1. w.e.f 01 JANUARY 2011

2. What are INCOTERMS® Rules?
INCOTERMS® Rules are the standard sets trading terms and conditions, designed to simplify communication and prevent misunderstanding between traders.

3. Three major issues between B and S
WHO WILL DO WHAT “ TASK’
COST …..WHO WILL PAY WHAT
WHO WILL HAVE THE “TECHENICAL” OWNERSHP WHEN

4. Division of Cost Transfer of Risk How does it help?
Cost of Transport, Insurance and Loading & Unloading Charges
Point of Risk and Responsibility transfer from Seller to Buyer

5. Division of Cost Transfer of Risk How does it help?
Cost of Transport, Insurance and Loading & Unloading Charges
Point of Risk and Responsibility transfer from Seller to Buyer

6. What Incoterms are
‘INCOTERM’, is an abbreviation of International commercial terms and is a term of the contract of sale (not contract of carriage)
Contract of sales and not the contract of carriage:
1. cost 2. risk 3. Task/ responsibility
INCOTERMS were first published by the ICC in 1936 and subsequently revised in 1953, 1967, 1980, 1990 ,2000 and 2010
Applicable for tangible goods only

7. 11 Incoterms divided into 4 groups
Groups of Incoterms
11 Incoterms divided into 4 groups
Group
Term
Expansion
Significance
E - Departure
EXW
Ex Works
F – Main carriage unpaid
FCA
FAS
FOB
Free Carrier
Free Alongside Ship
Free on Board
Signifies that the seller must hand over the goods to a nominated carrier free of risk and expense to the buyer
C – Main carriage paid
CFR
CIF
CPT
CIP
Cost and Freight
Cost, Ins & Freight
Carriage Paid To
Carriage & Ins Paid To
Signifies that the seller must bear certain Costs even after the critical point for the division of the risk of loss of or damage to the goods has been reached
D – Arrival
DAT
DAP
DDP
Delivered at Terminal
Delivered at a Place
Delivered Duty Paid
Signifies that the goods must arrive at a stated Destination

8. Incoterms® 2010
In the second class , the point of delivery and the place of destination , are both PORTS

9. HIGHEST RISK TO IMPORTER HIGHEST RISK TO EXPORTER
Risk profile of Incoterms
LEAST RISK TO IMPORTER
HIGHEST RISK TO IMPORTER
HIGHEST RISK TO EXPORTER
LEAST RISK TO EXPORTER
DDP
EXW

10. TERMS FOR ANY MODE OR MODES
INCOTERMS 2010
TERMS FOR ANY MODE OR MODES

11. Ex-Works (EXW)

12. EXW – EX WORKS (…..named Place)
The Seller
fulfils his obligation to delivery when S has made the goods available at his premises (i.e. works, factor, warehouse, etc.) to the buyer.
will not contract for any transportation
Seller deliver the goods to a carrier appointed by buyer.
Once collected by buyer , sellers responsibility ends
not responsible for loading the goods on vehicle provided by the Buyer
Not responsible for clearing the goods for export, unless otherwise agreed. 12 12 12

13. EXW – EX WORKS (…..named Place)
The buyer
Take delivery of goods at the seller’s premises
make arrangement at his own cost and risk to bring the goods to the desired destination.
Arrange for clearance at the sellers country also
Arrange export license and pay for export duties
Arrange insurance 13 13 13

14. Free Carrier (FCA)

15. FCA – FREE CARRIER (…..named Place)
The Seller -
to hand over the goods, cleared for export, into the charge of the carrier, at the named place or point.
carrier named by the buyer
to complete export, customs formalities and pay all duties and costs until handing over of goods
GOODS NOT LOADED
Provide evidence of delivery of goods to the carrier 15 15 15

16. FCA – FREE CARRIER (…..named Place)
The Buyer
Nominate carrier and Make arrangement at his own cost and risk to cover transport of goods to his own premises
Responsible for all after the goods have been handed over by the seller to the appointed carrier
This term may be used for any mode of transport, including multimodal transport. 16 16 16

17. Carriage Paid To (CPT)

18. (…..named place of destination)
CPT – CARRIAGE PAID TO
(…..named place of destination)
The seller
has the same obligation as under CFR.
CPT term may be used for any mode of transport including multimodal transport whereas CFR can only be used for sea and inland waterway transport.
contract for the carriage and must pay the costs and freight necessary to bring the goods to the named port of destination
Deliver the goods into the custody of the first carrier
Obtain export licence and pay export taxes and fees
Furnish to the buyer the invoice and the usual transport document 18 18 18

