose 1 term from each group and discuss the risks and responsibilities of both the seller and the buyer.
Prepare a table and bullet point the items you wish to discuss.

Here are the exact definitions of the following incoterms, according to the international Chamber of Commerce
(2010)

 EXW - Ex Work

EXW means that the seller fulfills his obligation to deliver when he has made the goods available at his premises to the
buyer. In particular, he is not responsible for loading the goods on the vehicle provided by the buyer or for clearing the
goods for export, unless otherwise agreed. The buyer bears all costs and risks involved in taking the goods from the
seller's premises to the desired destination. This term thus represents the minimum obligation for the seller.

 DAP - Delivered at Place

DAP means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of
transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods
to the named place.

 FAS - Free Alongside Ship

FAS means that the seller fulfills his obligation to deliver when the goods have been placed alongside the vessel on the
quay or in lighters at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or
damage to the goods from that moment.
 Incoterms Assignment
 CFR - Cost and Freight
CFR means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination
but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the
goods have been delivered on board the vessel is transferred from the seller to the buyer when the goods pass the
ship's rail in the port of shipment. The CFR term requires the seller to clear the goods for export. This term can only be
used for sea and inland waterway transport.
Chart 1. Responsibilities of Buyers and Sellers (RIM Logistics, 2015)
INCOTERM SELLER
EXW Goods – Provide goods and any
documentation required by the
sales contract.
Licenses and Customs Formalities
– Provide the buyer at its
requests any license,
authorization or documents
required.
Carriage and Insurance – The
seller has no obligation to provide
carriage of goods or insurance.
Delivery – Make the products
available to the buyer in
agreement with the sales
contract.
Risk Transfer and Costs – Assume
all risks of losses, damages and
costs until the products become
available to the buyer as
previously stipulated in the
contract.
Notice to Buyer – Provide enough
notice or in order words tracking
of the products to the buyer
Proof of Delivery, Transport
Documents – There is no
obligation to provide the buyer
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BUYER
Payment – Pay the products in
agreement with the sales
contract.
Licenses and Customs Formalities
– Request any license,
authorization or documents
related to the sales contract.
Carriage and Insurance – The
buyer has no obligation to
provide contract of carriage or
insurance.
Risk Transfer and Costs - Assume
all risks of losses, damages and
costs until the products have
been made available by the seller
in accordance with the sales
contract.
Pay all costs resulting from
failures to delivery/ failure to take
delivery as stipulated in the
contract.
Pay all costs relating to export
and import including duties,
taxes, customs formalities and
other charges including
transshipment.
Reimburse the seller for costs
associated with assistance in
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 Incoterms Assignment
any proof of delivery or a
transport document.
Checking, Packing, Marking –
Pay all costs associated with
packing and marking as well as
the quality and number of
products shipped.
Check the quality and number of
products shipped.
Security/Insurance – Seller must
provide when requested
information about risks, expense
and any other information
required for the clearance of
goods or even as necessary
documents to obtain insurance.
DAP Goods – Provide the products,
commercial invoice or electronic
message, and other
documentation as required by the
sales contract
Licenses and Customs Formalities
– Obtain at own risk and cost any
export licenses, authorizations,
export formalities and
procedures, including those
associated with transshipment to
the named port of destination.
Carriage and Insurance – Pay all
costs of carriage and
transshipment to the named
destination.
There is no obligation to provide
insurance
Delivery – Make the products
available to the buyer in
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obtaining export licenses and
authorizations.
Notice to Seller – Taking Delivery.
Give the seller sufficient notice
about time, period and location.
Proof of Delivery - Provide the
seller with evidence/confirmation
of having taken delivery.
Inspections - Pay for the costs of
pre-shipment inspections
(including inspections required by
the country of export)
Other - Pay and/or reimburse the
seller for all costs associated with
securing documentation
originated in the country of origin
or destination as required for
export and import.
Payment – Pay the products in
agreement with the sales
contract.
Licenses and Customs Formalities
– Request any license,
authorization or documents
related to the sales contract.
Carriage and Insurance – The
buyer has no obligation to
provide contract of carriage or
insurance.
Risk Transfer and Costs - Assume
all risks of losses, damages and
costs until the products have
been made available by the seller
in accordance with the sales
contract.
Pay all costs resulting from
failures to delivery/ failure to take
delivery as stipulated in the
contract.
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 Incoterms Assignment
agreement with the sales
contract.
Risk Transfer and Costs – Assume
all risks of losses, damages and
costs until the products become
available to the buyer as
previously stipulated in the
contract.
Notice to Buyer – Provide enough
notice of dispatch to the buyer
and project arrival information.
Therefore, the buyer can take
appropriate actions to receive
products.
Proof of Delivery, Transport
Documents- Provide delivery
orders and/or transport
documents that help the buyer to
take delivery as stipulated in the
sales contract.
Checking, Packing, Marking –
Pay all costs associated with
packing (unless the goods are
traditionally delivered
unpackaged) and marking.
