Introduction : ¨Incoterm rules are International Commercial Terms. ¨Incoterms are published by ICC. ¨Incoterms are three letter trade terms ¨Incoterms are accepted by all member countries ¨Each incoterm refer to a type of agreement for the purchase and shipping of goods internationally ¨Incoterms deal with division of cost and risk between the parties but they do not deal with the transfer of property rights in the goods
What Incoterm do not do : ¨Not for service contract ¨Not for transfer of title ¨Not for determining breach of contract ¨Do not protect parties from their own risk/ losses ¨Do not cover goods before/after delivery ¨ ¨ ¨ ¨
Structure of Incoterms
¨Rules for any mode of transport ¨EXW ¨FCA ¨CPT ¨CIP ¨DAT ¨DAP ¨DDP
¨Rules for sea and inland waterway transport ¨FAS ¨FOB ¨CFR ¨CIF
¨Incoterms have been divided into four groups in terms of seller obligation: ¨ ¤“E” – EXW ¤“F” – FCA , FAS and FOB , ¤“C” – CFR , CIF , CPT and CIP ¤“D” – DAT , DIP and DDP
Explanation of Incoterms
¨1) EXW – Ex Works :
Seller has the goods ready at his place. Cost and risk for bringing the goods to final destination will be of buyer. ¨2) FCA – Free Carrier :
Seller hands over the goods, cleared for export, into the custody of the first carrier( named by the buyer) at the named place. ¨3) CPT – Carriage Paid To :
Seller pays for carriage to the named point of destination, but risk passes when handed over to first carrier.
¨4) CIP – Carriage and Insurance Paid :
Seller pays for carriage and insurance to the named destination, but the risk passes when handed over to first carrier. ¨ ¨5) DAT – Delivered at Terminal :
Seller delivered at the named terminal, except for cost related to import clearance, and assume all risk prior to the point that the goods are unloaded at terminal. ¨
¨6) DAP – Delivered at Place :
Seller delivered to the named place, except for cost related to import clearance, and assume all risk prior to the point that the goods are ready for unloaded by the buyer.
¨7) DDP – Delivered Duty Paid :
Seller deliver the goods to the named place in buyer’s country and pays all cost in bringing the goods to the destination including import duties and taxes, if any.
¨8) FAS – Free Alongside Ship :
Seller must place the goods, cleared for export, alongside the ship at the named port.
¨9) FOB – Free on Board :
Seller must load the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel.
¨10) CFR – Cost and Freight :
Seller must pay the cost and freight to bring the goods to the port of destination. However , the risk is transferred to the buyer once the goods are loaded on the vessel.
¨11) CIF – Cost, Insurance and Freight :
Exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer.