INCOTERMS : INternational COmmercial TERMS “INCOTERMS define the mutual obligations of seller and buyer arising from the movement of goods under an international contract from the standpoint of risks, costs and documents” UNCTAD, 1990

What are they? Set of international rules for the interpretation of the most commonly used foreign trade terms

Why are they Important? Reduce the uncertainty caused by trade practices in different countries. Simplify the negotiations involved in international commerce. Ensure common understanding of obligations

The Categories E Terms F Terms C Terms D Terms Incoterms Code Ex works EXW Free carrier FCA Free alongside ship FAS Free on board FOB Cost & freight CFR Cost, insurance & freight CIF Carriage paid to CPT Carriage and insurance paid to CIP Delivered at frontier DAF Delivered ex ship DES Delivered ex quay DEQ Delivered duty unpaid DDU Delivered duty paid DDP E Terms F Terms C Terms D Terms

The Steps of Global Logistics Customs Clearance for Export 3 4 2 Handling Outbound Loading Preliminary Transportation 1 5 Packing 6 Insurance Main International Transportation Customs Clearance Duties 7 9 11 10 8 Unloading Final Transportation Handling Inbound

Acronym (…named location) Acronym dictates mode and where the lines are drawn SELLER Export Clearance Import Clearance BUYER Goods PRE -CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Seller’s Cost

E Terms: Departure EXW (named place) Under E-terms, the seller minimizes his risk by only making the goods available at his own premises. Goods Seller’s Risk Seller’s Cost PRE -CARRIAGE MAIN CARRIAGE ON-CARRIAGE SELLER BUYER Export Clearance Import

EXW = Ex Works The seller fulfills his obligation to deliver when he has made the goods available at his premises to the buyer. The seller is not responsible for loading the goods on the vehicle provided by the buyer The seller is not responsible for clearing the goods for export, unless agreed. The buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination.

Group F: Main Carriage Not Paid by Seller FAS - Free Alongside Ship FCA - Free CArrier FOB - Free On Board Under F-terms, the seller arranges and pays for pre-carriage in the country of export. Including export clearance under FCA and FOB

FAS (…named port of shipment) Seller delivers goods alongside ship evidence of delivery Export Clearance Import Clearance SELLER BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Buyer export documents nominates carrier, contracts carriage pays freight Seller’s Cost

FCA (…named place) Seller clears export customs, delivers goods to carrier evidence of delivery Export Clearance Import Clearance SELLER BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Buyer nominates carrier, contracts carriage pays freight Seller’s Cost

FOB (…named port of shipment) Seller clears export customs, delivers and loads goods on ship evidence of delivery Export Clearance Import Clearance SELLER BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Seller’s Cost Buyer nominates carrier, contracts carriage pays freight

Group C: Main Carriage Paid by Seller CFR - Cost & FReight CIF - Cost, Insurance & Freight CPT - Carriage Paid To CIP - Carriage & Insurance Paid to Under C-terms, the seller arranges and pays for the main carriage but without assuming the risk of the main carriage.

CFR (…named port of destination) SELLER Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Seller’s Cost

CIF (…named port of destination) SELLER Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Seller’s Cost + Insurance

Ocean vs Other Ocean Terms Other Terms CFR CPT CIF CIP

Group D: Arrival DAF - Delivered At Frontier DES - Delivered Ex Ship DEQ - Delivered Ex Quay DDU - Delivered Duty Unpaid DDP - Delivered Duty Paid Under D-terms, the seller’s cost/risk is maximized because he must make the goods available at the agreed destination. Including import clearance under DEQ and DDP

DAF (…named place) SELLER BUYER Goods Seller’s Risk Seller’s Cost Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Seller’s Cost

DES (…named port of destination) SELLER Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Seller’s Cost

DEQ (…named port of destination) SELLER Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE Seller’s Risk Seller’s Cost

Ocean vs Other Ocean Terms Other Terms DES DDU DEQ DDP

Quick Quiz

IncoTerms & “Price”

Sources www.wto.org www.icc.org UNCTAD at United Nations Local Chambers of Commerce International Chamber of Commerce - New York City Office