19. (…..named place of destination)
CPT – CARRIAGE PAID TO
(…..named place of destination)
The Buyer
Accept delivery of goods when they are delivered to the first carrier and when the invoice , if customary, the usual transport docts are tendered to him.
This term is used for air or ocean containerized shipments 19 19 19

20. Carriage and Insurance Paid To (CIP)

21. CIP – CARRIAGE AND INSURANCE PAID TO (…..named place of destination)
The Buyer
Accept delivery of the goods when they are delivered to the first carrier and when the invoice, the cargo insurance policy( certificate) and the usual transport document are tendered to him
This term is used for air or ocean containerized shipments 21 21 21

22. CIP – CARRIAGE AND INSURANCE PAID TO (…..named place of destination)
The seller
has the same obligation as under CIF.
contract for the carriage
must pay the costs and freight necessary to bring the goods to the named port of destination
Obtain export license and pay export taxes and fees , if required
Obtain Contract for the insurance of the goods during the carriage and pay the insurance premium
Furnish to the buyer the invoice , the usual transport document and a transport insurance policy
However, this term can be used for any mode of transport including multimodal transport whereas CIF could be used only for sea and inland waterway transport. 22 22 22

23. Delivery at Terminal (DAT)

24. DAT – DELIVERED AT TERMINAL .....named port or place of destination)
TAILORED FOR CONTAINER TRANSPORT
FREIGHT CONDITIONS INCLUDE ENTIRE HANDLING CHARGES NEGOTIATED BY TRANSPORT COMPANIES AND PORT AUTHORITIES – “TRMINAL IN TERMINAL OUT “
The Seller
seller fulfils his obligation to deliver when the goods are delivered to the buyer UNLOADED at the named place of desination.
The seller has to bear the risks and costs, including duties, taxes and other charges for delivery of goods
Obtain export licence and pay export duties , taxes and fees
Not responsible to clear the goods for import, pay any import duty
Carry out export custom formalities
Provide docts to enable the buyer to take delivery at the named place 24 24 24

25. Delivery at Place (DAP)

26. DAP – DELIVERED AT PLACE .....named place of destination)
The Seller
seller fulfils his obligation to deliver when the goods are placed at the disposal of the buyer on the arriving means of transport ready for UNLOADING at the named place of desination.
The seller has to bear the risks and costs, including duties, taxes and other charges for delivery of goods
Obtain export licence and pay export duties , taxes and fees
Carry out export custom formalities and not import customs
Provide docts to enable the buyer to take delivery at the named place 26 26 26

27. Delivery Duty Paid (DDP)

28. DDP – DELIVERED DUTY PAID .....named port of destination)
The Seller
seller fulfils his obligation to deliver when the goods have been made available at the named place in the country of importation.
not unloaded but cleared for import
The seller has to bear the risks and costs, including duties, taxes and other charges for delivery of goods duly cleared for importation.
Obtain import licence and pay import duties , taxes and fees
Carry out custom formalities
Provide docts to enable the buyer to take delivery at the named place 28 28 28

29. DDP – DELIVERED DUTY PAID .....named port of destination)
The Buyer
get the goods unloaded
Pay unloading charges
take delivery of goods
This term can used irrespective of mode of transport but if destination is on board a vessel or on the quay then DES or DEQ should be used .
This term should not be used if seller is unable directly or indirectly to obtain the import licence 29 29 29

30. DDP – DELIVERED DUTY PAID .....named port of destination)
The Buyer
get the goods unloaded
Pay unloading charges
take delivery of goods
This term can used irrespective of mode of transport .
This term should not be used if seller is unable directly or indirectly to obtain the import licence 30 30 30

31. TERMS FOR SEA AND INLAND WATERWAY TRANSPORT
INCOTERMS 2010
TERMS FOR SEA AND INLAND WATERWAY TRANSPORT

32. Free Alongside Ship (FAS)

33. FAS – FREE ALONGSIDE SHIP
The Seller -
obligations over when the goods have been placed alongside the vessel , on the quay or in lighter at the named port of shipment.
Complete export and clearance requirement
Does not include charges for loading the goods on board.
Seller deliver the goods to a carrier appointed by buyer.
Provide an ‘ALONGSIDE” receipt
make arrangement with a shipping co for transport of goods . 33 33 33

