INCOTERMS
Presentation by:
Vikram S. Tyagi
WHAT ARE INCOTERMS
 FIRST PUBLISHED IN 1936 BY THE
INTERNATIONAL CHAMBER OF COMMERCE AND
ARE AMENDED EVERY 10 YEARS TO SUIT
CONTEMPORARY COMMERCIAL PRACTICES.
 SET OF RULES GOVERNING INTERNATIONAL
TRADE. IT IS ACCEPTABLE TO GOVERNMENTS
AND LEGAL AUTHORITIES WORLDWIDE.
 IN ORDER TO ENFORCE INCOTERMS IN A SALE-
PURCHASE CONTRACT, IT HAS TO BE CLEARLY
SPECIFIED THAT THE CONTRACT IS GOVERNED
BY THE INCOTERMS 2000.
Contd.
 IT DENOTES THE POINTS AT WHICH THE SHIPPER, THE
CARRIER AND THE CONSIGNEE RISK & RESPONSIBILITY
BEGIN AND TERMINATE.
 THERE ARE 13 MAIN TERMS, DENOTED BY THREE
LETTER ABBREVIATIONS AND MANY LOCAL VARIANTS OF
EACH.
 THE SCOPE OF INCOTERMS IS LIMITED TO THE RIGHTS
AND OBLIGATIONS OF PARTIES TO THE CONTRACT OF
SALE WITH RESPECT TO DELIVERY OF PHYSICAL GOODS,
BUT EXCLUDING “INTANGIBLES” LIKE COMPUTER
SOFTWARE
THE VARIOUS INCOTERMS
BROADLY, THESE THREE LETTER ABBREVIATIONS
USED IN DENOTING 13 INCOTERMS CAN BE CLASSIFIED
IN FOUR CATEGORIES TO DEFINE ROLES AND RESPONSIBILITIES:
 “E”- TERM: DENOTES DISPATCH FROM SELLER’ PREMISES.
 “F”- TERM: DENOTES BUYER PAYS MAIN CARRIAGE. ONLY
PRE-CARRIAGE PAID BY SELLER. THIS IS PRIMARILY A
“SHIPMENT” CONTRACT
 “C”- TERM: DENOTES SELLER PAYS MAIN CARRAIGE.THIS IS A
SHIPMENT CONTRACT
 “D”- TERM: DENOTES SELLER DELIVERS AT AGREED
DESTINATION AND BEARS ALL COST & RISK TILL THEN.THIS
IS PRIMARILY A “ARRIVAL” CONTRACT.
EXW (EX WORKS………NAMED PLACE)
 SELLER HAS DELIVERED WHEN HE PLACES
GOODS AT THE DISPOSAL OF THE BUYER
WITHIN ITS PREMISES OR AT A GIVEN PLACE
WITHOUT BEING RESPONSIBLE FOR LOADING
THE GOODS ON THE COLLECTING VEHICLE
(NORMALLY) NOR FOR CLEARING THE GOODS
FOR EXPORT.
 IF MUTUALLY AGREED ON THE SALE
CONTRACT, THE SELLER MAY AGREE TO LOAD
THE VEHICLE WITHOUT BEARING THE RISK &
COST OF DOING SO.
Contd.
 VARIANT: EXW LOADED...SELLER AGREES TO
BEAR THE COST & RISK FORTUIOUS DAMAGES
WHILE LOADING THE GOODS.
 LEAST RISK TO THE SELLER
 CAVEAT: BUYER SHOULD NOT AGREE TO SUCH
A TERM IF HE IS UNABLE TO CARRYOUT
EXPORT FORMALITIES, DIRECTLY OR
INDIRECTLY. FCA PREFERRED.
FCA (FREE CARRIER…NAMED PLACE)
 SELLER DELIVERS GOODS CLEARED FOR EXPORT, TO
THE CARRIER NOMINATED BY BUYER. IF DELIVERY IS
OCCURING WITHIN SUPPLIER PREMISES, THE SUPPLIER
IS REPSONSIBLE FOR LOADING.
 IF HOWEVER, DELIVERY IS OCCURING AT ANY OTHER
PLACE, SUPPLIER IS NOT RESPONSIBLE FOR
UNLOADING.
