INCO Terms

Version: 1
Jan 2013

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INCO Terms

 Objective of these sessions are

1. Understanding INCO Terms
2. Responsibility & Ownership Matrix
3. Impact on Supply Chain Cost

Pre-requisite: Complete GTNU course IO 115

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INCO Terms

1 INCO Term – Recap

2 Landed Cost

3 Examples

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Supply Chain Classification

INCO Terms 2010

• Inco Terms stand for International Commercial Terms.

•Inco terms define the terms of shipment and delivery, as well as the transfer of risk,
between the buyer and seller.

•In proper use, the Inco term must be stated with the specific place plus “Inco terms 2010.”
The named place is where the seller’s cost ends and is also the seller’s delivery point with
the exception of the “C” terms.

•Inco terms were created by the International Chamber of Commerce (ICC) and are a
registered trademark of the ICC.

• Inco terms are regularly updated to keep pace with the ever-changing world of
international trade.

• The latest edition is the Inco terms 2010 which are effective January 1, 2011.

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INCO Terms

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INCO Terms

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INCO Terms

1 INCO Term – Recap of IO 115

2 Landed Cost

3 Examples

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 INCO Terms

Transportation Charges

Enterprise Customer
Manufacturing
[Suppliers]

Pre-carriage Main-carriage On-carriage

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INCO Terms

Pre-carriage Charges

The transportation segment from the seller’s location to the point where the
cargo would leave from the seller’s side. Example, to arrange for pre-carriage,
you would contract with an inland carrier to make delivery to a port or
airport.

 Special Packaging
 Loading
 Local Transportation – Trucking/Train
 CY/CFS Charges
 Terminal Handling Charges (Lift-off Lift-on)
 Documentation Charges
 Export Documentation charges

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INCO Terms

Main-carriage Charges
The transportation segment from the seller’s side to the buyer’s side. Example,
to arrange for main-carriage, you would contract for ocean or air carriage.

 Ocean Freight Charges/Air-Freight Charges

 Bunker Adjustment Factor(Sea)
 Currency Adjustment Factor (Sea)
 Peak Season Surcharges (Sea)
 War-risk Surcharges (Sea)
 Fuel Surcharge (Air)
 Security Surcharge (Air)
 Scanning/Screening charges (Air)
 Insurance, etc

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INCO Terms

On-Carriage or Post-carriage Charges

The transportation segment from the point of arrival on the buyer’s side to the
designated ultimate receiver. Example, to arrange for on-carriage, you would
contract with an inland carrier to make delivery from the port/airport of arrival to
the ultimate receiver.

 Destination Terminal Handling Charges

 Delivery Order Fees
 Customs clearance Charges
 Duty, Custom Fees, Taxes
 CY/CFS Handling Charges
 Local Transportation Charges (Truck/Train)
 Re-positioning Charges

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INCO Terms

Landed Cost

1. Product Cost (ExW Charges)

2. Pre-carriage Charges
3. Main-carriage Charges
4. Post-Carriage Charges

Landed Cost = 1+2+3+4

The total cost of a landed shipment including purchase price, freight,

insurance, and other costs up to the port of destination. In some
instances, it may also include the customs duties and other taxes
levied on the shipment

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INCO Terms

1 INCO Term – Recap of IO 115

2 Landed Cost

3 Examples

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INCO Terms

My Company imports Steel bar; Contracted prices are below (in USD):

Steel bars (purchase price) 2000/Ton

Origin Transportation Charges (trucking) 50/Ton

Origin Port handling charges 50/Ton

Documentation fee 100/Invoice

Ocean Freight(includes BAF/CAF & other surcharges) 150

Destination Port handling charges 50/Ton

Customs clearance and documentation fee 100/Invoice

Destination Transportation Charges (trucking) 50/Ton

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INCO Terms

If the INCO term is ExW, What should be paid to Service provider for
transporting one ton of Steel ?
Steel bars (purchase price) 2000/Ton

Origin Transportation Charges (trucking) 50/Ton

Origin Port handling charges 50/Ton

Documentation fee 100/Invoice

Ocean Freight (includes BAF/CAF & other surcharges) 150

Destination Port handling charges 50/Ton

Customs clearance and documentation fee 100/Invoice

Destination Transportation Charges (trucking) 50/Ton

Total Transportation cost to be paid 550 USD

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INCO Terms

If the INCO term is FOB, What should be paid to Service provider for
transporting one ton of Steel ?
Steel bars (purchase price) 2000/Ton

Origin Transportation Charges (trucking) 50/Ton

Origin Port handling charges 50/Ton

Documentation fee 100/Invoice

Ocean Freight (includes BAF/CAF & other surcharges) 150

Destination Port handling charges 50/Ton

Customs clearance and documentation fee 100/Invoice

Destination Transportation Charges (trucking) 50/Ton

Total Transportation cost to be paid 350 USD

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INCO Terms

If the INCO term is CFR, What should be paid to Service provider for
transporting one ton of Steel ?
Steel bars (purchase price) 2000/Ton

Origin Transportation Charges (trucking) 50/Ton

Origin Port handling charges 50/Ton

Documentation fee 100/Invoice

Main Carriage (includes BAF/CAF & other surcharges) 150

Destination Port handling charges 50/Ton

Customs clearance and documentation fee 100/Invoice

Destination Transportation Charges (trucking) 50/Ton

Total Transportation cost to be paid 200 USD

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INCO Terms

If the INCO term is DDP, What should be paid to Service provider for
transporting one ton of Steel ?
Steel bars (purchase price) 2000/Ton

Origin Transportation Charges (trucking) 50/Ton

Origin Port handling charges 50/Ton

Documentation fee 100/Invoice

Ocean Freight (includes BAF/CAF & other surcharges) 150

Destination Port handling charges 50/Ton

Customs clearance and documentation fee 100/Invoice

Destination Transportation Charges (trucking) 50/Ton

Total Transportation cost to be paid 0 USD

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Supply Chain – Business Orientation

I am a buyer for a famous Apparel company

 Commodity : Apparels
 Importing from China to Europe
 Transportation mode is Ocean
 Load can be LCLs or FCLs
 Source from many Suppliers/Factories
 Contracts with 3PLs

Which INCO Terms should I choose?

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Supply Chain – Business Orientation

I am a buyer for a famous Automobile company

 Commodity : Car Stereos

 Importing from China to USA
 Transportation mode is Ocean
 Load will be FCLs
 Source from many Suppliers/Factories
 Contracts with Ocean Carriers (VOCs)

Which INCO Terms should I choose?

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Supply Chain – Business Orientation

I am a buyer for a famous Automobile company

 Commodity : Machinery for Assembly

 Importing from Europe to India
 Transportation mode is Ocean
 Needs Special Packing and Handling
 Load will be FCLs
 Over Dimensional Cargo
 Sourcing from a reputed Machinery Manufacturer who regularly exports to
many customers
 Contracts with 3PLs for Normal Cargo

Which INCO Terms should I choose?

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Supply Chain – Business Orientation

For further reading;

 INCO Terms 2000 by ICC

 http://www.trade-terms.com/index.html

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