Check the quality and number of
products shipped.
Security/Insurance – Seller must
provide when requested:
Information about risks, expense
and any other information
required for the clearance of
goods or even necessary
documents to obtain insurance.
FAS Goods – Provide goods and any
documentation required by the
sales contract.
Licenses and Customs Formalities
– Provide the buyer at its
requests any license,
authorization or documents
required.
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Pay all costs relating to export
and import including duties,
taxes, customs formalities and
other charges including
transshipment.
Reimburse the seller for costs
associated with assistance in
obtaining export licenses and
authorizations.
Notice to Seller – Taking Delivery.
Give the seller sufficient notice
about time, period and location.
Proof of Delivery - -Accept the
seller's transport document in
conformity with the sales
contract.
Inspections - Pay for the costs of
pre-shipment inspections except
inspections required by the
country of export.
Other - Pay and/or reimburse the
seller for all costs associated with
securing documentation
originated in the country of origin
or destination as required for
export and import.
Payment – Pay the products in
agreement with the sales
contract.
Licenses and Customs Formalities
– Request any license,
authorization or documents
related to the sales contract.
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 Incoterms Assignment
Carriage and Insurance – The
seller has no obligation to provide
carriage of goods or insurance.
Delivery – Deliver the products
properly/place them alongside
the vessel nominated by the
buyer in agreement with the sales
contract
Risk Transfer and Costs – Assume
all risks of losses, damages and
costs until the products become
available to the buyer alongside
the named vessel as previously
stipulated in the contract.
Notice to Buyer – Provide enough
notice or in order words tracking
of the products. Therefore, the
buyer can be aware of goods that
have been delivered alongside
the named vessel.
Checking, Packing, Marking –
Pay all costs associated with
packing and marking.
Check the quality and number of
products shipped.
Security/Insurance – Seller must
provide when requested
information about risks, expense
and any other information
required for the clearance of
goods or even as necessary info
to obtain insurance.
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Carriage and Insurance – Provide
contract of carriage from the
named port of shipment.
There is no obligation for
insurance.
Taking Delivery - Take delivery of
the goods as specified in the sales
contract.
Risk Transfer and Costs - Assume
all risks of losses, damages and
costs until the products have
been made available by the seller
alongside the ship as stipulated in
the sales contract.
Pay all costs for carriage and
insurance from the time the
goods have been delivered
alongside the vessel in agreement
with the sales contract.
Pay all costs resulting from
failures to delivery/ failure to take
delivery as stipulated in the sales
contract as well as the ones
related to export and import such
as duties, taxes, customs
formalities and transshipment.
Notice to Seller – Taking Delivery.
Give the seller sufficient notice
about the vessel, time, period and
location.
Proof of Delivery - Accept the
seller's transport document in
conformity with the sales
contract.
Inspections - Pay for the costs of
pre-shipment inspections except
inspections required by the
country of export.
Other – Pay and/or reimburse the
seller for all costs associated with
securing documentation
originated in the country of origin
or destination as required for
export and import.
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 Incoterms Assignment
CFR Goods – Provide goods and any
documentation required by the
sales contract.
Licenses and Customs Formalities
– Provide the buyer at its
requests any license,
authorization or documents
required.
Carriage and Insurance – Pay all
costs of carriage by sea vessel to
the nominated port of
destination.
There is no obligation to provide
insurance.
Delivery – Deliver the products
properly on the nominated vessel
at the named port as stipulated in
the sales contract.
Risk Transfer and Costs – Assume
all risks of losses, damages and
costs until they have passed over
the ship's rail at the port of
destination.
Notice to Buyer – Provide
sufficient notice to the buyer that
the products have been delivered
on board at the named vessel
Checking, Packing, Marking –
Pay all costs associated with
packing and marking.
Check the quality and number of
products shipped.
Security/Insurance – Seller must
provide when requested
information about risks, expense
and any other information
required for the clearance of
goods or even necessary
documents to obtain insurance.
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Provide the seller instructions
about contract for carriage.
Payment – Pay the products in
agreement with the sales
contract.
Licenses and Customs Formalities
– Request any license,
authorization or documents
related to the sales contract.
Carriage and Insurance – No
obligation to the seller.
Taking Delivery - Take delivery of
the products at the port of
destination as specified in the
sales contract.
Risk Transfer and Costs - Assume
all risks of losses, damages and
costs until the products have
been made available by the seller
alongside the ship as stipulated in
the sales contract.
Pay all additional costs for the
goods once they have passed
over the ship's rail at the port of
destination, including unloading,
lighterage and wharfage.
Pay all costs resulting from costs
related to export and import such
as duties, taxes, customs
formalities and transshipment.
Notice to Seller – Taking Delivery.
Give the seller sufficient notice
about the port of destination,
time, period and location.
Proof of Delivery - Accept the
seller's transport document in
conformity with the sales
contract.
Inspections - Pay for the costs of
pre-shipment inspections except
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 Incoterms Assignment
inspections required by the
country of export.

