1. INCOTERMS 2000 First published by the ICC in 1936
ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade terms.
Purpose is to provide a set of international rules for the interpretation of the most commonly used trade terms.
These describing where risks lie between seller and buyer, responsibilities of each party and place of transfer of ownership.
International Commercial Terms (INCOTERMS)
Must say, “as per ICC 2000” or “Incoterms 2000” for it to be enforceable.

2. International Commercial Terms (Incoterms)
What are Incoterms ?
International Commercial Terms (Incoterms)
First formulated by the ICC in 1936
A set of standardized guidelines that parties in different countries (and different legal environments) use for structuring the logistical elements of selling and buying goods.
the risks and costs between the seller and the buyer via determining a specific place and time for delivery of the goods.
Revision , 2000, and now the 2010 revision, applied from 1st Jan 2011. 2 2

3. What are Incoterms ? 3 3

4. Incoterms – Purpose and Scope
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.
Provides a clear, universal set of standards for multi-lingual, multi-cultural, “multi-legal” usage -- very practical and based on business practices (not legal principles and abstract ideas)
Specifies which party -- either the seller or the buyer -- has the obligation (to arrange and cover any costs) for (transport) carriage, (cargo) insurance, and (trade) compliance.

5. Payment Terms + Incoterms = Terms of Sale
Incoterms are not Payment Terms (although payment timing is commonly tied to the event of delivery).
Payment Terms + Incoterms = Terms of Sale 5 5

6. Four Groups of Incoterms
Less
Control
More
Control
1) “E” group
2) “F” group
3) “C” group
4) “D” group
Seller
Buyer
More
Control
Less
Control 6

7. Incoterms 2010 – What’s New?
New Layout – Divided into two distinct sections
Any Mode Terms: DDP, DAP, DAT, CIP, CPT, FCA, EXW
Waterway/Maritime Terms: FOB, FAS, CFR, CIF
As opposed to 2000 version that began with EXW and progressed to DDP – Least to most risk
11 Terms (Down from 13)
DAF, DES, DDU, & DEQ have been removed and replaced by DAP & DAT respectively 7 7

8. Any Mode Terms
EXW
FCA
CIP and CPT
DAP, DAT and DDP 8 8

9. Sea and Inland Waterway Transport Terms
FAS
FOB
CFR
CIF 9 9

10. EXW EX WORKS (…named place)
The “E”-term is the term in which the seller’s obligation is at its minimum.
Seller delivers when goods placed at disposal of buyer
Not obligated to put goods on truck, but usually does help anyway.

11. Incoterms 2010
The “F” –terms require the seller to deliver goods for carriage as instructed by the buyer.
FCA
FAS
FOB
Note: insurance and freight are responsibilities of buyer.

12. F Terms – General Considerations
Main Carriage contracted by buyer
Less work for seller, but less control over documents
For documentary payment terms
For US Exporters, EEI (Electronic Export Information) filings are typically done by forwarder
Compliance – Documentation required 12 12

13. FCA FREE CARRIER (named place)
Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place.
Term may be used irrespective of the mode of transport.
Seller obligated to load goods on arriving vehicle if it arrives at the seller’s premises.
Seller not obliged to unload goods from his vehicle.
Seller responsible for loading truck if at premises, but if delivered any other place they do not have to load it.
Buyer at risk at this point.

14. FAS -FREE ALONGSIDE SHIP (…named port of shipment)
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.
Terms can be used for sea or inland waterway transport only.
Used to be the buyer who was responsible to clear the goods for export.
Logic – it’s easier for those in home country to clear.

15. FOB – FREE ON BOARD (…named port of shipment)
Seller delivers when goods, cleared for export, pass the ship’s rail at the named port of shipment.
The buyer bears all costs and risks of loss or damage to the goods from that point.
Term can be used for sea or inland waterway transport only.
If intent is not to deliver goods across the ship’s rail, use FCA
If not using sea, FCA should be used.
Do not use FOB unless something unusual happens at the loading of ship.
This is the oldest term and it is overused.

16. Incoterms 2000
The “C” –terms require the seller to contract for carriage at his expense – to a specified point.
CFR
CIF
CPT
CIP
Note: carriage/freight is responsibility of exporter.

