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Terms of Trade or Incoterms
When a Purchase Is Made Who Pays What?
Export packing costsInland transportation to portExport clearanceInternational carrier loading
Main transportation costsCargo insuranceCustoms dutiesRisk in transit
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INternational Chamber Of COmmerce TERMS
Export packing costsInland transportation to portExport clearanceInternational carrier loading
Main transportation costsCargo insuranceCustoms dutiesRisk in transit
Click on “Page Down” to continue.
Incoterm Definition
International Commerce Term • A formalized international Term of Trade regulated by the
International Chamber of Commerce• Specifies the responsibilities of the exporter and the
responsibilities of the importer in an international transaction– Which tasks will be performed by the exporter– Which tasks will be performed by the importer– Which activities will be paid by the exporter– Which activities will be paid by the importer
– When the transfer of responsibility for the goods will take place
• First codified by the International Chamber of Commerce in 1953. The latest revision is dated 2000
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INCOTERMS
EXW
CFR
FCA
FOB
FAS
CPTDAF DES
CPT
DEQ
CIF
CFR
CIP
DDU
DDP
Ex Works
Free Carrier
Free Alongside Ship
Free On Board
Cost and Freight
Carriage Paid To
Cost, Insurance, Freight Delivered Ex Ship
Delivered Duty Unpaid
Carriage and Insurance Paid To Delivered at Frontier
Delivered Ex QuayDelivered Duty Paid
Cost, Insurance, FreightDelivered Ex Ship
CPT
Carriage Paid To
Free CarrierCarriage and Insurance Paid To
DDUDelivered Ex Quay
Delivered Ex Quay
Delivered Ex Quay
CFR
Ex Works
Carriage and Insurance Paid To
DEQ
Carriage Paid To
Delivered Duty UnpaidDelivered Ex Ship
Delivered Ex Ship
Delivered Ex Ship
Free Alongside Ship
Free Alongside ShipFree Alongside Ship
Free Alongside ShipCIF
DDUCPT
CPT
CPT
CFR
Cost, Insurance, Freight
Delivered Duty Unpaid
Delivered Duty Unpaid
Delivered Duty Unpaid
Delivered Duty Unpaid
Delivered Duty Unpaid
Delivered Ex Ship
Delivered Ex Ship
Delivered Ex Ship
Delivered Ex Ship
Delivered Ex Ship
Delivered Ex Ship
Delivered Ex Ship
Delivered Ex Ship
Delivered Ex ShipDelivered Ex Ship
Delivered Ex ShipDelivered Ex Ship
Delivered Ex ShipDelivered Ex Ship
Delivered Ex Ship
Delivered Duty UnpaidDelivered Duty Unpaid
Delivered Duty UnpaidDelivered Duty Unpaid
Delivered Duty UnpaidDelivered Duty Unpaid
EXWEXW
EXWEXW
EXWEXW
EXW
DDUDDU
DDUDDU
DDUDDU
DDUvCarriage and Insurance Paid To
Carriage and Insurance Paid ToCarriage and Insurance Paid To
Carriage and Insurance Paid ToCarriage and Insurance Paid To
Carriage and Insurance Paid ToCarriage and Insurance Paid ToCarriage and Insurance Paid To
Free Alongside ShipFree Alongside Ship
Free Alongside ShipFree Alongside Ship
Free Alongside ShipFree Alongside Ship
Free Alongside ShipFree Alongside Ship
Free Alongside ShipFree Alongside Ship
Carriage Paid ToCarriage Paid To
Carriage Paid ToCarriage Paid To
Carriage Paid To
CIF
CIF
CIFCIF
CIF
CIF
CIF
CIFCIF
CIFCIF
CIFCIF
CIFCIF
CIF
Delivered Duty PaidDelivered Duty Paid
Delivered Duty PaidDelivered Duty Paid
Delivered Duty PaidDelivered Duty Paid
??? ?
INCOTERMS
• “E” Terms
INCOTERMS
• “E” Terms.
• “F” Terms.
INCOTERMS
• “E” Terms.
• “F” Terms.
• “C” Terms.
INCOTERMS
• “E” Terms.
• “F” Terms.
• “C” Terms.
• “D” Terms.
INCOTERMS
• “E” Terms.
INCOTERMS
• “E” Terms.
INCOTERMS
• “E” Term.– “Ex Works.”
INCOTERMS
• “E” Term.– “Ex Works.”– Buyer pays everything.
INCOTERMS
• “F” Terms.
INCOTERMS
• “F” Terms.– Seller pays for product to be delivered,
cleared for export, to carrier buyer selects.
INCOTERMS
• “F” Terms.– Seller pays for product to be delivered,
cleared for export, to carrier buyer selects.
• “C” Terms.
INCOTERMS
• “F” Terms.– Seller pays for product to be delivered,
cleared for export, to carrier buyer selects.
• “C” Terms.– Seller pays for main carriage and/or cargo
insurance.
