International Commercial Terms

(INCOTERMS)

ICC Official Rules for Interpretation of Trade

*

Terms

By
Muhammad Hamayuon Bashir
Hamayoun.bashir@gmail.com

* International Chamber of Commerce

 Background to the presentation

 The topic of Inco Terms is complicated yet interesting.

 Inco Terms are used in the international trade.

 Inco Terms are official rules of ICC

 To understand Inco Terms it is essential to have a fair

idea of international trade.
 Activity to move a cargo from one country to
other.

 Inland Transportation, Loading & Unloading, Overseas

transportation, Storage, documentation, Payment of goods,
Clearance, Risk coverage, Handing over taking over of cargo.
 Each of the above activity is an independent one and is
performed by separate organization who has special manpower
and equipment to cater the requirement.
 The involvement of various organizations at different level
demand for determination of the following:
 What will be the point of delivery?
 Who will pay the cost at different stages?
 How the risk element shall be determined?
 Purpose of Incoterms

 Rules for the interpretation of trade

terms in foreign trade

 Reduce misunderstanding, disputes &

litigation.
 Scope
Rights and obligations of the parties to the contract
of sale with respect to the delivery of “tangible”
goods sold
and
NOT including “intangibles” such as computer
software etc.
 Misconceptions
 Incoterms apply to contract of carriage rather
than to the contract of sale.

 Incoterms assumed to provide for all the duties

which parties may wish to include in a contract of
sale.
Structure of Incoterms

PART E PART F PART C PART D

DEPARTURE MAIN MAIN ARRIVAL

CARRIAGE CARRIAGE
UNPAID PAID

DAF
CFR DES
FCA CIF DEQ
FAS CPT DDU
FOB CIP
EXW DDP
Continued
 Structure of Incoterms
 Clause A1 Provision of goods
 Clause A2 Licence, authorization & formalities
 Clause A3 Contract of carriage and insurance
 Clause A4 Delivery
 Clause A5 Transfer of risks
 Clause A6 Division of costs
 Clause A7 Notice to the buyer
 Clause A8 Proof of delivery
 Clause A9 Checking – packing - marking
 Clause A10 Other obligations
 EXW

Seller Warehouse and Workshop

BUYE
R SELLE
R

Marine Port Load Exp Ware

Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
EXW EX WORKS

 Seller delivers when he places the goods at the

disposal of the buyer at the seller’s premises or
another named place (i.e. works, factory,
warehouse, etc.) not cleared for export and not
loaded on any collecting vehicle.
 Min obligation for the seller.

 Buyer has to bear all costs and risks.

 FCA

SELLER’S
WAREHOUSE

Marine Port Load Exp Ware

Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
FCA FREE CARRIER

 Seller delivers the goods, cleared for export, to the

carrier nominated by the buyer at the name place.

 Carrier means any person who undertake to

perform a contract of carriage and include a
nominee by the buyer.
 FAS

CUSTOMS AREA OF SELLER’S

PORT

Marine Port Load Exp Ware

Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
FAS FREE ALONGSIDE SHIP

 Seller delivers when the goods are placed

alongside the vessel at the name port of shipment.

 FAS term requires the seller to clear the goods for

export.
 FO
B

LOADING AREA OF THE SELLER’S

PORT

Marine Port Load Exp Ware

Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
FOB FREE ON BOARD

 Seller delivers when the goods pass the ship’s rail

at the named port of shipment.

 The FOB term requires the seller to clear the

goods for export.

 The buyer has to bear all costs and risks of loss of

or damage to the goods from that point.

 This term can be used only for sea or inland

waterway transport.
 CFR

BUYER’S PORT

Marine Port Load Exp Ware

Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
CFR COST AND FREIGHT
(….named port of destination)

 Seller delivers when the goods pass the ship’s rail

in the port of shipment.
 Seller to pay the costs and freight for named port
of destination
 the risk of loss of or damage to the goods, as well as
any additional costs due to events occurring after the
time of delivery, are transferred from the seller to the
buyer.
 CIF

BUYER’S PORT

Port Marine Load Exp Ware

chrgs Insrnc on house Seller
Forwar Inland Lice-
on Duties of the
Ocean der Freight nce Load Storag Fab
arrival Taxes goods Vesse e &
Dlvry / Air Fee Auth the the
at & l Labor
to Freight from Goods
buyer Termina Check Goods
Import the Cont. Govt. on
port Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
CIF COST INSURANCE & FREIGHT
(….named port of destination)

 Seller to pay the costs, freight and marine

insurance during the carriage.

 Seller to get insurance on min. cover. for greater

cover, buyer to get his extra arrangement.

 Seller to clear the goods for export.

 CPT

UNLOADING AREA OF THE BUYER’S PORT

Marine Port Load Exp Ware
Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
CP CARRIAGE PAID TO
T (…named port of destination)

 The seller deliver the goods to the carrier

nominated by him

 The seller must in addition pay the cost of carriage

necessary to bring the goods to the name
destination.