 THE TERM CAN BE USED FOR ANY MODE OF
TRANSPORT, INCLUSING MULTI-MODAL TRANSPORT.
 CARRIER REFERS TO ANY PERSON WHO IN A CONTARCT
OF CARRIAGE UNDERTAKES TO TRANSPORT BY ANY OR
MULTIMODAL WAYS OF TRANSPORT.
FAS (FREE ALONGSIDE SHIP……NAMED
PORT OF SHIPMENT)
 SELLER DELIVERS GOODS CLEARED
FOR EXPORT ALONGSIDE VESSEL AT
NAMED PORT OF SHIPMENT AND BEARS
ALL RISK & COST TILL THEN.
 THIS TERM IS USED ONLY FOR SEA OR
INLAND WATERWAYS OF TRANSPORT.
FOB (FREE ON BOARD…………NAMED
PORT OF SHIPMENT)
 SELLER DELIVERS WHEN GOODS
CLEARED FOR EXPORT PASS THE SHIP’S
RAILS AT THE NAMED PORT OF
SHIPMENT.
 THIS TERM IS USED ONLY FOR SEA OR
INLAND WATERWAYS OF TRANSPORT.
CFR (COST & FREIGHT…………NAMED
PORT OF DESTINATION)
 SELLER DELIVERS WHEN GOODS CLEARED
FOR EXPORT PASS THE SHIP’S RAILS AT THE
NAMED PORT OF SHIPMENT. HOWEVER, THE
SELLER INCURS THE COST OF BRINGING THE
GOODS TO THE NAMED PORT OF DESTINATION.
 PROOF OF DELIVERY IS B/L OR SEA WAYBILL
 THE RISK AND ANY ADDITIONAL COST DURING
FREIGHT ARE BORNE BY BUYER.
 THIS TERM IS USED ONLY FOR SEA OR INLAND
WATERWAYS OF TRANSPORT.
CIF (COST INSURANCE &
FREIGHT………NAMED PORT OF
DESTINATION)
 SELLER DELIVERS WHEN GOODS CLEARED
FOR EXPORT PASS THE SHIP’S RAILS AT THE
NAMED PORT OF SHIPMENT. HOWEVER, THE
SELLER INCURS THE COST OF FREIGHT AND
MARINE INSURANCE OF MINIMUM COVER TO
THE NAMED PORT OF DESTINATION.
 PROOF OF DELIVERY IS B/L OR SEA WAYBILL
 ANY ADDITIONAL COST DURING FREIGHT ARE
BORNE BY BUYER.
 THIS TERM IS USED ONLY FOR SEA OR INLAND
WATERWAYS OF TRANSPORT.
CPT (CARRIAGE PAID TO………NAMED
PLACE OF DESTINATION)
 SELLER DELIVERS WHEN GOODS ARE
HANDED OVER TO NOMINATED CARRIER.
THE SELLER INCURS THE COST OF
FREIGHT (PRE OR POST PAID)TO THE
NAMED PORT OF DESTINATION.
 THE TERM IS USED IRRESPECTIVE OF
MODE OF TRANSPORT OR MULTIMODAL
TRANSPORT.
CIP (CARRAIGE & INSURANCE
PAID TO…………NAMED PLACE OF
DESTINATION)
 CPT + MINIMUM MARINE INSURANCE
COVER
DAF (DELIVERD AT
FRONTIER…………NAMED PLACE)
 SELLER DELIVERS WHEN GOODS ARE PLACED
AT THE DISPOSAL OF THE BUYER ON ARRIVING
MEANS OF TRANSPORT, NOT UNLOADED,
CLEARED FOR EXPORT, BUT NOT FOR IMPORT
AT A NAMED POINT & PLACE AT THE FRONTIER
BUT BEFORE THE CUSTOMS BORDER OF THE
ADJOINING COUNTRY.
 FRONTIER: REFERS TO ANY FRONTIER
INCLUDING THAT OF THE COUNTRY OF ORIGIN.
 THE TERM IS USED IRRESPECTIVE OF MODE OF
TRANSPORT BUT PRIMARILY WHEN GOODS ARE
DELIVERED AT LAND FRONTIER.
