INCOTERMS

International Commercial Terms
(INCOTERMS)
The INCOTERMS is a universally
recognized set of definitions of international
trade terms, such as FOB, CFR and CIF,
developed by the International Chamber of
Commerce ((ICC)) in Paris,, France.
It defines the trade contract responsibilities
and
d liliabilities
biliti b
between
t
b
buyer and
d seller.
ll It iis
invaluable and a cost-saving tool.
INCOTERMS 2000
The INCOTERMS was first published in
1936 -INCOTERMS
INCOTERMS 1936 - and
d it iis
revised p
periodically
y to keep
p up
p with
changes in the international trade needs.
The complete definition of each term is
available from the current publication--INCOTERMS 2000.
Exporter and Importer
The exporter and the importer need not
g a lengthy
g y negotiation
g
about the
undergo
conditions of each transaction.
Once they
O
th have
h
agreed
d on a commercial
i l
term like FOB, they can sell and buy at FOB
without discussing who will be responsible
for the freight, cargo insurance, and other
costs and risks.
A common set of rules
The Incoterms provide the most often used
international terms of trade and an official version
of the Incoterms should be referenced in the text of
the contract.
The goal is to alleviate or reduce confusion over
interpretations of shipping terms by outlining who
is obligated to take control of and/or insure goods
at a particular point in the shipping process.
Furthermore, the terms outline the obligations for
the clearance of the goods for export or import and
packing requirements.
Not appropriate for every contract
Specifically, the terms used in a contract state
exactly when the shipper unloads and relinquishes
obligation and when the buyer takes over for
carriage and insurance.
The Incoterms are not meant to replace
statements in a contract of sale that outline
transfers of ownership or title to goods.
Therefore, the Incoterms may not be of use when
Therefore
looking to resolve disputes that may arise
regarding payment or ownership of goods
goods.
Incoterms groups
IIncoterms
t
fall
f ll into
i t four
f
different
diff
t groups :
• Departure (E),
• Main Carriage Unpaid (F),
g Paid ((C),
),
• Main Carriage
• Arrival (D).
The point at which liability and carriage
transfer from the seller to the buyer
distinguishes the groups and each group’s
group s
letter corresponds to the first letter of an
INCO Term.
Groups
p
E EXW
F FAS
FCA
FOB
C CFR
CIF
CIP
CPT
D DAF
DDP
DDU
DEQ
DES
Ex Works
Free Alongside Ship
Free Carrier
Free On Board
Cost and Freight (was C&F)
Cost, Insurance and Freight
g
Carriage and Insurance Paid To
Carriage Paid To
Delivered At Frontier
Delivered Duty Paid
Delivered Duty Unpaid
Delivered Ex Quay
D li
Delivered
dE
Ex Shi
Ship
EXW - EX WORKS
Franco fabbrica
La merce è a di
L
disposizione
i i
d
dell’acquirente
ll’
i t
presso lo stabilimento del venditore.
FAS - FREE ALONGSIDE
SHIP
Franco sottobordo (p
(porto di
imbarco convenuto)
Il venditore adempie i suoi obblighi quando
a merce
e ce viene
e e posta sotto il bo
bordo
do de
della
a
la
nave sulla banchina o su mezzi galleggianti
nel porto d
d’imbarco
imbarco convenuto
convenuto. Da tale
momento i rischi e le spese si trasferiscono
all compratore.
t
FOB - FREE ON BOARD
Franco a bordo (porto di imbarco
convenuto )
Il venditore deve curare che la merce sia
messa a bordo della nave. Le spese e i
rischi
i hi sii ttrasferiscono
f i
all compratore
t
all
momento del passaggio della merce oltre
la murata della nave.
CFR - COST AND FREIGHT
Costo e nolo (porto convenuto)
Il venditore ha a carico tutte le spese
necessarie per il trasporto della merce fino
al porto di destinazione convenuto.
CIF - COST INSURANCE
FREIGHT
Costo assicurazione e nolo (porto
di destinazione convenuto).
Il venditore
e d to e ha
ag
gli stess
stessi obb
obblighi
g de
del C
CFR
con in più quello di stipulare un contratto di
assicurazione.
assicurazione
DAF - DELIVERED AT
FRONTIER
Franco frontiera (luogo di
consegna convenuto alla frontiera)
Il venditore p
paga
g le spese
p
e si accolla i rischi
fino al passaggio della frontiera compreso.
DDP - DELIVERED DUTY
PAID
Reso sdoganato
g
luogo
g di
destinazione convenuto
Tutte le spese
p
e i rischi sono a carico del
venditore fino alla consegna presso
ll’acquirente
acquirente, compreso lo sdoganamento
sdoganamento.
