INCO Terms

2. Determine (Incoterms) Terms of Sale Exporter must know the terms before preparing a quotation or a pro forma invoice. Incoterms are standardized names created by the International Chamber of Commerce (ICC) for describing terms of sale.International Chamber of Commerce (ICC)

Diagram of INCO terms erm

Most Common Incoterms TermDefinitionRiskCostInclude on Quotation EXW Ex Works Buyer arranges for pick up of goods at the seller’s location. Seller is responsible for packing, labeling, and preparing the goods for shipment on a specified date or time Buyer assumes all risk Buyer pays all transportation costs N/A FCA Free Carrier Seller is responsible for costs until the buyer’s named freight carrier takes charge Seller and Buyer SplitN/A FAS Free Alongside Ship (over water only) Buyer arranges for the ocean transport. Seller is responsible for packing labeling, preparing the goods for shipment, and delivering the goods to the dock. Seller: until the goods reach the dock. Buyer: from dock to destination Buyer: all ocean transport costs. Seller is responsible for costs associated with transporting the goods to the dock. Costs of transporting goods to the dock.

Most Common Incoterms TermDefinitionRiskCostInclude on Quotation FOB* Free On Board FOB should also never be used unless you specify what and where such as "FOB ocean vessel at New York City Seller arranges for ocean transport of the goods, preparing the goods for shipment, and loading the goods onto the vessel. The goods ship ocean freight collect. Buyer: Once the items are on board Seller: Wharfage (charges to load the goods onto the ship) and freight forwarder fees. Costs, until on board CFR Cost and Freight Seller has the same responsibilities as when shipping FOB, but shipping costs are prepaid by the seller, instead of shipping collect. Seller: assumes the risk until the shipment reaches the overseas dock. Seller: costs of freight fees up to destination. Add Freight to cost of product. CIF Cost, Insurance, and Freight Seller has the same responsibilities as when shipping CFR with addition of including a marine insurance policy Seller:; until the shipment reaches the overseas dock. Seller insurance and freight forwarder fees. Insurance, freight and cost of goods

FOB Example FOB, New Orleans for 3 ice makers. You as the exporter are responsible for all costs in delivering the goods to New Orleans and loading the icemakers on board a vessel named by the German firm. You are responsible for arranging any export clearances (licenses, taxed, fees). The German firm is responsible for booking space for cargo and pays for the ocean freight.

CIF Example CIF (Named foreign port of destination) YCI quotes its German customer CIF Bremerhaven for 3 ice makers. YCI arranges for and pays all transportation costs to the Port of Bremerhaven. YCI arranges and pays for the marine insurance policy. YCI, however, is only responsible for risk of loss until loading of the icemakers on board the vessel in New Orleans.

FAS Example YCI, the U.S. exporter, quotes the German firm FAS, New Orleans for 3 ice makers. YCI is responsible for all costs in getting the goods to the Port of New Orleans alongside the nominated vessel prior to sailing time. The German buyer is responsible for booking space, paying ocean freight and arranging for all export clearances.

Source for INCOTERMS For a complete list of INCOTERMS, including responsibilities of the parties, see Incoterms m.htm