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CERTIFIED EXPORT SPECIALIST (CES)

Case Study #005 – Incoterms 2010


Study Material & Quiz
Incoterms® 2010
Study Material
Incoterms® 2010 Rules

• International Commercial Terms (Incoterms®) are terms designed to communicate the


commercial sale of goods. Mostly, Incoterms have been used in international trade on a
world-wide basis. After the 2010 update they have become good tool for domestic
trade, as well.
• Incoterms are terms used to provide instructions to the Seller, Buyer, Freight Forwarder,
Customs Broker and other parties involved in an international transaction. The use of
the terms helps each party involved understand how to facilitate the export clearance,
international documentation, transportation, loading and unloading, compliance and
import clearance processes. The proper use of Incoterms reduces many questions in the
transaction and reduces delays.
• In this power point, we will go through a little bit of the history, changes, the meaning of
Incoterms. The most common Incoterms will be discussed in this case.

Background

• Incoterms® were first created in 1936 by the International Chamber of Commerce (ICC),
and they are in their eighth version since their inception.
• In recent decades, Incoterms have been reviewed and published with updates every ten
years. The most recent updates have been in 1990, 2000, and 2010.
• The Incoterms® 2010 drafting committee at the ICC began in redrafting in 2007. There
were 9 drafting meetings, 4 drafts and 2000 comments from 92 ICC sub committees
prior to approval in May 6, 2010.
• The current Incoterms are published in the Incoterms® 2010 Book.
o Refer to the online bookstore:
o http://www.iccwbo.org/copyright-and-trademarks/
• “INCOTERMS” is an abbreviation for International Commercial Terms. Incoterms and the
Incoterms® logo are trademarks of the International Chamber of Commerce. It is
important to know that Incoterms is not a generic name for international trade terms,
but is a trademark used to designate the rules devised by the ICC.
• Proper citing of Incoterms: Incoterms® 2010
• Incoterms are business terms. They are not recognized by U.S. Government Regulations
• They help traders avoid costly misunderstandings by clarifying tasks, costs and risks
involved in delivery of goods from buyers and sellers.

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Incoterms® 2010 Book

If you want to learn about Incoterms, a good start is to read the book. The Incoterms book is
insightful and offers examples to explain the terms.

• Review Incoterms® 2010 Book Layout


• The book offers graphics added to illustrate risk and obligation related to each Incoterm
• Incoterms® 2010 now defines itself as “rules”
– Old Incoterm versions can be used even though the Incoterms 2010 are in effect,
but they must be cited with the year.
• Written in 30 language translations
• They were effective as of January 1, 2011

Summary of Major Changes from the 2000 version

Many people refer to the 2010 version as the “new Incoterms.” In 2010 there were many
changes that updated the terms to be more progressive to today’s way of doing business.

• New layout - divided into two distinct sections.


– There are 7 Multimodal terms:
• DDP, DAP, DAT, CIP, CPT, FCA, EXW, and
– 4 Waterway/Maritime terms:
• FOB, FAS, CFR, CIF

– 11 terms (down from 13)


• DAF, DES, DDU and DEQ were removed and replaced by DAP and DAT
respectively

Incoterms – Domestic

U.S. Sellers / Exporters (aka Shippers) have historically been confused over Incoterms versus
their local state Uniform Commercial Code (UCC) business terms.

As companies start selling outside the United States, their company domestic UCC terms do not
translate to international commerce transactions. The current Incoterms®2010 allow for
domestic trade as well as international.

As the new 2010 terms have been rolled out over the past five years, states are beginning to
replace their local UCC with the Incoterms. This has allowed U.S. corporations to adopt
Incoterms for domestic and international use.

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What do Incoterms do?

• Incoterms divide costs, risks and responsibilities between sellers and buyers.
– Carrier responsibility is not mentioned

• Incoterms guide the seller or buyer into additional contracts required to fulfill
designated tasks such as carriage and insurance.
– Example: CPT

• Incoterms reduce the potential for buyer and seller misunderstanding.

• Incoterms define a delivery point.


– Delivering to a carrier somewhere on the seller’s side (Shipment Terms)
– Delivery to a destination somewhere on the buyer’s side (Destination Terms)

What Incoterms are NOT

• Incoterms are not law.


