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

International Commerce Terms =

A formalized international Term of Trade
Incoterms

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

Set of international rules for the

interpretation of the most
commonly used foreign trade
terms

Reduce the uncertainty caused by

trade
practices in different countries.
Simplify the negotiations involved
in international commerce.
Ensure common understanding of
obligations

First codified by the International Chamber of

Commerce in 1936. It was revised in 1953, 1967,
1976, 1980, 1990, 2000 and the latest revision
was in 2010 (Known as Incoterms 3000).

In Incoterms 2000, there were 13 terms: EXW,

FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES,
DEQ, DDU, and DDP
In Incoterms 2010, there are only 11 terms: EXW,
FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAT, DAP,
and DDP

Incoterms
Ex works
Free carrier
Free alongside
ship Free on
board
Cost & freight
Cost, insurance &
freight Carriage paid
to
Carriage and insurance
paid to Delivered at
frontier
Delivered ex ship
Delivered ex quay
Delivered duty
unpaid Delivered

Code
EX
FC
W
A
FAS
CF
R
FO
CIF
B
CP
DAF
T
CIP
DES
DE
Q
DD
U

E Terms
F Terms
C Terms

D Terms

2
1

Customs
Clearance
for Export
4

Loadin
g

Preliminary
Transportati
on

Packin
g

11

10

Unloadin
g

Final
Transportati

Custom
s
Clearan
ce
9
Duties

Handlin
g
Outboun
5d

6
Main
International
Transportati
on

8
Handlin
g

Insuranc
e

Goods available only at sellers premises.

Buyer: loads the goods on truck or container at the
sellers
premises, and takes into account the
subsequent costs and risks.

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

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

Delivery at the specified point of departure: the sellers

premises
or a named cargo terminal / railroad station
Buyer: main carriage/freight, cargo insurance and other
costs and risks

Seller: places the goods alongside the ship

at the named port, loaded at his
expense.
Buyer: pays loading fee, main
carriage/freight,
cargo insurance and other costs risks.

Delivery of goods on board the vessel at the

port of origin is at the sellers expense.
Buyer is responsible for loading fee, main
carriage/freight, cargo insurance and
other costs risks.

Group C: Main
Carriage
Paid by Seller
CFR - Cost &
FReight
CIF - Cost, Insurance &
Freight
CPT - Carriage Paid
To
CIP - Carriage & Insurance
Paid
Under
C-terms,
the
seller
to
arranges and pays for the main
carriage but without assuming
the risk of the main carriage.

Seller: pays the costs and freight to bring

the goods to the port of destination.
Risk: transferred once the goods have
crossed the ships rail.

Used exactly the same way as CFR except that

Seller: must in addition procure and pay for
insurance for the cargo insurance and
delivery of goods to the port of destination
Buyer: responsible for the import customs
clearance & other costs and risks

Seller delivers the goods at the named place

of
destination at his expense.
Buyer assumes the cargo insurance,
import customs clearance, payment of
customs duties and taxes, and other
costs and risks.
Risk transferred at the delivery of goods

Seller delivers the goods on the ship.

On board, the risk is transferred to
the buyer.
Buyer is accountable for the import
customs clearance, payment of
customs duties and taxes, and
other costs and risks until goods
reach their final destination.

Ocean Terms
CFR
CIF

Other
Terms
CPT
CIP

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

Delivery of goods is done at the specified point

at the frontier at the seller's expense.
Buyer is responsible for the import customs
clearance, payment of customs duties and
taxes. The transfer of risk is made at the
frontier

Seller assumes expenses linked to the

delivery of goods. At the arrival of the
ship, the risk is transferred to the buyer.
Buyer is accountable for the unloading fee,
import
customs clearance, payment of
customs duties and taxes, cargo insurance,
and other costs

Delivery of goods is done to the quay of the

port at the seller's expense. He is also
responsible for the import customs
clearance and payment of customs duties
and taxes at the buyer's end.
Buyer assumes the cargo insurance and other
costs and risks

Delivery of goods and the cargo insurance to the

final destination, which is often the project site
or buyer's premises, is done at the seller's
expense.
Buyer is responsible for the import customs
clearance and
payment of customs duties and taxes

Seller is responsible for most of the expenses,

which include the cargo insurance, import
customs clearance, and payment of
customs duties and taxes at the buyer's
end, and the delivery of goods to the final
point at destination, which is often the
project site or the buyer's premises.
It is a door to door delivery.
Risk is transferred when the goods are
delivered

Ocean vs
Other
Ocean
Terms
DES
DEQ

Other
Terms
DDU
DDP

EXW

EXW

F
Class:
FCA
FAS
FOB
C Class:
CFR
CIF
CPT
CIP

F
Class:
FCA
FAS
FOB
C Class:
CFR
CIF
CPT
CIP

D Class:
DAF
DES
DEQ
DDU
DDP

D Class:
DAT
DAP
DDP

Selection depends on the following parameters:

Type of product sold
Method of shipment
Ability of the parties to perform the tasks
involved in the shipment
The amount of trust between one party toward
the others
For simplification purposes, an exporter often
quotes using the same Incoterm in every
transaction.