INCOTERMS
• “F” Terms.– Seller pays for product to be delivered,
cleared for export, to carrier buyer selects.
• “C” Terms.– Seller pays for main carriage and/or cargo
insurance.
• “D” Terms.
INCOTERMS
• “F” Terms.– Seller pays for product to be delivered,
cleared for export, to carrier buyer selects.
• “C” Terms.– Seller pays for main carriage and/or cargo
insurance.
• “D” Terms.– Seller pays all costs of delivery.
INCOTERMS
• “E” Terms.– “Ex Works.”– Buyer pays everything.
Incoterms: EXW
• Used with any merchandise or form of transportation.
• Easiest Incoterm for exporter, most difficult for importer.
• Basically, exporter says: “Here is product. Come get it.”
SellerPrepare order
Mfg.Pick itemsPack items
Buyer
SellerPrepare order
Mfg.Pick itemsPack items
Buyer
Buyer pays:Export packing costsInland transportation to portExport clearanceInternational carrier loading
Main transportation costsCargo insuranceCustoms dutiesRisk in transit
Incoterms: FCA
• “Free Carrier.”• For goods shipped multi-modal without
handling.• Oriented toward containerization.• Exporter delivers goods to carrier that
importer selects.• Responsibility shifts from exporter when
goods are delivered to carrier’s vehicle, either at exporter’s plant or carrier’s premises.
Land Incoterm: DAF
• “Delivered at Frontier.”
• For any merchandise, but specifically refers to land transportation.
• Transfer of responsibility from exporter to importer is at city named in Incoterm.
• Usually goods remain on vehicle to final destination.
Ocean Incoterms
• FAS: “Free Along Ship.”– Exporter brings goods to port.– At port, importer takes responsibility for
goods.
• FOB: “Free on Board” Port of Departure.– Exporter responsible for goods until they are
on the ship, then importer is responsible.– Dividing point is ship’s rail.
Ocean and Corresponding Non-Ocean Incoterms
OCEAN TERM:– CFR “Cost and Freight”
• Exporter responsible for goods until on ship.
– CIF “Cost, Insurance and Freight”
• Same as CFR except exporter pays marine insurance.
NON-OCEAN TERM:– CPT “Carriage Paid To”
• Exporter responsible for goods until on carrier.
– CIP “Carriage and Insurance Paid to”
• Same as CIF except it’s a non-ocean shipment.
Ocean and Corresponding Non-Ocean Incoterms
OCEAN TERM:– CFR “Cost and Freight”
• Exporter responsible for goods until on ship.
– CIF “Cost, Insurance and Freight”
• Same as CFR except exporter pays marine insurance.
NON-OCEAN TERM:– CPT “Carriage Paid To”
• Exporter responsible for goods until on carrier.
– CIP “Carriage and Insurance Paid to”
• Same as CIF except it’s a non-ocean shipment.
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Ocean and Corresponding Non-Ocean Incoterms
OCEAN TERM:– DES “Delivered ex Ship”
• Exporter responsible or goods (usually bulk commodities) until importer gets them at port of destination.
– DEQ “Delivered ex Quay” • Usually bulk
commodities for which exporter pays for ship unloading.
NON-OCEAN TERM:– DDU “Delivered Duty
Unpaid” • Exporter performs most
tasks in shipment except unloading costs.
– DDP “Delivered Duty Paid”• Exporter pays for
everything in the shipment.
Ocean and Corresponding Non-Ocean Incoterms
OCEAN TERM:– DES “Delivered ex Ship”
• Exporter responsible or goods (usually bulk commodities) until importer gets them at port of destination.
– DEQ “Delivered ex Quay” • Usually bulk
commodities for which exporter pays for ship unloading.
NON-OCEAN TERM:– DDU “Delivered Duty
Unpaid” • Exporter performs most
tasks in shipment except unloading costs.
– DDP “Delivered Duty Paid”• Exporter pays for
everything in the shipment.
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Incoterms by Transport ModeMode E
XW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
DES
DEQ
DAF
DDU
DDP
Break-bulk ocean cargo
X X X X X X X X X
Bulk ocean cargo X X X X X X X X X
RORO X X X X X X X
Multimodal FCL X X X X X X X
Multimodal LCL X X X X X X X
Rail X X X X X X X
Road X X X X X X X
Air X X X X X X X
Incoterms by Transport ModeMode E
XW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
DES
DEQ
DAF
DDU
DDP
Break-bulk ocean cargo
X X X X X X X X X
Bulk ocean cargo X X X X X X X X X
RORO X X X X X X X
Multimodal FCL X X X X X X X
Multimodal LCL X X X X X X X
Rail X X X X X X X
Road X X X X X X X
Air X X X X X X XClick on “Page Down” to continue.
Incoterm STRATEGY
• Incoterm determined by exporter’s strategy and…– Type of product.– Method of shipment.– Ability of both parties to perform tasks in
shipment.– Trust parties have toward one another.
• Exporter always chooses Incoterm.
End of Program