– They are guidelines provided to develop an international understanding for
business trade.

• They are not all inclusive.


– Incoterms do not address issues of customary operations of carriers, ports, or
government regulations.

• They are not used in the sale of services or intangible products.

• They are not used by the U.S. Federal Government to communicate trade.
– You cannot call Customs & Border Protection and discuss the INCOTERM of a
shipment. They will quickly respond that they do not use INCOTERMS as they
are not regulatory, they are business terms only.

What Incoterms do NOT do

• Incoterms do not address the passage of title or ownership.


– Ownership should be addressed in the selling or buying contract or agreement.
If it is not, then the transaction may become subject to applicable law.

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• If an Incoterm is not specified, the transaction defaults subject to the UCC
of the State. Though many UCC have aligned themselves, each state has
their own UCC to consider.
– The UCC may contradict foreign business law

• Incoterms do not remedy breach of contract or address more than one contract.
– Example: When a buyer sells the product and ships to the new sold party. This is
commonly called a “drop shipment or triangle shipment.” These shipments
require more than one contract and therefore different Incoterms and
commercial documents.

• Incoterms do not automatically apply. They must be specified and cannot be assumed.

• Incoterms do not Define “Customary” as in Customary Customs Regulations in a specific


country.
– Some countries, such as Brazil, use Incoterms to assist in calculating the total
value of goods for Customs Clearance. U.S. Regulations, however, do not
consider Incoterms. Instead, the customs value is defined by Customs based on
the Price Actually Paid or Payable.
– Refer to:
• The informed compliance manual regarding Customs Value
• An example regarding Brazil, where Incoterms are mentioned on the
calculation of the value of goods for import into Brazil

• Incoterms do not address payment methods.


– A payment method may be: payments made by wire, draft, or cash for example.
– Incoterms do not address payment terms. The terms are unique to the buyer
and seller’s agreement on when to make payment. Payment terms may be:
payments made cash in advance of shipping.
– 30 days after sailing, 30 days after arrival, 60 days after invoice date.

• Incoterms do not address stowage obligations.


– Container Stowage or loading
– Vessel loading (i.e. oversize shipments)

• Incoterms will only define the delivery point if disclaimed after the term and should be
based on what has been defined in the contract or sales agreement.

• Incoterms do not address recognition of revenue directly.


– However, Incoterms can assist in the recognition when used correctly.

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– By defining “delivery,” Incoterms provide a way to resolve revenue recognition
questions.

• GAAP and IFRS (International Financial Reporting Standards) do discuss issues dealt with
by Incoterms, such as control, delivery and risk transfer.

Revenue Recognition Considerations

• When does the sale become a receivable under GAAP, IFRS rules?
• Sarbanes-Oxley has made strict adherence to accounting regulations more important
• “Delivery” as defined in the Incoterms rules, is a factor in revenue recognition
– Important to use the terms correctly and understand their implication
– D-Group terms delay Revenue Recognition
• An exporter / importer should discuss their options with an accountant that is
knowledgeable in the recognition of inventory in international trade.

Definitions – Incoterms® 2010

The Incoterms Book has clear definitions in order to create an equal understanding across
cultures and languages.

• Shipper: the party that contracts with the carrier


• Carrier: “the party with whom the carriage is contracted” (Incoterms® 2010) includes
NVOCCs
• Delivery: “point where the risk of loss or damage to the goods passes from the seller to
the buyer” (Incoterms® 2010)
• Pre-Carriage: transportation on the exporter/seller’s side to the place, port or point of
departure before main carriage
• Main Carriage: the main transportation moving the goods from the exporter / seller’s
side to the importer/buyer’s side
– ocean or air portion of an international shipment, for example
• On-Carriage: transportation from the point or place of arrival on the side of the buyer,
to the buyer’s location, or another location on the side of the buyer
• Packaging: packaging of the goods is to be defined in the sales contract or agreement.

