INTERNATIONAL COMMERCIAL

TERMS (INCOTERMS)
INCOTERMS
This is a short form of International Commercial Terms.
Are uniform set of rules created by the International
Chamber of commerce, to clarify the costs, risks and
obligations of the buyers and sellers in an international
commercial transaction.
OR
INCOTERMS
Are internationally standardized trade terms that
describe the dynamic obligations of both buyers and
sellers in international sales transportations.
Moreover, INCOTERMS is a set of 11 terms that clearly
allocate the costs, risks, customs and insurance,
responsibilities of international transporting goods
between the buyer and seller
 IMPORTANCE/ROLES OF INCOTERMS.
• Help to avoid and eliminate possible
misunderstandings that can arise between the
buyer and seller.
• Shows the price to be paid under different
circumstaces
• Shows the obligations of the buyer under the
contractual terms.
• Shows the obligations of the seller under the
contractual terms
• Shows transfer of ownership/title to the goods
passes from the seller to the buyer.
• Shows transfer of risks.
 The following are the INCOTERMS
E-Group
This is used where the seller does not want to
arrange transport.
EXW - ExWorks
• In this term, the seller’s only responsibility is to make the
goods available at the seller’s premise i.e..the work or
factory. The seller is not responsible for loading the
goods on the vehicle provided by the buyer unless
otherwise agreed.
• The buyer bears the full costs and risk involved in
bringing the goods from there to the desired destination.
This term places the maximum obligation to the buyer
and minimum obligation to the seller.
EXW - ExWorks
 F - Group
• This is used where the seller can arrange
some transport within his/her own
country
FCA - Free Carrier (named place of delivery)
• This term means that the seller delivers
the goods, cleared for export, to the
carrier nominated by the buyer at the
named place. Seller pays for carriage to
the named place.or
 FCA Free Carrier
• The seller delivers the goods to an agreed place
and bears the costs and risks up to the point of
delivery of those goods at the agreed place,
including the cost of export clearance.
• The seller is responsible for inland transport and
export customs clearance unless the designated
place is the seller’s premises (FCA warehouse), in
which case the goods are delivered there and
loaded onto the means of transport arranged by
the buyer at the buyer’s expense.
FCA - Free Carrier (named place of
delivery)
 FAS - Free Alongside Ship (named port of
shipment)
• This term means that the seller delivers when
the goods are placed alongside the buyer’s vessel
at the named port of shipment. The seller is
required to clear the goods for export. The buyer
has to bear all costs and risks of loss or damage
to the goods from that moment.
• The seller puts the goods alongside the ship at
the specified port they are going to be shipped
from.
FAS - Free Alongside Ship (named port of
shipment)
 FOB - Free On Board (named port of
shipment)
• Under this term the seller bears all cost and risks
up to the point the goods are loaded on board
the vessel. The seller must get the goods ready
for export and load them into the speficied ship.
• The risk of loss or damage to the goods is
transfered to the buyer when the goods placed
on the ship.
• This term can only be used for sea transport.
FOB - Free On Board (named port of
shipment)
 C-Group
C-Group: Used where the seller can arrange and
pay for most of the freight charges up to the
foreign country.
CFR(C&F) - Cost and Freight (named
port of destination)
• The seller must pay the cost and freight
necessary to bring the goods to the specified
port/named destination. The buyer is
responsible for risks when the goods are loaded
onto the ship.
 CFR(C&F) - Cost and Freight (named
port of destination)
Seller must pay the costs and freight necessary to
bring the goods to the named port of destination.
This incoterm is suitable for maritime transport
only and Insurance for the goods is NOT included.
Insurance is at the cost of the buyer.
CFR(C&F) - Cost and Freight (named port
of destination)
 CIF-Cost, Insurance and Freight
CIF-COST, INSURANCE AND FREIGHT
The exporter or seller is responsible for all costs
until the port of destination. In addition, the
exporter pays for the insurance.
CIF - Cost, Insurance, Freight (named
port of destination)
 CPT - Carriage Paid To ( named place
of destination)
• The seller bears the costs until the goods are
delivered to an agreed place, i.e. they are
responsible for all of the costs at origin, export
clearance, the main transport and usually, costs at
destination.
• The buyer is responsible for import procedures
and insurance if taken out as it is not mandatory.
The risk is transferred to the buyer once the goods
are loaded onto the first means of transport
arranged by the seller.
• This Incoterm is valid for any means of transport.
CPT - Carriage Paid To ( named place
of destination)
 CIP - Carriage and Insurance Paid (named
place of destination)
• The seller bears the costs up to delivery at an
agreed place at destination, i.e. the costs at
origin, export clearance, freight and also
insurance which is mandatory.
• The importer is responsible for import clearance
and delivery at destination and takes on the risk
when the goods are loaded onto the first means
of transport.
 CIP - Carriage and Insurance Paid
(named place of destination)
• What is new in this Incoterm with respect to
Incoterms 2010 again relates to insurance
cover. In this instance, apart from being
mandatory, insurance must contain the same
coverage, the goods must be insured until their
delivery to the carrier at destination.
CIP - Carriage and Insurance Paid
(named place of destination)
GROUP D (D-TERMS)
DAT- (DELIVERY AT TERMINALS)
Seller pays for carriage to the terminal, except for
costs related to import clearance, and assumes all
risks up to the point that the goods are unloaded
at the terminal.
 DAP - Delivered At Place (named
place of destination)
• DAP - Delivered at Place: the seller delivers the
goods, without unloading, to the destination
place designated by the buyer.
• Once goods are ready for shipment, the
necessary packing is carried out by the seller at
his own cost, so that the goods reach their final
destination safely.
• All legal formalities in the expoert country are
completed by the seller at his own cost and risk
to clear the goods for export.
 DDP - Delivered Duty Paid (named
place of destination)
• The seller is responsible for delivering the goods
to the named destination in the buyer’s country
and pays all costs in bringing the goods to the
destination including import duties and taxes.
• This term places the maximum obligations on the
seller and minimum obligations on the buyer.
• No risk or responsibility is transferred to the
buyer until delivery of the goods at the named
place of destination.