1. 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

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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.

9. 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

10. 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

11. 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

12. 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

13. 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.

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

15. 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

16. Ocean vs Other
Ocean Terms Other Terms
CFR CPT
CIF CIP

17. 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

18. 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

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

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

21. Ocean vs Other
Ocean Terms Other Terms
DES DDU
DEQ DDP

22. Quick Quiz

23. IncoTerms & “Price”

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