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Incoterm Syntax

• Proper Usage of Incoterms


– Shipment and Delivery Terms section on quotes,
– Pro-forma invoices and commercial invoices.
• (Incoterm – Geographic Location – Incoterm® 2010
– CIP Charles De Gaul Airport, France, (Incoterm® 2010)
– FCA 123 W Main Street, Palatine IL 60123 (Incoterm® 2010)
– Be Specific with your geographic location in order to reduce questions upon
arrival. The more specific the less questions.
– Omit the word “Total” on invoices/quotes:
• CIP Charles De Gaul Airport
• CIP Paris France

General Incoterm Layout

Commonly, the parties involved want to relate the Incoterms to the party financially
responsible for each part of the move. The basic question is: Is the shipment collect or
prepaid?

• Collect = the buyer will be paying for transportation of the shipment


• Prepaid = the seller will be paying for the transportation of the shipment.

If you are knowledgeable about international transportation you will know that this question
needs more definition in order to know who is really paying for each part of the transportation
move.

We can break down the Incoterms by E, F, C, & D.

Overview of the Incoterms

A simplification of Incoterms breaks down as follows.


While this is a good start, it still does not offer us the detail we need to know when we are
deciding who will be paying for each part of the move. Thus is why we have 11 Incoterms.

 E – terms (collect from door)


 F – terms (collect from port or terminal)
 C – terms (prepaid to port or terminal)
 D – terms (prepaid to door)

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General Transport / Multimodal Incoterms

These terms are designed to be used with Multimodal transportation:

 EXW – Ex Works
 FCA – Free Carrier
 CPT – Carriage Paid To
 CIP – Carriage and Insurance Paid To
 DAT - Delivered at Terminal
 DAP – Delivered at Place
 DDP – Delivered Duty Paid

Sea and Inland Waterway Transport Incoterms

These terms are designed to be used strictly with Sea and Inland waterway transport:

 FAS – Free Alongside Ship


 FOB – Free on Board
 CFR – Cost and Freight
 CIF – Cost, Insurance and Freight

Mode of Transportation

The next consideration is how is the shipment is moving. Some of the Incoterms are designed
mainly for Sea.

 Sea
 Air
 Road
 Rail
 Multimodal (a mix of any of the four)

Marine Cargo Insurance

Insurance is only specified in two Incoterms:

 CIP = Carriage & Insurance Paid To (named destination port)


 CIF = Carriage, Insurance Freight (named port of entry)

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In all other Incoterms – Cargo Insurance for any mode of transportation must be defined in a
contract or agreement apart from the Incoterm.

U.S. Export Customs Clearance

The party responsible to declare an Electronic Export Invoice (EEI) via the Automated Export
System (AES) will change if the cargo is ROUTED or NOT ROUTED:

 ROUTED = the buyer is taking responsibility to hire the freight forwarder and select the
exporting carrier to export the cargo.
 NOT ROUTED = the seller is taking responsibility to hire the freight forwarder and select
the exporting carrier to export the cargo.

Many time Incoterms are used as a tool to assist to know who will take on this responsibility.
While the consideration works most of the time it is not a complete correlation and requires an
agreement between the buyer and seller on who will decide to select the carriers.

Routing of a Shipment

Commonly, the Incoterm can be correlated to routed or not routed. However, there are
scenarios that a shipment can be an F - term and Collect; however, the Seller is selecting the
freight forwarder and carrier. Or the buyer is selecting the freight forwarder and carrier and
the shipment is a C – Term. As said previously, the Incoterms can’t be directly correlated to the
U.S regulations.

 E – Term - Collect - Routed (if buyer is in control)


 F – Term - Collect - Routed (if buyer is in control)
 C – Term - Prepaid - Not Routed (if seller is in control)
 D – Term - Prepaid - Not Routed (if seller is in control)

You may read more about a routed shipment on the Census website.
https://aesdirect.census.gov/support/routed_transactions.html

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E – Terms
There is only one E – Incoterm: EXW – Ex Works (named place of delivery)

EXW - Ex Works (named place of delivery)

