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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 responsibilitiesand liabilities between buyer and seller. It is

invaluable and a cost-saving tool.

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INCOTERMS 2000

The INCOTERMS was first published in

1936 -INCOTERMS 1936 - and it is

revised periodically to keep up withchanges in the international trade needs.

The complete definition of each term isavailable from the current publication---

INCOTERMS 2000.

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Exporter and Importer

The exporter and the importer need not

undergo a lengthy negotiation about the

conditions of each transaction.Once they have agreed on a commercial

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.

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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.

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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

looking to resolve disputes that may arise

regarding payment or ownership of goods.

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Incoterms groups

Incoterms fall into four different groups :

Departure (E),

Main Carriage Unpaid (F),

Main Carriage Paid (C),

Arrival (D).

The point at which liability and carriage

transfer from the seller to the buyerdistinguishes the groups and each groupsletter corresponds to the first letter of anINCO Term.

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Groups

E EXW Ex WorksF FAS Free Alongside Ship

FCA Free Carrier

FOB Free On Board

C CFR Cost and Freight (was C&F)

CIF Cost, Insurance and Freight

CIP Carriage and Insurance Paid To

CPT Carriage Paid To

D DAF Delivered At Frontier

DDP Delivered Duty Paid

DDU Delivered Duty Unpaid

DEQ Delivered Ex Quay

DES Delivered Ex Ship

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EXW - EX WORKS

Franco fabbrica

La merce a disposizione dellacquirente

presso lo stabilimento del venditore.

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FAS - FREE ALONGSIDE

SHIP

Franco sottobordo (porto di

imbarco convenuto)

Il venditore adempie i suoi obblighi quando

la merce viene posta sotto il bordo della

nave sulla banchina o su mezzi galleggiantinel porto dimbarco convenuto. Da tale

momento i rischi e le spese si trasferiscono

al compratore.

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FOB - FREE ON BOARDFranco a bordo (porto di imbarco

convenuto )

Il venditore deve curare che la merce sia

messa a bordo della nave. Le spese e i

rischi si trasferiscono al compratore al

momento del passaggio della merce oltrela murata della nave.

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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.

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CIF - COST INSURANCE

FREIGHT

Costo assicurazione e nolo (porto

di destinazione convenuto).

Il venditore ha gli stessi obblighi del CFR

con in pi quello di stipulare un contratto diassicurazione.

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DAF - DELIVERED AT

FRONTIER

Franco frontiera (luogo di

consegna convenuto alla frontiera)

Il venditore paga le spese e si accolla i rischi

fino al passaggio della frontiera compreso.

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DDP - DELIVERED DUTY

PAID

Reso sdoganato luogo di

destinazione convenuto

Tutte le spese e i rischi sono a carico del

venditore fino alla consegna pressolacquirente, compreso lo sdoganamento.

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Applicable trade terms in different modes of transport

E EXW Ex Works

F FAS FreeA

longside Ship OFCA Free Carrier L A M

FOB Free On Board O

C CFR Cost and Freight O

CIF Cost, Insurance and Freight OCIP Carriage and Insurance Paid To L A M

CPT Carriage Paid To L A M

D DAF Delivered At Frontier L M

DDP Delivered Duty Paid L O A M

DDU Delivered Duty Unpaid L O A M

DEQ Delivered Ex Quay O

DES Delivered Ex Ship OL land; O ocean; A air; M multimodal.

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Responsibilities of the Seller (Exporter) and Buyer (Importer)

Trade contract responsibilities EXW FCA FAS FOB

Inland freight in Seller's country O O O O

Customs clearance in Seller's country O O O O

Payment of customs charges and taxes in export 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

Inland freight in Buyer's country O O O O

Other costs and risks in Buyer's country O O O O

O Seller is responsible

O Buyer is responsible

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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 OCargo (marine) insurance O O O O O

Unloading from the main carrier O O O O O

Customs clearance in Buyer's country O O O O O

Payment of customs duties and taxes in import O O O O OInland freight in Buyer's country O O O O O

Other costs and risks in Buyer's country O O O O O

O Seller is responsible

O Buyer is responsible

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Examples

In the range of Incoterms, DDP (Delivered

Duty Paid) entails the most obligations for

the seller, whereas EXW (Ex Works)

represents the least.

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Examples

If your agreement with a buyer calls for the

seller to release goods at the sellers

location (Departure group), the Incoterms

EXW (Ex Works) would be used.

Ex Works states principally that the buyer

takes over carriage and insurance

responsibilities at the sellers dock.

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Examples

Alternatively, if the seller were to deliver

goods to the buyers dock, including 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 buyers dock with all carriage, insurance

and duties paid.

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