INCOTERMS 2000*

*(Based on Information Collected from Various Sources)

Incoterms -Understanding

Published by the International Chambers of Commerce A set of rules for the interpretation of the commonly used international commercial terms (INCOTERMS) First published by the ICC in 1936, since then updated in 1953, 1967, 1976,1980, 1990 and latest revision in 2000 Rules framed to ensure uniformity in understanding of various shipping terms used in international trade by different countries

Incoterms Purpose and Scope

In pricing terms, shipping terms, sales terms Define the rights and obligation of the parties to the contract of sale with respect to the delivery of goods sold. Clarify how functions, costs and risks are split between buyer & seller for delivery of goods as per requirement of sales contract

Incoterms - Classification in Groups

Thirteen Incoterms are split into four distinct groups: Group E - where the goods are made available to the buyer at the seller's premises; Group F - where the seller must deliver the goods to a carrier appointed by the buyer; Group C - where the seller must contract for the carriage of the goods without assuming risk of loss of, or damage to the goods or additional costs due to events occurring after shipment; Group D - where the seller has to bear all costs and risks required to bring the goods to the place of destination.

Incoterms The Controls

Less Control
Seller More Control

1) E group 2) F group 3) C group 4) D group

More Control
Buyer Less Control

Group E Departure

Only one incoterm - EXW

EXW EX WORKS (named place)

Term may be used for any mode of transport. Seller delivers when goods placed at disposal of buyer or another named place Not cleared for export and not loaded on any collecting vehicle The only term that requires the buyer to clear the goods for export (including obtaining any export license necessary) is EXW

EXW
Ex Works (named place)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay Buyers Risks

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Sellers Cost

Buyers Cost

Incoterm Group F Main Carriage Unpaid

The F terms require the seller to deliver goods for carriage as instructed by the buyer. FCA FAS FOB

FCA FREE CARRIER (named place)

Term may be used for any mode of transport Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place. Seller not obliged to unload goods from his vehicle.

FCA
Free Carrier(named place)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

11

FAS -FREE ALONGSIDE SHIP (named port of shipment)

Term used for Maritime & inland waterway transport only Seller delivers when goods, cleared for export, are placed alongside the vessel Seller obliged to clear goods for export. The buyer bears all costs and risks of loss or damage to the goods from that moment.

FAS
Free Alongside(named place)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

13

FOB FREE ON BOARD named port of shipment)

Term can be used for sea or inland waterway transport only.

Seller delivers when goods, cleared for export, pass the ships rail at the named port of shipment. The buyer bears all costs and risks of loss or damage to the goods from that point.

FOB
Free On Board(named port of shipment)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

15

Incoterms Group C Main Carriage Paid

The C terms require the seller to contract for carriage at his expense to a specified point. CFR CIF CPT CIP

CFR COST AND FREIGHT (named port of destination)

Term can be used for maritime or inland waterway transport. Seller delivers when goods, cleared for export, pass the ships rail at the named port of shipment. The seller pays the costs and freight necessary to bring goods to port of destination, but the buyer bears the risk of loss and additional costs occurring after delivery.

CFR
Cost and Freight (named port of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay Buyers Risks

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Sellers Cost

Buyers Cost

18

CIF COST, INSURANCE AND FREIGHT (named port of destination)

Term can be used for maritime or inland waterway transport. Seller delivers when goods, cleared for export, pass the ships rail at the named port of shipment. The seller pays the costs and freight necessary to bring goods to port of destination, but the buyer bears the risk of loss and additional costs occurring after delivery. The seller procures marine insurance, against buyers risk of loss. Seller is required to obtain insurance only on minimum cover.

CIF
Cost, Insurance and Freight (named port of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay Buyers Risks

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Sellers Costs

Buyers Cost

20

CPT CARRIAGE PAID TO (named place of destination)

Term may be used for any mode of transport. Seller delivers the goods, cleared for export, to the carrier. The seller pays the costs of carriage necessary to bring goods to named destination, but the buyer bears the risk of loss and additional costs occurring after delivery.

CPT
Carriage Paid To (named port of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks

Sellers Cost

Buyers Costs

22

CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)

Term may be used for any of mode of transport. Seller delivers the goods, cleared for export, to the carrier. The seller pays the costs of carriage to named destination, but the buyer bears the risk of loss and additional costs occurring after delivery. The seller procures insurance against buyers risk of loss. Seller is required to obtain insurance only on a minimum cover.

CIP
Carriage and Insurance Paid To (named port of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay Buyers Risks

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Sellers Cost

Buyers Cost

24

Incoterms Group D Arrival

The D terms require the seller to take the goods all the way to destination at the border or within the country of import. DAF DES DEQ DDU DDP

DAF DELIVERED AT FRONTIER (named place)

Term may be used for any mode of transport when goods are delivered at a land frontier. Seller delivers goods, cleared for export, at disposal of buyer on arriving means of transport. Not unloaded, not cleared for import at point at frontier before customs border of adjoining country. If delivery is to take place in the port of destination, DES or DEQ should be used.

DAF
Delivered At Frontier(named place)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

27

DES DELIVERED EX SHIP (named port of destination)

Maritime and inland waterway transport only Seller delivers goods at disposal of buyer on board the ship. Not cleared for import at the named port of destination. Seller bears all costs and risks to bring goods to the named port before discharging. If the seller is to bear the costs of discharging the goods, DEQ should be used.

DES
Delivered exShip(named port of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

29

DEQ DELIVERED EX QUAY (named port of destination)

Maritime and inland waterway transport only Seller delivers goods, not cleared for import, at disposal of the buyer on the quay at the named port of destination. Seller bears all costs and risks to bring goods to the named port of destination and discharging the goods on the quay.

DEQ
Delivered Ex Quay(named port of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

31

DDU DELIVERED DUTY UNPAID (named place of destination)

Term may be used for any mode of transport. Seller delivers goods to the buyer, not cleared for import, and not unloaded, at the named place of destination. Seller bears all costs and risks (except duty) to bring goods to the named place of destination. If delivery is to take place at the port, quay or on board a vessel, DES or DEQ should be used.

DDU
Delivered Duty Unpaid(named place of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

33

DDP DELIVERED DUTY PAID (named place of destination)

Term may be used for any of mode of transport Seller delivers goods to the buyer, cleared for import, and not unloaded, at the named place of destination. Seller bears all costs and risks, including import duty, to bring goods to the named place of destination. If delivery is to take place at the port, quay or on board a vessel, DES or DEQ should be used. The only term that requires the seller to clear the goods for import (including obtaining any import license necessary) is DDP.

DDP
Delivered Duty Paid(named place of destination)
SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/ Quay

Loading Port of Shipment

Onboard Ship Rail Plane Ships Ships Rail Rail

Discharging Port of Arrival

Delivery at named place of destination: Frontier/ Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

35

Incoterm - Any Mode of Transport

EXW FCA CPT CIP DAF DDU DDP

Incoterm Maritime and Inland Waterway Transport Only

FAS FOB CFR CIF DES DEQ

The Precautions needed

Must name a place after the INCOTERM Clearly mention Incoterm edition INCOTERMS should appear on all commercial documents Avoidance of risky incoterms

DEQ,DDP,DDU,DES more risky for exporters EXW,FAS,FCA may be risky for the importers

Understand rules & regulations of importers country

Thank You