• EXW is a Multimodal Term


– Thus it can be used for Air / Sea / Road / Rail
• Contract Type: Shipment (departure)
• Insurance: Not specified
• Risk passes: At time of loading onto the carrier at origin
• Place where the shipment begins: The EXW starts at the seller designated loading
premises. The buyer has agreed to purchase the product and pick it up at the agreed
door location of the seller.
– An EXW shipment would be considered a “collect” shipment. The buyer will be
making the decisions on the mode of transportation, method of transportation,
and the carriers to use.
– An EXW shipment would also be considered “routed”. As we have discussed the
U.S. Federal Government does not recognized Incoterms; however, they do
recognize a “routed” shipment.
• An EXW shipment gives the most control to the buyer
• An EXW shipment gives the least control to the seller (who may also be considered the
exporter)
• The Exporter/Seller has agreed to make the goods available for pickup (including agreed
packaging)
• Buyer responsible for loading goods at EXW place
– Loading of the goods means that the buyer will bring their own labor to actually
load the truck. The seller does not provide this labor. A good example would be
loading Limestone at a quarry. The trucker drives up and fills the truck by loading
from the top from a hopper. Then the drivers weighs his vehicle for a weight
certificate to know how much was loaded.
– Another example: would be cargo required to be loaded by crane onto a flatbed
truck then brought to the port to be loaded by crane to the vessel
– This Incoterm is most useful for oversize or bulk cargo.
• Compliance: The buyer is responsible to assume the risk and expense to apply for any
licenses, authorization or security clearances. The seller is responsible to provide export
license or export authorizations assistance to the buyer at the request, risk and expense
of the buyer.

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F-Terms
FCA – Free Carrier
FOB – Free on Board
FAS – Free Alongside Ship

• Place where the shipment begins: The F-Terms starts at the agreed location between
the seller and buyer.
• The agreement may be at the seller’s door, or it may be at the port of export.
• These terms are considered to be “collect” and the buyer will be “routing” the cargo
(refer to the census website discussed in the EXW slide). While the EXW, is from the
loading point at the seller’s pick up location the F – term may be anywhere that has
been agreed upon in the origin country of the shipment.
• The buyer has agreed to purchase the product and pick it up at the agreed door
location of the seller.

FCA - Free Carrier (named place of delivery)

• Multimode Term
• Contract Type: Shipment (departure)
• Insurance: Not specified
• Risk passes: At the time the buyer receives the goods with their chosen carrier
• Place: Seller must deliver the goods, cleared for export, to the carrier provided by the
importer/buyer at a named point on the exporter/seller’s side
– If no point is named the seller can choose a point best suited for them
– The named point can be the seller’s facility
• Seller is responsible for:
– Packaging
– Loading
– Pre-carriage (if any)
– Compliance documentation
• Buyer responsible for everything beyond loading
• The seller not responsible for unloading on the side of the buyer
• FCA should be considered as an alternative to EXW. Since EXW includes bringing labor
to load the shipment.
– FCA is very flexible and can be used from door up to port.
• FCA door Madison, Wisconsin
• FCA CFS station Chicago
• FCA Ramp Chicago
• FCA Port of Houston

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• Compliance: The seller is responsible to assume the risk and expense to apply for any
export licenses, authorization or security clearances. The buyer is responsible to
assume the risk and expense to apply for any import licenses or import authorizations.

FOB - Free on Board (named origin or port of departure)

• Sea and Inland waterway term


• Contract Type: Shipment (departure)
• Insurance: Not specified
• Risk passes: At the time the cargo is loaded on board a vessel
• Place: Seller must deliver the goods to the vessel including loading provided by the
buyer at the named point in the origin country. The seller must arrange for customs
clearance.
– If no point is named the seller can choose a point best suited for them
– The named point can be the seller’s facility
• Seller is responsible for:
– Packaging
– Loading
– Pre-carriage (if any)
– Compliance documentation

FAS - Free Alongside Ship (named place)

• Sea and Waterway Term


• Contract Type: Shipment
• Insurance: Not specified
• Place: Seller delivers goods, packaged for shipment, to named port at buyer’s side
alongside vessel.
• Usually used for charter party transactions (not containerized shipments)
• Seller responsible for export clearance and export compliance requirements
• Buyer responsible for:
– Loading the vessel
– Main carriage
– Clearance through customs
– On-carriage
• Compliance: The seller is responsible to assume the risk and expense to apply for any
export licenses, authorization or security clearances. The buyer is responsible to
assume the risk and expense to apply for any import licenses or import authorizations.