34. FAS – FREE ALONGSIDE SHIP
The Buyer
Nominate carrier and make arrangement with a shipping co for transport of goods and pay the freight
Obtain export licence an dpay export taxes and fees if required
has to bear all costs and risks of loss or damage to the goods from that moment
Used for Ocean shipments that are NOT containerized popular in the break-bulk shipments and with the importing countries using their own vessels
This term can only be used for sea and inland waterway transport. 34 34 34

35. Free on Board (FOB)

36. FOB – (…..named port of shipment)
The seller
has the same obligation as under FCA.
Deliver the goods on board
Seller deliver the goods to a carrier appointed by buyer.
Price is inclusive of ex works price , packing charges transportation charges etc until loading of goods on board.
Provide export licence and pay export taxes, fees etc and pay also loading costs according to the custom of the port to the extent that they are not included in the freight
Provide a clean on board receipt 36 36 36

37. FOB – (…..named port of shipment)
The Buyer
Nominate carrier
Contract for the carriage and pay the freight.
pay loading costs to the extent that they are included in the freight
Pay unloading cost 37 37 37

38. Cost and Freight (CFR)

39. CFR – Cost and Freight(..named port of destinat)
The seller-
Seller must contract for the carriage and must must pay the costs and freight to bring the goods to the named port of destination
Deliver the goods on board
Obtain export licence and pay export taxes and fees
Pay loading costs
but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment. 39 39 39

40. CFR – Cost and Freight(..named port of destinat)
The Buyer
Accept delivery of the goods upon shipment , when the invoice and the bills of lading are tendered to him ; the bill of lading is deemed to “ represent the goods”
pay unloading costs to the extent that they are not included in the freight
This term is used for ocean shipments that are not containerized
This term can only be used for sea and inland waterway transport. 40 40 40

41. Cost, Insurance and Freight (CIF)

42. CIF – (…..named port of destination)- International Carriage Paid by Seller
The seller- must pay cost , insurance and freight
contract for the carriage and deliver the goods on board
must pay the costs and freight necessary to bring the goods to the named port of destination
Obtain Contract for the insurance of the goods during the carriage and pay the insurance premium
Pay loading costs
but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment. 42 42 42

43. CIF – (…..named port of destination)
The Buyer
Accept delivery of the goods upon shipment , when the invoice, the cargo insurance policy( certificate) and the bills of lading are tendered to him ; the bill of lading is deemed to “ represent the goods”
pay unloading costs to the extent that they are not included in the freight
This term is used for ocean shipments that are not containerized
This term can only be used for sea and inland waterway transport. 43 43 43

44. Incoterms-special points
Insurance:
There are only two terms which deal with insurance ie CIF and CIP.
Under these terms seller is obliged to procure insurance for the benefit of buyer.
In all other cases it is for the parties to decide them selves as to how to get covered.
However seller must provide the buyer , upon request, with the necessary information for procuring insurance.

45. Incoterms-special points
“Cleared for import in the country of destination”- seller is not responsible under any term except in the case of DDP.
Seller is required to UNLOAD the goods from the arriving vehicle only in DAT.
Should be clearly incorporated into contract of sale: FOB Mumbai ( name of place must), Incoterms 2010

46. What Incoterms aren’t?
It’s not a Law. Incoterms must be specified in sales contracts in order to apply. This is normally done by citing the current Incoterms version in Pos and sales quotations
Not all inclusive. Detailed situations beyond the scope of Incoterms must be covered elsewhere in sales contracts. It governs basically the responsibility btw S and B. Do not confuse with responsibilities btw Shipper , Carrier and Consignee under contract of carriage or with other contractual realtionships

47. What Incoterms don’t do
Incoterms do not deal with
What the S and B should do as matter of precaution in his own favour eg take out the insurance except in the case of CIF and CIP
Consequences of breaches of contract
Exemptions from liability owning due to various impediments
Transfer of property rights in the goods
Relief from obligations and exemptions from liability in case of unexpected events

48. FACTORS EFFECTING USE OF A PARTICULAR INCOTERM
Status of the seller-Bargaining positions in the market
Governmental conditions
Bulk transaction

49. PRECAUTIONS WHILE USING INCOTERM
Seller to refrain, wherever possible, from dealing in trade terms DDP where seller becomes responsible for the import customs clearance and/or payment of import customs duties and taxes and/or other costs and risks at the buyer's end.
Similarly, it would be best for importers not to deal in EXW (Ex Works), which would hold the buyer responsible for the export customs clearance, payment of export customs charges and taxes, and other costs and risks at the seller's end.