Terms of Trade or

Incoterms
 INternational Chamber Of
COmmerce TERMS
Export packing costs Main transportation costs
Inland transportation to port Cargo insurance
Export clearance Customs duties
International carrier loading Risk in transit

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 Incoterm Definition
International Commerce Term
• A formalized international Term of Trade regulated by the
International Chamber of Commerce
• Specifies the responsibilities of the exporter and the
responsibilities of the importer in an international transaction
– Which tasks will be performed by the exporter
– Which tasks will be performed by the importer
– Which activities will be paid by the exporter
– Which activities will be paid by the importer
– When the transfer of responsibility for the goods will take
place
• First codified by the International Chamber of Commerce in
1953. The latest revision is dated 2000
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 CFR Delivered Ex Quay

Delivered Ex Ship
INCOTERMS
Delivered Ex Ship CFR Cost, Insurance, Freight
Delivered Ex Ship Delivered Duty Unpaid
Delivered Ex ShipDelivered Duty Unpaid Delivered Ex Ship
Delivered Ex ShipDelivered DutyCPTUnpaid
Delivered
Cost, Insurance, Ex Ship
Delivered Duty UnpaidEx Ship CPT CIF
DeliveredFreight
Ex ShipDelivered
Delivered
Duty Unpaid
Delivered Ex Ship
Delivered Ex Ship
Delivered ExDelivered
Quay
Delivered
Duty Unpaid
CPT
Duty
Delivered
Unpaid Ex
Cost, Insurance, Freight
Ship
CIF EXW Delivered
Delivered Ex
Duty
Ship
Unpaid CIF
CIF EXW Delivered Duty Unpaid FCA Carriage Paid To CIF
Delivered
CIFEx ShipEXW Carriage Paid To

??? ?
DDU
CIF EXW Delivered Ex Ship DDU Carriage
Carriage
Paid Paid
To To
CIF
Free Alongside
EXW Ship Free Alongside Ship
DDU Carriage Paid To
CIF
Free Alongside
EXW Ship Carriage
Free Paid
Alongside
To Ship Carriage
DDU FOB Delivered Paid
Ex To
Ship
CIF EXW Free Alongside Ship
DDU Carriage Paid To
CarriageCIF
and Insurance
EXWCFR Paid To Free Alongside
Delivered Ship
DDU
Ex Ship
CarriageCIFand Insurance Paid To Free
CIF
DAF Alongside Ship
DDU DEQ
Carriage
Delivered
CIF
and Insurance
Ex ShipFree
Paid
CPT Carriage and Insurance Paid ToCarrier
To Free Alongside
Free CarrierShip
DDUv DES
Free Alongside Ship DDU
Carriage
Cost andandFreight
InsuranceExPaid
CPT WorksTo Delivered
Free Duty
Alongside
UnpaidShip
Carriage and Insurance Paid To Delivered
Free Ex
Alongside
Quay Ship
Carriage
Delivered Duty and
Free
Insurance
AlongsidePaid
Ship
Paid and Insurance Paid To To Free Alongside Ship CIF
Carriage
Delivered DutyCarriage
Paid andEx
FAS Insurance
Works Paid To Free Alongside Ship
Delivered Duty Paid Ship DDU CFR CIF
Free Alongside
Delivered Duty Paid CIF Delivered Duty Unpaid
Delivered
Delivered Duty PaidDuty Delivered
Unpaid Ex Quay
DEQ
Delivered Duty PaidCarriage and Insurance Paid Free On Board
Delivered Duty Paid CIP To
DDP
Delivered Ex Ship CIF
Carriage and Insurance Paid To
Delivered Duty Unpaid Delivered at Frontier CPT
Delivered Ex Ship
 INCOTERMS
• “E” Terms.
• “F” Terms.
• “C” Terms.
• “D” Terms.
 INCOTERMS
• “E” Terms.
 INCOTERMS
• “E” Terms.
 INCOTERMS
• “E” Term.
– “Ex Works.”
– Buyer pays everything.
 INCOTERMS
• “F” Terms.
– Seller pays for product to be delivered,
cleared for export, to carrier buyer selects.
• “C” Terms.
– Seller pays for main carriage and/or cargo
insurance.
• “D” Terms.
– Seller pays all costs of delivery.
 INCOTERMS
• “E” Terms.
– “Ex Works.”
– Buyer pays everything.
 Incoterms: EXW
• Used with any merchandise or form of
transportation.
• Easiest Incoterm for exporter, most difficult
for importer.
• Basically, exporter says: “Here is product.
Come get it.”
 Seller
Prepare order
Mfg. Buyer
Pick items
Pack items

Buyer pays: Main transportation costs

Export packing costs Cargo insurance
Inland transportation to port Customs duties
Export clearance Risk in transit
International carrier loading
 Incoterms: FCA
• “Free Carrier.”
• For goods shipped multi-modal without
handling.
• Oriented toward containerization.
• Exporter delivers goods to carrier that
importer selects.
• Responsibility shifts from exporter when
goods are delivered to carrier’s vehicle,
either at exporter’s plant or carrier’s
premises.
 Land Incoterm: DAF
• “Delivered at Frontier.”
• For any merchandise, but specifically
refers to land transportation.
• Transfer of responsibility from exporter to
importer is at city named in Incoterm.
• Usually goods remain on vehicle to final
destination.
 Ocean Incoterms
• FAS: “Free Along Ship.”
– Exporter brings goods to port.
– At port, importer takes responsibility for
goods.
• FOB: “Free on Board” Port of Departure.
– Exporter responsible for goods until they are
on the ship, then importer is responsible.
– Dividing point is ship’s rail.
 Ocean and Corresponding Non-Ocean
Incoterms
OCEAN TERM: NON-OCEAN
– CFR “Cost and Freight” TERM:
• Exporter responsible for – CPT “Carriage Paid To”
goods until on ship.
• Exporter responsible for
– CIF “Cost, goods until on carrier.
Insurance and – CIP “Carriage and
Insurance Paid to”
Freight”
• Same as CIF except it’s
• Same as CFR a non-ocean shipment.
except exporter
pays marine
insurance.

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 Ocean and Corresponding Non-Ocean
Incoterms
OCEAN TERM: NON-OCEAN
– DES “Delivered ex Ship” TERM:
• Exporter responsible or – DDU “Delivered Duty
goods (usually bulk Unpaid”
commodities) until • Exporter performs most
importer gets them at tasks in shipment
port of destination. except unloading costs.
– DEQ “Delivered ex Quay”
– DDP “Delivered Duty Paid”
• Usually bulk
commodities for which • Exporter pays for
everything in the
exporter pays for ship
shipment.
unloading.

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Incoterms by Transport Mode
Mode E FFF C C C C D D D D D
X CAO F I P I E E A D D
WASB R F T P S Q F U P
Break-bulk ocean X XX X X X X X X
cargo
Bulk ocean cargo X XX X X X X X X
RORO X X X X X X X
Multimodal FCL X X X X X X X
Multimodal LCL X X X X X X X
Rail X X X X X X X
Road X X X X X X X
Air X X X X X X X
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 Incoterm STRATEGY
• Incoterm determined by exporter’s
strategy and…
– Type of product.
– Method of shipment.
– Ability of both parties to perform tasks in
shipment.
– Trust parties have toward one another.

• Exporter always chooses Incoterm.

End of Program