INCO Tems

INTERNATIONAL COMMERCIAL
TERMS
2010
International Commercial Terms History
• Initially created in 1936 by the International Chamber of Commerce (ICC)
and have been periodically revised (Incoterms® 2010 is the 8th revision)
• Incoterms® are generally good for approximately 10 years ~ not a magic

number, but historically about accurate
• Incoterms® reflect world-wide trade practices, as practices change,

Incoterms® are revised
• Incoterms® 2010 were written by the ICC, 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 is written in British English and will be
translated into 35+ languages over the next year.
Incoterms Contd.
• These terms are used in a sales agreement

• They are not enforceable by law until incorporated in a
sales contract. India has not adopted Incoterms but they are
widely used in the country.
• Defines the costs and risks between exporter & Importer
in an International Sales Transaction.
• To help parties to avoid misunderstandings
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.”
• It is not always:
• When the goods arrive in your customer’s hands or
• When the goods leave your dock
• Defined the same in all countries
• You must know your contract and your Incoterm®
• 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.
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 pint on the buyer’s side
• On-carriage:
• Domestic: subsequent transportation beyond main carriage
• International: transportation from the arrival pint on the buyer’s side
Transportation Definitions
• 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
Type of Transportation?
• Company A
• Company B
Door to Door – one contract for all

carriage (pre-, main, and on-carriage)
Type of Transportation?
• Company A
Door to Port – contract for pre-carriage

and main-carriage
Company B responsible for arranging

pick up at Arrival Airport
A Few More Definitions…..
• 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 (sea)
• 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
Packaging Definitions
• The packaging of the goods to comply with any
requirements under the contract of sale.
• The packaging of goods so that they are fit for

transportation.
• 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.
Key questions to ask in structuring
a transaction
• 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)?
What do Incoterms® 2010 Do?
• 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
• Address “String sales”
• Shipments where ownership changes in transit
What Incoterms® 2010 DO NOT Do…
• Automatically Apply
• Determine When Ownership Changes
• When delivery occurs or when payment happens can impact when
ownership changes
• Must be addressed specifically in contract
• Under US Law, it is when the product is delivered
• If jurisdiction is under another sovereign nation law, you need to
address per that country regulation
• If contract is subject to the United Nations Convention on Contracts
for the International Sale of Goods (CSIG) the law does not specify if
it is not addressed specifically within the contract
What Incoterms® 2010 DO NOT Do…
• Identify when Revenue is Recognized

• Identify if a Breach of Contract occurs, when it happened
• Does not determine remedies for breach of contract
• Provide relief from obligations/exemptions from liability in

unexpected or unforeseeable situations
• Address Payment issues

• Tells you that the buyer must pay, but not when or where
Incoterms®
2000 vs. 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

• CFR – Cost and Freight
• CIF – Cost, Insurance & Freight
• CIF – Cost, Insurance & Freight
• CPT – Carriage Paid To
• CPT – Carriage Paid To
• CIP – Carriage & Insurance Paid To
• CIP – Carriage & Insurance Paid To
• DEQ – Delivered Ex Quay

• DAT – Delivered At Terminal
• DES – Delivered Ex Ship
• DAP – Delivered At Place
• DAF – Delivered at Frontier
• DDP – Delivered Duty Paid
• DDU – Delivered Duty Unpaid
• DDP – Delivered Duty Paid
Marine Restricted Omni-Modal
Group Term Definitions
F – Terms
C – Terms
D – Terms
F-Group Terms
• Are considered to be “Shipment Contracts”
• Are considered Seller Friendly
Seller Buyer
• Handles Export Clearance • Contracts for Main
• Handles Pre-carriage Carriage
• Named Place on Seller’s Side • In charge of Carrier (and
usually forwarder)
selection
• Control over Freight Costs
• Control of Documentation
C-Group Terms
• Are considered to be “Shipment Contracts”
• Are considered Buyer Friendly
Seller Buyer
• Contracts for Main Carriage • Named Place is on Buyer’s
side
• In charge of carrier (and
usually forwarder) selection • Has risk of loss while goods
are in transit with carrier
• Handles pre-carriage selected and paid for by
• Has control over freight costs seller
• In control of documentation • Must rely heavily on Seller
for data elements required
• Passes risk of loss (delivers) for ocean shipments such as
to Buyer prior main carriage Importers General manifest
• Handles export clearance
If informed, should not
consider “C” terms due to
downside described
D-Group Terms
• Are considered to be “Arrival Contracts”
Seller Buyer
• Contracts for Main Carriage • Named Place on Buyer’s side
• In charge of carrier (and • Must rely heavily on Seller
usually forwarder) selection for data elements required
• Handles pre-carriage for ocean shipments such as
• Has control over freight costs Importers General manifest
• In control of documentation • Undertakes less risk than in
• Passes risk of loss (delivers) “C” terms
to Buyer at freight arrival
• If inexperienced, or does not
point
have good relationship with
• Handles export clearance
carriers, is served will by “D”
• Seller may have revenue terms
recognition issues since
“delivery” occurs on arrival
side, meaning revenue is
recognized only upon arrival
Omni-Modal Incoterms® 2010
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
• Goods are packaged
• 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: Neither party 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
EXW
Ex Works …(named place)
SELLER BUYER
Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Exporter Documents at named Port of Ship Port of named place of Documents Importer
Premises Formalities place of: Shipment Rail Arrival destination: Formalities Premises
Frontier/ Plane Frontier/
Terminal/ Ship’s Ship’s Terminal/Quay
Quay Rail Rail
Seller’s Buyer’s Risks
Risks
Seller’s Buyer’s Cost