 Buyer bears all risks and any other costs occurring

after the goods have been so delivered.
 CIP

UNLOADING AREA OF THE BUYER’S PORT

Dlvry Port Load Exp Ware

to chrgs on house Seller
Forwar Inland Lice-
Plant upon Ocean the
der Freight nce Load Storag Fab
Site Duties arrival Vesse e &
Taxes Marine / Air Fee Auth the the
l Labor
& Insrnc of Freight from Goods
Termina Check Goods
Import of shpmnt Cont. Govt. on
Cstm l Export
goods of Exp the
Custms of s Charges Pack
Clranc Carriage Cntry truck
Cleara Mark
nce
CIP CARRIAGE AND INSURANCE PAID TO
(….named port of destination)

 Seller delivers the goods to the carrier nominated by

him.

 Seller must in addition pay the cost of carriage

necessary to bring the goods to the named
destination.

 The seller also has to procure insurance.

 DAF

FRONTIER OF THE COUNTRY OF

SELLER

Marine Port Load Exp Ware

Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
 DAF

FRONTIER OF THE COUNTRY OF

BUYER

Marine Port Load Exp Ware

Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
DA DELIVERED AT
FRONTIER
F (….named places)

Seller delivers the goods when the goods are

placed at the disposal of the buyer on the
arriving means of transport, not unloaded, not
cleared for import at the named point and
place at the frontier, but before the customs
border of the adjoining country.
 DE
S

UNLOADING AREA OF THE BUYER’S PORT

Marine Port Load Exp Ware
Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
DE DELIVERED EX SHIP
S (….named port of destination)

 Seller delivers when the goods are placed at the

disposal of the buyer on board the ship, not
cleared for import at the named port of
destination.

 The seller has to bear all the costs and risks

involved in bringing the goods to the named port
of destination before discharging.
 DEQ

UNLOADING AREA OF THE BUYER’S PORT

Marine Dlvry Port Load Exp Ware

nsrnc to chrgs on house Seller
the Forwar Inland Lice-
of upon Ocean the
plant
Duties der Freight nce Load Storag Fab
goods Taxes arrival Vesse e &
site / Air Fee Auth the the
& l Labor
of Freight from Goods
Termina Check Goods
Import shpmnt Cont. Govt. on
Cstm l Export
Custms of of Exp the
s Charges Pack
Clranc Carriage Cntry truck
Cleara Mark
nce
DE DELIVERED EX QUAY
Q (….named port of destination)

 Seller delivers when the goods are placed at the

disposal of the buyer not cleared for import on the
quay (wharf) at the named port of destination.

 The seller has to bear costs and risks involved in

bringing the goods to the named port of
destination and discharging the goods on the
quay (wharf).

 The DEQ term requires the buyer to clear the

goods for import and to pay for all formalities,
duties, taxes and other charges upon import.
 DD
U

Customs Clearance Area

for Storage, Appraisement
& Release to the importer

WEST WHARF

UNLOADING AREA OF THE BUYER’S PORT

Marine Port Load Exp Ware
Insrnc chrgs on Forwar Inland Lice- house Seller
of upon Ocean the der Freight nce
Duties Load Storag Fab
goods Taxes Dlvry arrival Vesse Fee Auth e &
/ Air the the
& l from Labor
to of Freight Termina Goods Check Goods
Import the l Govt. on
shpmnt Cont. Cstm Export
Custms plant Charges of Exp the
of s Pack
Clranc site Cntry truck
Carriage Cleara Mark
nce
DDU DELIVERED DUTY UNPAID
(….named place of destination)

 Seller delivers the goods to the buyer, not cleared for import, and
not unloaded from any arriving means of transport at the named
place of destination.

 The seller has to bear the costs and risks involved in brining
the goods thereto, other than, where applicable, any “duty”
(which term includes the responsibility for and the risks of
the carrying out of customs formalities, and the payment of
formalities, customs duties, taxes and other charges) for
import in the country of destination.

 Such duty has to be borne by the buyer as well as any costs

and risks caused by his failure to clear the goods for import in
time.
 DDP

Customs Clearance
Area for Storage,
Appraisement &
Release to the
importer
WEST WHARF
UNLOADING AREA OF THE BUYER’S PORT
Marine Port Load Exp Ware
Insrnc chrgs on house Seller
Forwar Inland Lice-
of upon Ocean the
Duties der Freight nce Load Storag Fab
goods Taxes Dlvry arrival Vesse e &
/ Air Fee Auth the the
& l Labor
to of Freight from Goods
Termina Check Goods
Import the shpmnt Cont. Govt. on
Cstm l Export
Custms plant of of Exp the
s Charges Pack
Clranc site Carriage Cntry truck
Cleara Mark
nce
DDP DELIVERED DUTY PAID
(….named place of destination)

 Seller delivers the goods to the buyer, cleared for

import, and not unloaded from any arriving means
of transport at the named place of destination.

 The seller has to bear all the costs and risks

involved in brining the goods thereto including,
where applicable, any “duty” (which term includes
the responsibility for and the risks of the carrying
out of customs formalities and the payment of
formalities, customs duties, taxes and other
charges) for import in the country of destination.
Thank You