Incoterms and transport modes
FOB indicates that the shipper (seller) has upheld his/her
part of the agreement when the goods pass the ship’s
ship s rails
at the port of exit. The receiving party (buyer) assumes risk
and costs associated with the g
goods once they
yp
pass the
ship’s rail in the seller’s homeport. Due to the specific
mention of the ship's rails, an aircraft or other mode of
transport could not be used with FOB.
For a shipment scheduled for delivery by air, rail, or some
other form of transport with the same agreement as FOB
one would need to use the Incoterm FCA, or Free Carrier.
FCA can include other modes of transportation such as
road, rail, inland waterway and air.
Applicable trade terms in different modes of transport
E EXW
Ex Works
F FAS
FCA
FOB
C CFR
CIF
CIP
CPT
D DAF
DDP
DDU
DEQ
DES
Free Alongside Ship
Free Carrier
Free On Board
C t and
Cost
dF
Freight
i ht
Cost, Insurance and Freight
Carriage and Insurance Paid To
Carriage Paid To
Delivered At Frontier
Delivered Duty Paid
Delivered Duty Unpaid
Delivered Ex Quayy
Delivered Ex Ship
L land; O ocean; A air; M multimodal.
O
L
A M
O
O
O
L
A
L
A
L
L O A
L O A
O
O
M
M
M
M
M
Responsibilities of the Seller (Exporter) and Buyer (Importer)
Trade contract responsibilities
EXW FCA
FAS
FOB
Inland freight in Seller's
Seller s country
O
O
O
O
Customs clearance in Seller's country
O
O
O
O
y
of customs charges
g and taxes in export
p
Payment
O
O
O
O
Loading to the main carrier
O
O
O
O
Main carriage/freight
O
O
O
O
Cargo (marine) insurance
O
O
O
O
Unloading from the main carrier
O
O
O
O
Customs clearance in Buyer's country
O
O
O
O
Payment of customs duties and taxes in import
O
O
O
O
I l d ffreight
Inland
i ht iin B
Buyer's
' country
t
O
O
O
O
Other costs and risks in Buyer's country
O
O
O
O
O Seller
S ll iis responsible
ibl
O Buyer is responsible
Responsibilities of the Seller (Exporter) and Buyer (Importer)
CFR
CIF
CPT
CIP
Inland freight in Seller's
Seller s country
O
O
O
O
Customs clearance in Seller's country
O
O
O
O
y
of customs charges
g and taxes in export
p
Payment
O
O
O
O
Loading to the main carrier
O
O
O
O
Main carriage/freight
O
O
O
O
Cargo (marine) insurance
O
O
O
O
Unloading from the main carrier
O
O
O
O
Customs clearance in Buyer's country
O
O
O
O
Payment of customs duties and taxes in import
O
O
O
O
I l d ffreight
Inland
i ht iin B
Buyer's
' country
t
O
O
O
O
Other costs and risks in Buyer's country
O
O
O
O
Trade contract responsibilities
O Seller
S ll iis responsible
ibl
O Buyer is responsible
Responsibilities of the Seller (Exporter) and Buyer (Importer)
Trade contract responsibilities
DAF DES DEQ DDU DDP
Inland freight in Seller's country
O
O
O
O
O
Customs clearance in Seller's country
O
O
O
O
O
Payment of customs charges and taxes in export
O
O
O
O
O
Loading to the main carrier
O
O
O
O
O
Main carriage/freight
O
O
O
O
O
C
Cargo
((marine)
i ) iinsurance
O
O
O
O
O
Unloading from the main carrier
O
O
O
O
O
Customs clearance in Buyer's
Buyer s country
O
O
O
O
O
Payment of customs duties and taxes in import
O
O
O
O
O
Inland freight in Buyer's
Buyer s country
O
O
O
O
O
Other costs and risks in Buyer's country
O
O
O
O
O
O Seller
S ll iis responsible
ibl
O Buyer is responsible
Examples
In the range of Incoterms, DDP (Delivered
y Paid)) entails the most obligations
g
for
Duty
the seller, whereas EXW (Ex Works)
represents the least.
least
Examples
If your agreement with a buyer calls for the
goods at the seller’s
seller to release g
location (Departure group), the Incoterms
EXW (Ex Works) would be used
used.
Ex Works states principally that the buyer
takes over carriage and insurance
responsibilities at the seller’s
seller s dock.
Examples
Alternatively, if the seller were to deliver
goods to the buyer’s
g
y
dock,, including
g all
carriage and insurance, a term from the
arrival group such as DDP (Delivered Duty
Paid) would be appropriate.
DDP requires that the seller deliver goods to
the buyer’s
buyer s dock with all carriage, insurance
and duties paid.
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