The document discusses Incoterms, which are international commercial terms used in sales contracts. It provides an overview of key Incoterms and their meanings. Specifically, it discusses the 11 main Incoterms divided into categories - EXW, FCA, FAS, FOB for Carriage terms, then CFR, CIF, CPT, CIP for Carriage and Insurance terms, followed by DAF, DES, DEQ, DDU, DDP for Delivery terms. Each Incoterm is defined in one or two sentences to clarify responsibilities for costs and risks between the buyer and seller.
4. AN OVERVIEW
International Commercial Terms (‘Incoterms’) are
internationally recognized standard trade terms used in
sales contracts. They’re used to make sure buyer and
seller know:-
Who is responsible for the cost of transporting the
goods, including insurance, taxes and duties
Where the goods should be picked up from and
transported to
Who is responsible for the goods at each step during
transportation
5. What are they ?
Set of international rules for the interpretation of the
most commonly used foreign trade terms.
6. 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
7. The Categories
Group Term Status
E EXW Ex Work
F
FCA Free Carrier At
FAS Free Alongside Ship
FOB Free on Board
C
CFR Cost and Freight
CIF Cost Insurance and Freight
CPT Carriage Paid to
CIP Carriage and Insurance Paid to
D
DAF Delivered at Frontier
DES Delivered Ex Ship
DEQ Delivered Ex Quay
DDU Delivered Duty Unpaid
DDP Delivered Duty Paid
9. EXW (‘Ex Works’ )
The seller makes the goods available to be collected at their premises
and the buyer is responsible for all other risks, transportation costs
, taxes and duties from that point onwards. This term is commonly used
when quoting a price
11. FCA - Free Carrier
The seller gives the goods, cleared for export, to the buyer’s carrier
at a specified place.The buyer is then responsible for getting
transported to the specified place of final delivery. This term is
commonly used for containers travelling by more than one mode of
transport.
12. FAS Free Alongside Ship
The seller puts the goods alongside the ship at the specified port
they’re going to be shipped from. The seller must get the goods ready
for export, but the buyer is responsible for the cost and risk involved
in loading them.
This term is commonly used for heavy-lift or bulk cargo (e.g.
generators, boats), but not for goods transported in containers by more
than one mode of transport (FCA is usually used for this).
13. FOB Free On Board
The seller must get the goods ready for export and load them onto
the specified ship. The buyer and seller share the costs and risks
when the goods are on board. This term is not used for goods
transported in containers by more than one mode of transport
(FCA is usually used for this).
14. C-MAIN CARRIAGE PAID
CFR - COST AND FREIGHT
CIF - COST, INSURANCE AND FREIGHT
CPT - CARRIAGE PAID TO
CIP - CARRIAGE AND INSURANCE PAID TO
15. CFR Cost and Freight
The seller must pay the costs of bringing the goods to the
specified port. The buyer is responsible for risks when the
goods are loaded onto the ship.
17. CIF – COST INSURANCE AND FREIGHT
Cost, Insurance and Freight" means that the seller delivers
when the goods pass the ship's rail in the port of shipment.
The seller must pay the costs and freight necessary to
bring the goods to the named port of destination but the
risk of loss or damage to the goods, as well as any
additional costs due to events occurring after the time of
delivery, are transferred from the seller to the buyer.
18. CPT – CARRIAGE PAID TO
The seller is responsible for arranging carriage to the named
place, but not for insuring the goods to the named
place. However delivery of the goods takes place, and risk
transfers from seller to buyer, at the point where the goods
are taken in charge by a carrier
19. CIP – CARRIAGE AND INSURANCE PAID TO
Seller Bears the same costs and obligations as in case of CPT
and additional obligation of hiring insurance to cover the
buyer’s risk during international transport.
Buyer Beneficiary of the insurance paid by the seller and
must take into account that the buyer is obliged only to a
minimum coverage insurance. He needs to agree with the seller
to hire additional insurance if he wants a larger coverage
20. D- ARRIVAL
DAF - DELIVERED AT FRONTIER
DES - DELIVERED EX SHIP
DEQ - DELIVERED EX QUAY
DDU - DELIVERED DUTY UNPAID
DDP - DELIVERED DUTY PAID
21. DAF- DELIVERED AT FRONTIER
This term can be used when the goods are transported by rail
and road. The seller pays for transportation to the named place
of delivery at the frontier. The buyer arranges for customs
clearance and pays for transportation from the frontier to his
factory. The passing of risk occurs at the frontier.
22. DES- DELIVERED EX SHIP
Where goods are delivered ex ship, the passing of risk does not occur until the
ship has arrived at the named port of destination and the goods made available
for unloading to the buyer. The seller pays the same freight and insurance costs
as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has
agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel
at the named port. Costs for unloading the goods and any duties, taxes, etc. are
for the Buyer. A commonly used term in shipping bulk commodities, such as coal,
grain, dry chemicals; and where the seller either owns or has chartered, their
own vessel.
23. DEQ- DELIVERED EX QUAY
This is similar to DES, but the passing of risk does not occur until the
goods have been unloaded at the port of discharge.
Buyer assumes the cargo insurance and other costs and risks
24. DDU- DELIVERED DUTY UNPAID
This term means that the seller delivers the goods to the buyer to
the named place of destination in the contract of sale. A
transaction in international trade where the seller is responsible for
making a safe delivery of goods to a named destination, paying all
transportation expenses but not the duty. The seller bears the risks
and costs associated with supplying the goods to the delivery
location, where the buyer becomes responsible for paying the duty
and other customs clearing expenses.
DDU
25. DDP- DELIVERED DUTY PAID
The term “DDP.” is generally followed by words indicating the
buyer’s premises. It notes that the seller bears all risks and all
costs until the goods are delivered. This term can be used
irrespective of the mode of transport. If the parties wish to make
clear that the seller is not responsible for certain costs,
additional word should be added (for example, “delivered duty
paid exclusive of VAT and/or taxes”).
