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

What are they?

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

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

The Categories
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 duty paid

Code
EXW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
DAF
DES
DEQ
DDU
DDP

E Terms
F Terms

C Terms

D Terms

The Steps of Global

Logistics
Customs Clearance
for Export

2
1

Loading

Preliminary
Transportation

Handling
Outbound

Packing

6
Insurance
Customs
Clearance
Duties

11

10

Unloading

Final
Transportation

Main
International
Transportatio
n

8
Handling
Inbound

Acronym (named location)

Acronym dictates mode and where the lines are drawn
SELLER

Export
Clearance

Import
ClearanceBUYER

Goods
PRE -CARRIAGE
Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

E Terms: Departure

EXW (named place)

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

SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE -CARRIAGE
Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

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

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

FAS (named port of shipment)

Seller
delivers goods alongside ship
evidence of delivery
SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

Buyer
export documents
nominates carrier,
contracts carriage
pays freight

FCA (named place)

Seller
clears export customs,
delivers goods to carrier
evidence of delivery
SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

MAIN CARRIAGE

ON-CARRIAGE

Sellers Risk
Sellers Cost

Buyer
nominates carrier,
contracts carriage
pays freight

FOB (named port of shipment)

Seller
clears export customs,
delivers and loads goods on ship
evidence of delivery
SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

MAIN CARRIAGE

ON-CARRIAGE

Sellers Risk
Sellers Cost

Buyer
nominates carrier,
contracts carriage
pays freight

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.

CFR (named port of destination)

SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

CIF (named port of destination)

SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

MAIN CARRIAGE

Sellers Risk
Sellers Cost + Insurance

ON-CARRIAGE

Ocean vs Other
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
under DEQ and DDP

DAF (named place)

SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

DES (named port of destination)

SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

DEQ (named port of destination)

SELLER

Export
Clearance

Import
Clearance

BUYER

Goods
PRE-CARRIAGE

Sellers Risk
Sellers Cost

MAIN CARRIAGE

ON-CARRIAGE

Ocean vs Other
Ocean Terms
DES
DEQ

Other Terms
DDU
DDP

Quick Quiz

IncoTerms & Price

Sources

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