Other – Pay and/or reimburse the

seller for all costs associated with
securing documentation
originated in the country of origin
or destination as required for
export and import.
Provide the seller instructions
about contract for carriage.

3) Which Inco terms place the most risk responsibility on the seller
List the risks and responsibilities of the seller

Figure1. Chart of Responsibility - Incoterms 2010 (ABS Courier and Freight Systems , 2015)

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 Incoterms Assignment
As illustrated above, the seller has much more responsibility than the buyer in the vast majority of cases, however DAP
and DDP clearly indicate the most risks for the seller.

Sellers - Risks and Responsibilities of DAP and DDP - Incoterms (RIM Logistics, 2015)

INCOTERM RISKS AND RESPONSIBILITIES

DAP Goods – Provide the products, commercial
invoice or electronic message, and other
documentation as required by the sales contract

Licenses and Customs Formalities – Obtain at

own risk and cost any export licenses,
authorizations, export formalities and
procedures, including those associated with
transshipment to the named port of destination.

Carriage and Insurance – Pay all costs of carriage

and transshipment to the named destination.

There is no obligation to provide insurance

Delivery – Make the products available to the

buyer in agreement with the sales contract.

Risk Transfer and Costs – Assume all risks of

losses, damages and costs until the products
become available to the buyer as previously
stipulated in the contract.

Notice to Buyer – Provide enough notice of

dispatch to the buyer and project arrival
information. Therefore, the buyer can take
appropriate actions to receive products.

Proof of Delivery - Provide delivery orders and/or

transport documents that help the buyer to take
delivery as stipulated in the sales contract.

Checking, Packing, Marking – Pay all costs

associated with packing (unless the goods are
traditionally delivered unpackaged) and marking.
Check the quality and number of products
shipped.

Security/Insurance – Seller must provide when

requested:
Information about risks, expense and any other
information required for the clearance of goods

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 Incoterms Assignment
or even necessary documents to obtain
insurance.

DDP Goods - Provide the goods, commercial invoice or

electronic message, and other documentation as
required by the sales contract.

Licenses and Customs Formalities - Obtain at own

risk and cost any export and import licenses and
authorizations and carry out all export and
import formalities and procedures, including
those associated with transshipment to the
named port of destination.

Carriage and Insurance - Contract for and pay all

costs of carriage and transshipment (if necessary)
to the named destination. No obligation to
provide insurance.

Delivery - Make the goods available to the buyer

not unloaded at the named destination on the
date or within the period specified in the sales
contract.

Risk Transfer and Costs - Assume all risks of loss

or damage to the goods until they have been
made available to the buyer at the named
destination.

Pay all costs until the goods have been delivered

to the named destination, including carriage, all
export and import formalities and transshipment
(if necessary) to the named destination.

Notice to Buyer - Provide sufficient notice of

dispatch and projected arrival that the buyer can
take appropriate action to arrange unloading of
the goods.

Proof of Delivery - Provide the buyer with the

delivery order and/or a transport document
enabling the buyer to take delivery at the named
place of destination.

Checking, Packing, Marking - Pay all costs

associated with checking the quality and quantity
of the goods to be in conformity with the sales
contract. Provide appropriate packing (unless the
goods are traditionally delivered unpackaged) as
required for the transport of the goods, to the
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 Incoterms Assignment
extent that the buyer has made transport
circumstances known to the seller prior to the
execution of the sales contract. Provide marking
appropriate to the packaging.

Security/Insurance – The seller must obtain, at its

own risk and expense, any export license or other
official authorization and carry out all customs
formalities necessary for the export of the
goods., for their transport through any country
and for their import.

The Seller must provide when requested:

Information about risks, expenses and any other

information required for the clearance of goods
or even necessary documents to obtain
insurance.

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 Incoterms Assignment
1 REFERENCES
ABS Courier and Freight Systems . (2015). Incomterms Rules for any Modes of Transportation. Retrieved from
http://www.absegy.com/incotermes.html

International Chamber of Commerce. (2010). Incoterms Rules. Retrieved from https://iccwbo.org/resources-for-

business/incoterms-rules/incoterms-rules-2010/

RIM Logistics. (2015). INCOTERMS 2010. Retrieved from http://www.rimlogistics.com/wp-

content/uploads/2015/09/INCOTERMS2010.pdf

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