INCOTERMS INternational COmmercial TERMS z INCOTERMS define the

INCOTERMS : INternational COmmercial TERMS z“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? z. Set of international rules for the interpretation of the most commonly used foreign trade terms

Why are they Important? z. Reduce the uncertainty caused by trade practices in different countries. z. Simplify the negotiations involved in international commerce. z. 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 3 2 1 Loading 4 Preliminary Transportation Handling Outbound 5 Packing 6 Customs Clearance Duties 11 10 Unloading Final Transportation 9 Main International Transportation 8 Handling Inbound Insurance 7

Acronym (…named location) Acronym dictates mode and where the lines are drawn SELLER Export Clearance Import Clearance BUYER Goods PRE -CARRIAGE Seller’s Risk Seller’s Cost MAIN CARRIAGE ON-CARRIAGE

E Terms: Departure z 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 Seller’s Risk Seller’s Cost MAIN CARRIAGE ON-CARRIAGE

EXW = Ex Works z The seller fulfills his obligation to deliver when he has made the goods available at his premises to the buyer. z The seller is not responsible for loading the goods on the vehicle provided by the buyer z The seller is not responsible for clearing the goods for export, unless agreed. z The buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination.

Group F: Main Carriage Not Paid by Seller z FAS - Free Alongside Ship z FCA - Free CArrier z 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 Seller’s Risk Seller’s 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 Seller’s Risk Seller’s 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 Seller’s Risk Seller’s Cost Buyer • nominates carrier, • contracts carriage • pays freight

Group C: Main Carriage Paid by Seller z z 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 Seller’s Risk Seller’s Cost MAIN CARRIAGE ON-CARRIAGE

CIF (…named port of destination) SELLER Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE Seller’s Risk Seller’s Cost + Insurance MAIN CARRIAGE ON-CARRIAGE

Ocean vs Other z. Ocean Terms y. CFR y. CIF Other Terms CPT CIP

Group D: Arrival z z z DAF - Delivered At Frontier DES - Delivered Ex Ship DEQ - Delivered Ex Quay DDU - Delivered Duty Unpaid DDP - Delivered Duty Paid Under D-terms, the seller’s 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 Seller’s Risk Seller’s Cost MAIN CARRIAGE ON-CARRIAGE

DES (…named port of destination) SELLER Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE Seller’s Risk Seller’s Cost MAIN CARRIAGE ON-CARRIAGE

DEQ (…named port of destination) SELLER Export Clearance Import Clearance BUYER Goods PRE-CARRIAGE Seller’s Risk Seller’s Cost MAIN CARRIAGE ON-CARRIAGE

Ocean vs Other z. Ocean Terms y. DES y. DEQ Other Terms DDU DDP

Quick Quiz

Inco. Terms & “Price”

Sources zwww. wto. org zwww. icc. org z. UNCTAD at United Nations z. Local Chambers of Commerce z. International Chamber of Commerce New York City Office