Exporting Country

Importing Country

DAP
DA
T

Definition and Application

For any merchandise and for

any means of transportation
Easiest of Incoterms for exporter,
most difficult for importer
Syntax: EXW [City where
merchandise is
to be picked up]
-- EXW Buffalo, New York, USA
- EXW Alor Setar, Kedah, Malaysia

Exporter's and Importer's

Responsibilities
Exporter
Makes the goods available to the buyer
Packages the goods for international

travel
Assists in the export clearance
procedures
Provides the documents to the importer
so that the goods can clear Customs in
country
or the
be insured.
the importing
Is responsible
for all
other aspects
Importer
of the
shipment

Definition and Application

For any merchandise and any means
of
transportation
Exporter delivers goods to carrier that
importer has selected.
Responsibility shifts from exporter
when goods are delivered to carriers
vehicle.
Syntax: FCA [City where merchandise
is delivered to carrier]
FCA Johor Bahru, Malaysia

Exporters and Importers

Responsibilities
Exporter
Packages the merchandise for

international travel
Loads the container on the carrier's truck or
delivers it to the carrier's facilities
Provide documents to clear Customs in the
importing country and to obtain insurance

Importer
Arranges the contract of carriage
Is responsible for all the other aspects of

the
shipment

Definition and Application

Can be used for any merchandise, but
typically used for heavy-lift or bulk
cargo. For ocean or inland waterway
transportation only
Syntax: FAS [Port of Departure].
For example:
FAS Tanjung Pelepas,
Malaysia FAS Klang,
Malaysia
Delivery

Exporter's and Importer's

Responsibilities
Exporter
Packages the goods for international travel
Transports them to the port
Unloads them onto the quay or holding area

in the port
Clearing the goods for export and provides
whatever documents the importer may
need to clear Customs in the importing
country and to obtain insurance

Importer
Pays for services from the point of delivery:

Definition and Applicability

For any merchandise.
For ocean transportation or
inland waterway only.
Syntax: FOB [Port of Departure].
Example:
FOB Klang, Malaysia
FOB Klang, Malaysia, stowed
[variant]

Delivery takes place when the

merchandise crosses the ships

Exporter's and Importer's

Responsibilities
Exporter
Packages the goods for international travel
Ships them to the port of departure and

loads them onto the ship

Provide whatever documents and assistance
the importer may need to clear Customs in
the importing country and to obtain
insurance

Importer
Responsible for arranging and paying

for ocean transportation from the port

Exporting Country

Definition and Application

For any merchandise. Ocean transportation only.

The exporter pays for ocean transportation.
Syntax: CFR [Port of Destination]. Example: CFR
Lagos, Nigeria
Delivery takes place when the merchandise
crosses the ships rail, the same as under an FOB
shipment.

Exporter's and Importer's

Exporter
Responsibilities
Packages the goods for international travel
Ships them to the port of departure, loads

them onto the ship and pre-pays the ocean

carriage
Provide documents & assistance the
importer may need to clear Customs in the
importing country and to obtain insurance
The pre-paid contract of carriage may
include the costs of unloading the goods in
the port of
destination (depends on
practices at port).

Importer

Definition and Application

For any merchandise. Ocean transportation only.
Exporter has the additional responsibility to pre-pay for
Marine Cargo Insurance until the port of destination.
Syntax: CIF [Port of Destination]. Example: CIF Kobe,
Japan
Delivery takes place when the merchandise crosses
the ships rail, the same as under an FOB shipment
and a CFR shipment.

Exporter's and Importer's

Responsibilities
The exporter and importer have the
same responsibilities as in CFR.
The exporter has the additional
responsibility to pre-pay for Marine
Cargo Insurance until the port of
destination.

Definition and Application

For any merchandise that is shipped by means other
than
ocean transport, or shipped by sea without being
handed
over the ship's rail (multi-modal transportation).
Delivery is at the city where the exporter delivers the
goods to the carrier.
Syntax: CPT [City of Delivery importing @
neighboring country]. Example: CPT Kln, Germany

Delivery takes place when two

conditions are met:
The exporter hands over the goods to

the carrier
The exporter is given a bill of lading or
equivalent document

Exporter's and Importer's

Responsibilities
Exporter
Packs the goods for export & ships

them to
the carrier

Definition and Application

Can be used for any merchandise.
Similar to CIF: it applies to goods shipped by means
other than ocean transport, or shipped by sea without
being handed over the ship's rail (multi-modal
transportation)
Exporter has the additional responsibility to pre-pay
for Cargo Insurance.
Syntax: CIP [City of Delivery] For example: CIP
Sofia, Bulgaria

Delivery takes place when:

The exporter hands over the goods to the

carrier
The exporter is given a bill of lading or
equivalent document

Exporter's and Importer's Responsibilities

The exporter and importer have the
same responsibilities as in CPT.
The exporter has the additional responsibility to
pre- pay for International Cargo Insurance until
the city of destination.