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C-Terms
CPT – Carriage Paid To + (named place of destination)
CIP – Carriage and Insurance Paid To + (named place of destination)
CFR – Cost and Freight + (named port of destination)
CIF – Cost, Insurance and Freight + (named port of destination)

• C – Terms allow for the most control by the seller


• Main carriage contracted by seller
– Most control over documents
• Under C rules, buyers are responsible for the goods during the main
carriage even though the seller has made the arrangements for main
carriage
• U.S. importer relies on their supplier’s forwarder to submit ISF (Importer Security Filing)
documentation
• Best term to use to comply with the EAR (Export Administration Regulations)

CPT - Carriage Paid To (named place of destination)

• Multimode Term
• Contract Type: Shipment (departure)
• Place: Seller delivers goods, packaged for shipment, to the first carrier for transportation
• Risk passes: Once the cargo is loaded on the first carrier to the final destination country.
• Insurance: Not specified
– Risks and costs transfer at different places.
• Contracts should clearly state where risk passes vs contract of carriage is paid to.
• The buyer responsible for unloading at place of destination
• The buyer is responsible for the Import customs clearance process is
• CPT is a very flexible term to the said final destination terminal. It can be a Port, Airport,
Terminal, Rail Ramp etc.
• Compliance: The seller is responsible to assume the risk and expense to apply for any
export licenses, authorization or security clearances. Furthermore, the seller is
responsible for any security or export customs regulations in transit prior to arrival to
the final named place. The buyer is responsible to assume the risk and expense to apply
for any import licenses or import authorizations.

CIP - Carriage and Insurance Paid To (named place of destination)

• Multimode Term
• Contract Type: Shipment (departure)

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• Place: Seller delivers goods, packaged for shipment, to main carriage carrier for
transportation
• Insurance: Is required as part of the Incoterm
– Risks and costs transfer at different places.
• Transportation Costs are covered to the Named Place.
• Transportation Risks will transfer to the seller at the point of first contact
• Contracts should clearly state where risk passes vs. contract of carriage is paid to.
• Buyer typically responsible for unloading at place of destination
• Seller must clear the goods for export including export compliance documentation
• Insurance is seller’s obligation (minimum coverage – exact insurance coverage should be
agreed upon in a contract or agreement.)
• Make sure your insurance coverage is up to date!
• The CIP Incoterm is regularly used for Letters of Credit

CIP Insurance Requirements

• Minimum Cover: Clause C or FPA (Free of Particular Average)


• Additional Cover can be purchased as agreed between buyer and seller
– Clause A – All Risk
– Clause B – With Average
• Insurance shall cover the goods for a price provided in the contract +10%
• Seller to provide evidence of cover to buyer.

CFR – Cost and Freight & CIF – Cost, Insurance and Freight (named port of destination)

CFR
• Sea and inland water way term.
• Responsibilities and risks are similar to CPT
• Seller must pay freight charges to the agreed port of destination.

CIF
• Sea and inland water way term.
• Responsibilities, risks and insurance requirements are similar to CIP
• Seller must pay freight charges to the agreed port of destination.

CFR & CIF Compliance: The seller is responsible to assume the risk and expense to apply for any
export licenses, authorization or security clearances. The buyer is responsible to assume the
risk and expense to apply for any import licenses or import authorizations.

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D-Terms
DAT – Delivered at Terminal
DAP – Delivered at Place
DDP – Delivered Duty Paid

• D – Terms are considered “Arrival” Terms


• The main carriage is contracted by the Seller
• Seller is responsible for goods until delivered (“Arrived”) to Specified locations on the
buyer’s side.
• With a D – Term the Revenue Recognition is delayed

• Exporter: More responsibility than other terms


– Seller agrees to “Deliver” at the named location on the buyer’s side
– Potential for demurrage charges

• D- Terms are not recommended for Letters of Credit (L/C) since B/L and AWB’s do not
show actual arrival.