17. C Terms – General Considerations
Most advantageous for seller
Main Carriage contracted by seller
Most control over documents
More work for exporter than F Terms
Under C Rules, buyers are responsible for the goods during the main carriage even though the seller has made the arrangements for main carriage 17 17

18. CFR – COST AND FREIGHT (…named port of destination)
Seller delivers when goods, cleared for export, pass the ship’s 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.
Term can be used for sea or inland waterway transport.
If intent is not to deliver goods across the ship’s rail, use CPT
Mostly on commodities.
Seller bears costs until delivery, but buyer bears the risks at that time.

19. CIF – COST, INSURANCE AND FREIGHT (…named port of destination)
Seller delivers when goods, cleared for export, pass the ship’s 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 buyer’s risk of loss. Seller is required to obtain insurance only on minimum cover.
Term can be used for sea or inland waterway transport.
If intent is not to deliver goods across the ship’s rail, use CIP.
Buyer may want to supplement with own insurance.
Same as CFR except insurance.
Must have bill of lading.

20. CPT – CARRIAGE PAID TO (…named place of destination)
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.
Term may be used irrespective of mode of transport.
Can be used for every means of transport, therefore not bill of lading.

21. CIP – CARRIAGE AND INSURANCE PAID TO (…named place of destination)
Seller delivers the goods, cleared for export, the 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 buyer’s risk of loss. Seller is required to obtain insurance only on a minimum cover.
Term may be used irrespective of mode of transport.

22. D Terms – General Considerations
“Arrival” Terms
Main Carriage contracted by seller
Seller responsible for goods until delivered (“arrived”) to specified location on the buyer’s side
Not particularly advantageous if you’re looking for early revenue recognition 22 22

23. Incoterms 2000
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 DAT
DEQ DAP
DDU
DDP
C-terms – shipment
D-terms – destination, buyer clears goods for import.

24. What happened to DAF, DES and DDU?
These three terms have been replaced by one term DAP (Delivered at Place)
DAF (Delivered at Frontier) – Rarely used and limited to ground transport
DES (Delivered Ex-Ship) – Limited to water shipments only
DDU (Delivered Duty Unpaid) – Not appropriate for domestic shipments since duty was implied
DAP can be used with any mode of transport – domestic or international 24 24

25. What happened to DEQ?
DEQ (Delivered Ex-Quay) replaced by DAT (Delivered at Terminal)
DEQ required the seller (shipper) to unload at the quay
DEQ was limited to water transport
DAT
Requires the seller to unload at the quay, terminal, or warehouse
Can be used with any mode of transport 25 25

26. DAT (Delivered at Terminal)
Any mode (arrival) term – replaces DEQ
Seller obtains export clearance and handles export compliance documentation
Seller packages goods for transport and pays for all transportation costs to a named destination terminal
Seller pays for unloading at the named destination (dock, warehouse, etc.) terminal on buyer’s side 26 26

27. DAP (Delivered at Place)
Any mode (arrival) term
Seller obtains export clearance and handles export compliance documentation
Seller packages goods for transport and pays for all transportation costs to a named destination place on the buyer’s side
Buyer responsible for unloading goods at the named place – this is the main difference b/t DAP and DAT 27 27

28. DAP (Delivered at Place) Continued
Buyer responsible for import clearance and on carriage (if any)
No insurance specified
Freight Prepaid – Seller pays – Need to incorporate freight charges into invoice to buyer
Seller must provide appropriate documentation for release of goods on buyer side
This is important if on a L/C – flow of documents 28 28

29. DDP (Delivered Duty Paid) Continued
Risky for exporter – dealing with foreign customs
Buyer typically responsible for unloading at the point of delivery
Insurance not specified
Freight Prepaid – Seller pays – Need to incorporate freight and insurance charges into invoice to buyer
An importer under DDP is not necessarily the importer of record since they are not clearing goods through Customs – this may affect Duty Drawback 29 29

31. Incoterms 2010 Chart Any Mode Terms Control of Costs
Main Carriage Cost
Risk of Costs
Departure, Freight Collect
EXW (Ex-Works)
Buyer
Main Carriage Freight Collect
FCA (Free Carrier)
Main Carriage Freight Prepaid
CIP (Carriage & Insurance Paid To)
Seller
CPT (Carriage Paid To)
Arrival, Freight Prepaid
DAT (Delivered at Terminal)
DAP (Delivered at Place)
DDP (Delivered Duty Paid) 31 31

32. International Transport Documents

33. International Transport Documents
BILL OF LADING
International Transport Documents

34. Transport Documents

35. Terms of Payment in EXIM
Advance Payment
Export on Consignment Basis
Open account
Documentary Collection- Document against payment, Document against acceptance
Letter of Credit