Definition and Application

Can be used for any merchandise, but
mostly used for bulk shipments of
commodities via for ocean
transportation.
Syntax: DES [Port of Delivery] For
example:
DES Istanbul,once
Turkey
destination,
the ship has reached
port
Delivery
takes place
at the port of
and makes
the merchandise
available to the importer.
Responsibilities: Exporter = Pays for
ocean shipment.

Definition and Application

For any merchandise, but is mostly used
for bulk shipments of commodities via
ocean transportation.
Syntax: DEQ [Port of Delivery]. For
example:
DEQ Santiago,
Chile the DES and DEQ
Difference
between
Incoterms is that the unloading costs
are borne by the exporter in DEQ

Delivery takes place when goods

are unloaded and placed at the
disposal of the importer.
Responsibilities:
Exporter
pays
ocean
shipment,
makes
arrangements, and
pays for,
unloading the ship.

Definition and Application

For any merchandise, but specifically to
land transportation
Transfer of responsibility: At the point
(city) named in Incoterm.
Usually, the goods remain on vehicle to
final destination.
Syntax: DAF [Border City or Border
Crossing
Point] For example:
DAF Nogales,
Arizona,
the truck or the railroad car, is placed
USA

Responsibilities: Exporter
packages the goods for export &
pays for transportation until the
border city
Importer: Pays for transportation from
the border city to the final
destination & Clears Customs

Definition and Application

For any merchandise, and any means
of transportation.
Syntax: DDU [City of Delivery]. For
example:
DDU Xi'An, China
Delivery: When the exporter places the
goods at the disposal of the importer in
the city of delivery.Exporter perform all
Responsibilities:
tasks involved in a shipment & pays all
shipping issues until goods are
delivered to the importer. Does not

May be used for all transport modes

Seller delivers when the goods, once unloaded
from the arriving means of transport, are placed
at the disposal of the buyer at a named
terminal at the named port or place of
destination. "Terminal" includes quay,
warehouse, container yard or road, rail or air
terminal.
Both parties should agree the terminal and if
possible a point within the terminal at which
point the risks will transfer from the seller to
the buyer of the goods.

Responsibilities
Seller is responsible for the costs and
risks to bring the goods to the point
specified in the contract
Seller should ensure that their
forwarding contract mirrors the
contract of sale
Seller is responsible for the export
clearance procedures
Importer is responsible to clear the goods for
import, arrange import customs formalities,
and pay import duty

May be used for all transport modes

Seller delivers the goods when they are
placed at the disposal of the buyer on
the arriving means of transport ready
for unloading at the named place of
destination.
Parties are advised to specify as clearly
as possible the point within the agreed
place
of destination, because risks
transfer at this point from seller to
buyer.

Responsibilities
Seller bears the responsibility and risks to
deliver the goods to the named place
Seller is advised to obtain contracts of
carriage that match the contract of sale
Seller is required to clear the goods for
export
If the seller incurs unloading costs at place of
destination, unless previously agreed they are
not entitled to recover any such costs
Importer is responsible for effecting
customs clearance, and paying any
customs duties

Definition and Application

For any merchandise and any means of transportation.
DDP is the ultimate in customer service by the
exporter.
Meant to be used when the exporter is willing to
shoulder all of the responsibilities of an international
shipment, including clearing Customs in the importing
country.
Syntax: DDP [City of Delivery]. For example:
DDP Karlsruhe, Germany

Delivery
The delivery takes place when the exporter
places the goods at the disposal of the importer
in the city
of delivery mentioned in the
Incoterm.
Exporter's and Importer's Responsibilities
Exporter:

Assumes all responsibilities in a DDP

shipment
Importer
Only has the responsibility to receive the goods
at delivery and unload them

Incoterms confusion with Domestic

Terms, such as FOB factory or
FOB destination
Incoterms confusion with Older
Incoterm Versions, such as FOB rail,
FOB truck or FOB airport, DAF, DES,
DEQ, DDU
Improper use of correct Incoterm,
such as FOB used with an air
shipment
Use of inexistent Incoterms, such

A strategic advantage can be gained

by an exporter willing to facilitate
the sale of its products by assisting
a novice importer in the handling of
a shipment.
An exporter should be willing to
determine which Incoterm to use on
a case-by-case basis.
The choice of the proper Incoterm is
a critical decision for a firm, as it
indicates willingness to
provide additional services for
the importer.