DAT - Delivered at Terminal (named terminal at port or place of destination)

• Multimode Term
• Contract Type: Arrival
• Insurance: Not specified
• Place: Seller delivers goods, packaged for shipment, to named destination terminal
• Seller obtains export clearance and handles appropriate export compliance
documentation
• Seller pays for unloading at the named destination terminal on importer/buyer’s side
• Terminals include
– Quay
– Warehouse
– Container Yard
– Road, Rail or Air Cargo Terminal
• Compliance: The seller is responsible to assume the risk and expense to apply for any
export licenses, authorization or security clearances. Furthermore, the seller is
responsible for any security or export customs regulations in transit prior to arrival to
the final named place. The buyer is responsible to assume the risk and expense to apply
for any import licenses or import authorizations.

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DAP - Delivered at Place (named place of destination)

• Multimode Term
• Contract Type: Arrival
• Insurance: Not specified
• Risk Passes: At point of delivery to at foreign destination
• Place: Seller delivers goods, packaged for shipment, to named destination at buyer’s
side.
• Customs clearance is the responsibility of the seller, and should be defined clearly in the
contract. Buyer is responsible for import duties and taxes. Typically DAP refers to a
door delivery at final destination without Customs Clearance, duties and taxes.
• Seller must provide appropriate documentation for release of goods on importer/buyer
side
• Suitable for Domestic use. (Duty Neutral)

DDP - Delivered Duty Paid (named place of destination)

• Multimode Term
• Contract Type: Arrival
• Insurance: Not specified
• Risk passes: At final destination, when unloaded
• Not suitable for domestic shipments (duty doesn’t apply)
• Place: Seller delivers goods, packaged for shipment, to named destination at buyers side
• Seller pays for:
– Transportation
– Foreign duties
– Export and import licenses
– Export compliance documentation
• Seller clears goods through customs in foreign country for delivery to a named place on
the importer/buyer’s side
– VAT or other taxes are for the sellers account
• Recommended to avoid VAT and other taxes. Must be written separately
in the contract
• May be foreign exchange risk
• Risky for exporter
– Dealing directly with foreign customs and government agencies
• Buyer typically responsible for unloading at the point of delivery
• A buyer under DDP is not the importer of record, since they are not clearing the goods
through customs
– Duty Drawback considerations?

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• Compliance: The seller is responsible to assume the risk and expense to apply for any
export licenses, authorization or security clearances. Furthermore, the seller is
responsible for any security or export customs regulations in transit prior to arrival to
the final named place and assume the risk and expense to apply for any import licenses,
import authorizations and Customs Clearance.

Incoterm Tidbits

• Incoterms are agreed upon between two private parties, they have no legal standing on
their own. If they are included in a contract the Incoterms become legally binding.
• At times one party does not understand the Incoterms or the agreed upon destination
which causes difficulty for one part and potential additional expenses.
• Many agreements are negotiated by using a purchase of a product and the Incoterms
only. The use of Incoterms does not replace a contract or agreement.
• Incoterms cannot be used to determine ownership.
• Once a shipment is in movement, Incoterms are recommended not be changed.
Changing Incoterms midstream can cause additional costs and delays if not followed
through correctly.

Conclusion

• Choose Incoterms most suitable to your firm.


• Implement them throughout your organization.
• Update your systems to handle the new revisions.

This case study was written by:


Lisa V Waller
Vice President
BDG International, Inc. (USA)

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1. What does "INCOTERMS" stand for?

o International Commercial Terms


o International Commerce Trade
o Internal Company Terms
o Internal Customs Trade

2. What organization created the Incoterms?

o WTO (World Trade Organization)


o ICC (International Chamber of Commerce)
o WCC (World Chamber of Commerce)
o UCC (Universal Chamber of Commerce)

3. Where can you purchase the Incoterms® 2010 Book?

o www.ict.org
o www.ictrade.org
o www.incoterms.gov
o www.iccwbo.org

4. How many languages are the Incoterms written in?

o 1 – English
o 5 major languages
o 30 languages
o 52 languages

5. What is the purpose of Incoterms?

o Divide costs and responsibilities between sellers and buyers. Carrier


responsibility is not mentioned.
o Divide costs, risks and responsibilities between sellers and buyers. Carrier
responsibility is mentioned.
o Divide costs between sellers and buyers.
o Divide costs, risks and responsibilities between sellers and buyers. Carrier
responsibility is not mentioned.

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6. What other purposes can the Incoterms have?

 Guide the buyer into additional contracts required to fulfill designated tasks such
as carriage and insurance.
 Guide the seller into additional contracts required to fulfill designated tasks such
as carriage and insurance.
 Guide the seller or buyer into additional contracts required to fulfill designated
tasks such as carriage and insurance.
 Guide the bank to fulfill designated tasks such as carriage and insurance.

7. Incoterms, if used correctly, can guide the seller or buyer into additional contracts
required to fulfill designated tasks such as carriage and insurance.

 True
 False

8. Incoterms are listed in the Code of Federal Regulations 19.

 True
 False

9. All of the following are true regarding Incoterms except:

 They are not law


 They are not all inclusive
 They do not address issues of customary operations of carriers, ports,
government regulations
 They are used in the sale of services or intangible products

10. What are the first letters of the Incoterms?

 E, F, C, D
 A, B, C, D
 E, F, A B
 G, A, C, D

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11. What are the Sea and Inland Waterway terms?

 EXW, FAS, FCA, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DDP
 EXW, FAS, FCA, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DDP, DEQ
 EXW, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DDP
 EXW, FCA, CFR, CPT, CIP, DAT, DAP, DDP

12. When using the Incoterm EXW, who will be responsible to arrange and pay for the
loading?

 The seller
 The buyer
 The bank
 The carrier

13. When using the Incoterm DDP, what are the insurance requirements from the
Incoterm?

 The seller is responsible to insure the cargo


 The buyer is responsible to insure the cargo
 The carrier is responsible to insure the cargo
 Insurance is not required and not considered in this Incoterm.

14. When using the Incoterm FOB, what is the best way to describe an airfreight
shipment?

 FOB Chicago O’Hare Airport


 FOB Airport
 FOB Amsterdam Airport
 FOB is not an airfreight Incoterm.

15. Which of the following Incoterms is correctly written?

 EXW Port of Houston, TX


 FCA Door Des Moines, IA
 CPT New York, NY Airport
 DDP CFS Station Milano, Italy

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16. Who is responsible to make payment for duties and taxes in the DDP Incoterm, as long
there are no other requirements?

 The seller
 The buyer
 The bank
 The carrier

17. Who is responsible to pay for loading at origin with an FCA Incoterm?

 The seller
 The buyer
 The bank
 The carrier

18. Which of the following Incoterms does the buyer pay for main carriage?

 DDP
 DAP
 CIP
 FCA

19. At what point does the risk pass to the buyer in the CPT, CIP, CFR or CIF Incoterm?

o At the origin door


o At the destination place or port that has been declared
o Once loaded on the main carriage that will arrive into the final destination
country
o Once loaded on truck at point of destination prior to delivery

20. If there is an E-Term or F-Term, is the buyer always responsible for the export customs
clearance?

 Yes, these are collect terms and the buyer is responsible.


 No, the seller is responsible because the seller is responsible at country of origin.
 No, the buyer is not automatically responsible for export customs clearance. The
Incoterms actually itemize who is recommended to complete the export customs
clearance; however, it is the origin country regulations that will dictate who is
responsible for export customs clearance.
 Export customs clearance is not required for these Incoterms.

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21. Which of the following does not apply to an FCA Incoterm?

 Multimode Term
 Contract Type: Shipment (departure)
 Insurance: Not specified
 Seller is NOT responsible for: Packaging, Loading, Pre-carriage (if any),
Compliance documentation

22. Which of the following does not apply to a CPT Incoterm?

 Sea and Inland Waterway term only


 Contract Type: Shipment (departure)
 Place: Seller delivers goods, packaged for shipment, to the first carrier for
transportation
 Risk passes: Once the cargo is loaded on the first carrier to the final destination
country

23. What type of insurance does the CIP Incoterm require?

 Minimum Cover: Clause C or FPA (Free of Particular Average)


 Insurance Clause A - All Risk
 Insurance Clause B - With Average
 Insurance is not specified in this Incoterm.

24. Which of the following Incoterms is not suitable for domestic cargo?

 CPT
 FCA
 DDP
 EXW

25. Can Incoterms be used to determine ownership without any assistance from a
contract or agreement?

 Yes
 No

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