Cost
• EXW should be used when the buyer has
better logistical expertise.
• It can be used even for domestic sales.
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 agree, 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 agree, loaded onto collecting
vehicle, pre-carriage
• Buyer responsible for unloading pre-carriage delivering
vehicle, main carriage, on-carriage
FCA + (Named Place)
• 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
• Export Clearance: Handled 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.

FCA
Free Carrier…(named place)
SELLER BUYER

Quay Rail Rail
Seller’s Risks Buyer’s
Risks
Seller’s Cost Buyer’s Cost

• Effective use in the case of Deemed Exports
• It is used when the buyer wants control on the
supply chain and is willing to take higher risk
• It is also suitable for Air Shipments
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: Neither party required
Note: Risk of Loss passes on Seller’s side to Buyer BUT Cost is Seller’s
responsibility to named location on Buyer’s side
CPT
Carriage Paid To …(named port of destination)
SELLER BUYER

Quay Rail Rail
Risks
Seller’s Cost Buyer’s

Costs
• Most suitable for Warehouse to Warehouse
Shipment;
• Widely used when intent is to get cargo in country
hinterland at dry ports;
• Buyer must take care of risk mitigating
mechanism to protect himself from 1st warehouse
itself.
• Should never be used at port town such as JNPT/
Kolkata/ Chennai.
• Ideal for Breakbulk; LCL cargo.
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
Note: Risk of Loss passes on Seller’s side to Buyer BUT Cost is Seller’s
responsibility to named location on Buyer’s side
CIP
Carriage and Insurance Paid To …(named port of destination)
SELLER BUYER

Quay Rail Rail
Seller’s Risks Buyer’s Risks

• Most suitable for Warehouse to Warehouse
Shipment;
• Widely used when intent is to get cargo in country
hinterland at dry ports;
• Buyer must take care of risk mitigating
mechanism to protect himself from 1st warehouse
itself.
• Should never be used at port town such as JNPT/
Kolkata/ Chennai.
• Ideal for Breakbulk; LCLcargo.
Delivered at Terminal – DAT +
Named Place (Buyer’s side)
• Replaced 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 Responsibility
• Import Clearance: Buyer Responsibility – documentation
and fees associated
• Insurance: Neither party required to insure
DAT
DEQ
Delivered at Terminal +Named Place
(Buyer’s
Delivered Ex Side)port of destination)
Quay…(named
SELLER BUYER

Quay Rail Rail
Risks

• Seller delivers when the goods unloaded from the
arriving means of transport.
• The goods are placed at the disposal of the buyer at the
named terminal at the named port or place of
destination.
• The terminal may include quay; warehouse; container
yard or road rail or air terminal.
• Both parties should agree the terminal and if possible a
point within the terminal at which point the risks will
transfer from seller to the buyer of the goods.
• If It is intended that seller is to bear all the costs and
responsibilities from the terminal to another point; DAP
or DDP may apply.
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: Buyer handles and pays associated
costs
• Insurance: neither party required to insure
DAP
DAF
Delivered at Place + Named Place
(Buyer’s
Delivered Side)
At Frontier…(named place)
SELLER BUYER

Quay Rail Rail
Risks

• If the seller incurs unloading cost at place of destination;
unless previously agreed he is not entitled to recover any
such costs.
• Parties are advised to specify as clearly as possible the

point within the agreed place of destination; because
risks transfer at this point from seller to buyer.
• If the intent is to deliver the goods duly cleared from

customs (Import Duty & Procedure); DDP should be
used.
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: Neither party required to provide
DDP
Delivered Duty Paid…(named place of destination)
SELLER BUYER

Quay Rail Rail
Risks

• Immense care should be taken to check local Import
policy/Authorisation requirements.
• Rate of Duties should also be checked in.
• Attitude of Customs Authority in Customs
Clearance/Corruption etc.
• Ideal for Vendor managed Inventory
situations/Consignment Sales when seller has better
logistical knowledge.
• Also known as Franco Domino in Francophone
Countries.
DDP Caveats
• Should not be used if SELLER CANNOT clear
goods in importing country
• NOT recommended if Buyer wants control of

import documents and declarations to
Customs
• DDP DOES NOT MEAN Buyer is absolved of all

Customs Regulations & Responsibilities
Water Transport Only
Incoterms® 2010
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 place
alongside the vessel on Seller’s side
• Export Clearance: Seller Handles
• Import Clearance: Buyer is responsible for requirement
and fees associated
FAS
Free Alongside…(named place)
SELLER BUYER

Quay Rail Rail
Risks

• FAS is best used in case of Inland water Transport
however can be used with equal ease in Sea
Transportation.
• Should not be used from country hinterland.
• Should also be avoided in case of Charter Party
Contracts.
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: Neither party is required to insure goods
• Import Clearance: Handled by Buyer
NOTE:
“Ships Rail” is no longer part of Incoterms® 2010. If using Marine Terms, Contract or PO must
exactly state what “on board the vessel” means for the transaction – where on the vessel is the
container, item to be placed
FOB
Free On Board…(named port of shipment)
SELLER BUYER

Quay Rail Rail
Risks

• Most suitable for Both the parties in ideally
competitive situation.
• Due Care should be taken for not using it
from “Place”.
• Should be avoided as possible for Air
Transport.
• Gives buyer the control on supply Chain.
• Establishes Ideal business relationships.
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
• Import clearance: Buyer is responsible for the customs
requirements and associated costs (fees, duties, etc.)
Even though risk passes from Seller to Buyer on Seller’s side (once loaded per
contract), Seller contracts for and pays freight necessary to bring goods to the
named port on the Buyer’s side
CFR
Cost and Freight …(named port of destination)
SELLER BUYER

Quay Rail Rail
Seller’s Risks Buyer’s Risks

• CFR is suitable for stand alone shipments or
when buyer has his own means of
Transportation.
• Suitable for FCL Cargo.
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
• Import clearance: Buyer is responsible for the customs requirements
and associated costs (fees, duties, etc.)
Even though risk passes from Seller to Buyer on Seller’s side (once loaded per
contract), Seller contracts for and pays freight necessary to bring goods to
the named port on the Buyer’s side
Same as CPT + Insurance coverage
CIF
Cost, Insurance and Freight …(named port of destination)
SELLER BUYER

Quay Rail Rail
Seller’s Buyer’s Risks
Risks
Seller’s Buyer’s Cost

Costs
• Most suitable for port to port Shipment
• Widely used in global trade.
• Buyer must take care of risk mitigating mechanism.
• Should be avoided when goods are to be delivered
across ship’s rail(country hinter land).
• Ideal for competitive business relations.
• Suitable for FCL Cargo.
Price Considerations
with Incoterms® 2010
When negotiating a contract, keep in mind the following:
• 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 Hilltown to Seattle?
•$10,000 EXW, Johnsburg Factory

•$10,200 FCA, Carrier in Hilltown
•$10,600 CIP, Newark Airport
•$10,800 DAT, O’Hare Airport
•$12,000 DDP Seattle
Importing and Incoterms® 2010
• Some charges if included and detailed in commercial

invoice need to be deducted from the dutiable value of
the shipment
• Main carriage
• Any foreign inland freight
• Insurance
• Supply chain security fees
• Terminal handling fees
Incoterms 2010 at a Glance

INCO Tems

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

INCO Tems

Caricato da

Copyright:

INTERNATIONAL COMMERCIAL

• Incoterms® are generally good for approximately 10 years ~ not a magic

• Incoterms® reflect world-wide trade practices, as practices change,

• Incoterms® 2010 were written by the ICC, represented by 8 individuals

• These terms are used in a sales agreement

As defined in Incoterms® 2010, “it is used to indicate

• Door – to – (Air) Port:

• (Air) Port – to – (Air) Port:

• (Air) Port – to – Door:

Door to Door – one contract for all

Door to Port – contract for pre-carriage

Company B responsible for arranging

• Marine-restricted: Terms that only apply to carriage by

• Shipment Contract: sales/purchase contract where the

• Arrival Contract: sales/purchase contract where seller’s

• The packaging of goods so that they are fit for

• The stowage of the packaged goods within a

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

• Identify when Revenue is Recognized

• Provide relief from obligations/exemptions from liability in

• Address Payment issues

• FCA – Free Carrier

• CFR – Cost and Freight

• DEQ – Delivered Ex Quay

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Buyer’s Cost

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

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

• Parties are advised to specify as clearly as possible the

• If the intent is to deliver the goods duly cleared from

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

• NOT recommended if Buyer wants control of

• DDP DOES NOT MEAN Buyer is absolved of all

• Delivery: Seller delivers goods to Buyer alongside the

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Cost Buyer’s Cost

Seller/ Export Delivered Loading Onboard Discharging Delivery at Import Buyer/

Seller’s Buyer’s Cost

• Basic Rule of Thumb: The more responsibility the Seller

•$10,000 EXW, Johnsburg Factory

• Some charges if included and detailed in commercial

Potrebbero piacerti anche