DES (DELIVERD EX-SHIP…………NAMED
PORT OF DESTINATION)
 SELLER DELIVERS WHEN GOODS ARE PLACED
AT THE DISPOSAL OF THE BUYER ON BOARD
THE SHIP NOT CLEARED FOR IMPORT AT
NAMED PORT OF DESTINATION.
 THIS TERM IS PRIMARILY USED FOR SEA
SHIPMENTS OR MULTIMODAL TPT. ON A VESSEL
IN THE PORT OF DESTINATION.
 IF SELLER AGREES TO PAY FOR UNLOADING
AND BEAR THE RISK OF DAMAGE IN THIS
PROCESS, THE TERM GETS MODIFIED TO DEQ
(DELIVERED EX- QUAY……………NAMED PORT
OF DESTINATION)
DDU (DELIVERED DUTY
UNPAID………NAMED PLACE OF
DESTINATION)
 SELLER DELIVERS GOODS TO BUYER,
NOT UNLOADED FROM ARRIVING MEANS
OF TRANSPORT, AND NOT CLEARED FOR
IMPORT AT NAMED PALCE OF
DESTINATION.
 APPLICABLE FOR ANY MODE OF
TRANSPORT BUT FOR SEA/ INLAND
WATERWAYS.
DDP (DELIVERED DUTY
PAID………NAMED PLACE OF
DESTINATION)
 SELLER DELIVERS THE GOODS TO THE BUYER
CLEARED FOR IMPORT BUT NOT UNLOADED
FROM ANY ARRIVING MEANS OF TRANSPORT
AT ANY NAMED PLACE OF DESTINATION.
 MAXIMUM OBLIGATION OF THE SELLER.
 APPLICABLE FOR ANY MODE OF TRANSPORT
BUT FOR SEA/ INLAND WATERWAYS.
GUIDELINES TO USE OF INCOTERMS
 ALWAYS SPECIFY WHICH TERMS ARE APPLICABLE.
TRY TO CHOOSE THE TERM WHICH MATCHES WITH
YOUR COMPANY’S STANDARD TERM OF SALE(OR
PURCHASE)
EG: FAS INCOTERMS 2000 HAS DIFFERENT
CONNOTATION AS COMAPRED TO THAT OF FAS
INCOTERMS 1990.
 USE THE CORRECT FORMAT OF A TERM.
EG: CFR IS PERSISTENTLY MISUSED WITH C+F AND
C&F. C+F NEVER EXISTED AND C&F WAS REPLACED
WITH CFR IN 1980.
 USE YOUR TRADING PARTNERS TO CONFIRM THEIR
ACCEPTANCE OF THE SPECIFIED TERM IN WRITING.
Contd.
 DRAW UP A CHECKLIST OF YOUR DUTIES AND
RIGHTS UNDER THE AGREED TERM. REQUEST
YOUR TRADING PARTNERS TO DO THE SAME, AND
EXCHANGE THIS INFORMATION WITH THEM.
 CHANGE OR ADD NOTHING (IF POSSIBLE) TO THE
SELECTED TERM. IN CASE ANY CHANGE OR
ADDITION IS INEVITABLE, INFORM YOUR TRADING
PARTNERS AND REQUEST TO THEM TO ACCEPT
THE CHANGES/ ADDITIONS IN WRITING.
 INFORM YOUR BANK & INSURANCE COMPANY OF
THE INCOTERMS SELECTED FOR A BUSINESS DEAL,
SO THAT THAY ARE IN HARMONY WITH REGARD TO
THEIR ROLE IN THE TRANSACTION.
INCOTERMS SUMMARY
 GROUP
 E

TERM
Stands for
EXW
Ex Works
FCA
FAS
FOB
Free Carrier
Free Alongside Ship
Free On Board
CFR
CIF
CPT
CIP
Cost and Freight paid
Cost, Insurance and Freight paid
Carriage Paid To
Carriage and Insurance Paid To
DAF
DES
DEQ
DDU
DDP
Delivered
Delivered
Delivered
Delivered
Delivered
 F



 C




 D





At Frontier
Ex Ship
Ex Quay
Duty Unpaid
Duty Paid
Thank You