INCOTERMS : INternational COmmercial TERMS

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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

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What are they?

• Set of international rules for the interpretation
  of the most commonly used foreign trade terms

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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

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The Categories
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
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The Steps of Global Logistics
Customs Clearance for Export
4
3
2
Handling Outbound
Loading
Preliminary Transportation
1
5
Packing
6
Insurance
Main International Transportation
Customs Clearance Duties
7
9
8
10
11
Handling Inbound
Final Transportation
Unloading
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Acronym (named location)
Acronym dictates mode and where the lines are
drawn
Export Clearance
Import Clearance
SELLER
BUYER
Goods
PRE -CARRIAGE
MAIN CARRIAGE
ON-CARRIAGE
Sellers Risk
Sellers Cost
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E Terms Departure

• EXW (named place)

Under E-terms, the seller minimizes his risk by
only making the goods available at his own
premises.
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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 sellers premises to
  the desired destination.

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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
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FAS (named port of shipment)

• Seller
• delivers goods alongside ship
• evidence of delivery

Export Clearance
Import Clearance
BUYER
SELLER
Goods
PRE-CARRIAGE
MAIN CARRIAGE
ON-CARRIAGE
Sellers Risk

• Buyer
• export documents
• nominates carrier,
• contracts carriage
• pays freight

Sellers Cost
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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
Sellers Risk

• Buyer
• nominates carrier,
• contracts carriage
• pays freight

Sellers Cost
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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
Sellers Risk

• Buyer
• nominates carrier,
• contracts carriage
• pays freight

Sellers Cost
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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.
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CFR (named port of destination)
Export Clearance
Import Clearance
SELLER
BUYER
Goods
PRE-CARRIAGE
MAIN CARRIAGE
ON-CARRIAGE
Sellers Risk
Sellers Cost
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CIF (named port of destination)
Export Clearance
Import Clearance
SELLER
BUYER
Goods
PRE-CARRIAGE
MAIN CARRIAGE
ON-CARRIAGE
Sellers Risk
Sellers Cost Insurance
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Ocean vs Other

• Ocean Terms Other Terms
• CFR CPT
• CIF CIP

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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 sellers cost/risk is
maximized because he must make the goods
available at the agreed destination. Including
import clearance under DEQ and DDP
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DAF (named place)
Export Clearance
Import Clearance
SELLER
BUYER
Goods
PRE-CARRIAGE
MAIN CARRIAGE
ON-CARRIAGE
Sellers Risk
Sellers Cost
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DES (named port of destination)
Export Clearance
Import Clearance
SELLER
BUYER
Goods
PRE-CARRIAGE
MAIN CARRIAGE
ON-CARRIAGE
Sellers Risk
Sellers Cost
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DEQ (named port of destination)
Export Clearance
Import Clearance
SELLER
BUYER
Goods
PRE-CARRIAGE
MAIN CARRIAGE
ON-CARRIAGE
Sellers Risk
Sellers Cost
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Ocean vs Other

• Ocean Terms Other Terms
• DES DDU
• DEQ DDP

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Quick Quiz
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IncoTerms Price
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Sources

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