1. Executive Director – NAFL UAE
Interpretation
&
Application By
Shankar Subramoniam
Executive Director – NAFL UAE

2. Incoterms - International Commercial Terms
Published by International Chamber of Commerce (ICC)
Purpose – to provide a set of international rules for the interpretation of the most commonly used terms in trading.
They tell the parties what to do with respect to
Responsibility related to carriage of goods from Seller to Buyer
Export and import clearance
Division of costs and risk
Key elements to contracts of Sale
Impacts on the contract of carriage
Do not deal with Title or Payment
INCOTERMS – International commercial terms
Terms of Sale and not terms of carriage
First version of INCOTERMS in 1936
Seven revisions done (1957, 1967, 1976, 1980, 1990, 2000, 2010)

3. Incoterms & Contracting practice
Incoterms standardises contracting practice by
Use of generally recognised key words
Agreeing on most common understanding of such key words
Avoiding misunderstandings in the use of them
Problems remain because
Commercial practice is inconsistent
Variation of the key word may not be appropriate or clear
The Incoterm is not sufficiently precise for that transaction
The parties inadvertently choose the wrong term

4. Sea & Inland waterway only
Incoterms
2010
The main divisions
Any mode of Transport
Sea & Inland waterway only
Group E
Departure
EXW EX Works
Group F
Main
Carriage
Unpaid
FCA Free Carrier
FAS Free Alongside Ship
FOB Free On Board
* often (incorrectly) referred
to as C&F, CNF, C+F etc.
Group C
Main
Carriage
Paid
CPT Carriage Paid To
CIP Carriage & Insurance Paid to
CFR Cost and Freight *
CIF Cost, Insurance &
Freight
Group E : Seller only makes goods available to the Buyer at Seller’s own premises.
Group F : Seller is called upon to deliver the goods to a carrier appointed by the Buyer.
Group C : Seller has to contract for carriage, but without assuming the risk of loss or damage to the goods or additional cost due to events occurring after shipment.
Group D : Seller has to bear all costs and risks needed to bring the goods to the destination.
Set1 : EXW, FCA, CPT, CIP, DAT, DAP, DDP : can be used in cases where a ship is used for part of the carriage.
Set 2 : FAS, FOB, CFR, CIF : The point of delivery and the place to which the goods are carried to are both Ports.
All mention of the ship’s rail as the point of delivery has been omitted. They are ‘delivered’ when they are ‘on board’ the vessel.
Group D
Arrival
DAT Delivered At Terminal
DAP Delivered At Place
DDP Delivered Duty Paid

5. Obligations SELLER BUYER General Obligations1. 2. 3. 4. 5. 6. 7. 8. 9.
10.
General Obligations
Licences, authorisations, security clearances and other formalities
Contracts of carriage and insurance
Delivery
Taking Delivery
Transfer of risks
Allocation of costs
Notices to the Buyer
Notices to the Seller
Delivery Document
Proof of Delivery
Checking – Packaging – Marking
Inspection of goods
Assistance with information and related costs

6. Incoterms EXW Key Points : Minimum obligation for the Seller.
2010
Key Points :
EXW
Minimum obligation for the Seller.
Delivery : Placing goods at disposal of Buyer at Seller’s premises or at another named place.
Evaluate using FCA if Seller has to load on to Buyer’s vehicle.
Seller must not use where more export ‘control’ is required or in safety-sensitive operations.
Buyer should not use EXW if they cannot obtain export clearance.
EX WORKS
(...named place of delivery)
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations
Seller delivers when he places the goods at the disposal of the Buyer at the Seller’s premises or another named place (i.e. works, factory, warehouse) not cleared for export and not loaded on any collecting vehicle.
HSE implication of Buyer’s loading vehicle.
Minimum obligation for the Seller
Suitable for domestic trade, for international FCA is more appropriate.
Buyers should not use EXW if they cannot directly or indirectly obtain export clearance.

7. Incoterms FCA Key Points :
2010
Key Points :
FCA
Covers all modes of transport incl. multimodal
Delivery
Seller’s premises : Load on Buyer’s vehicle
Other places : Placed at disposal of Buyer (unloading by Buyer).
Seller’s costs can be negotiated as part of the ‘delivery’ obligations
Seller is responsible for the Export clearance
No obligations on the Seller for freight and/or insurance unless requested.
FREE CARRIER
(...named place of delivery)
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations
Seller delivers the goods, cleared for export, to the carrier nominated by the Buyer at the named place.
The chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place.
If delivery occurs at Seller’s premises, Seller is responsible for loading (collections & container)
If the delivery occurs at any other place, Seller is not responsible for unloading.

8. Incoterms CPT Key Points :
2010
Key Points :
Delivery : Goods handed over to carrier or nominee at agreed place.
Risk & cost transferred at different places. **
Seller contracts for the freight to a destination place , which can be a port OR an inland destination.
Seller to clear goods for export.
Discharging costs, except where included in the freight, are for the Buyer.
CPT
CARRIAGE PAID TO
(...named place of destination)
Transport :
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations
Seller delivers the goods to the carrier or another person nominated by the Seller at an agreed place.
Seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
Risk and costs are transferred at two different places.
The default position is that risk passes when the goods have been delivered to the first carrier at a point entirely of the Seller’s choosing and over which the Buyer has no control.
Parties can agree for risk to pass at different point, but be explicit in the contract.
Seller to clear the goods for export

9. Incoterms CIP Key Points : As CPT, except
2010
Key Points :
As CPT, except
Seller contracts for insurance (minimum cover) to the destination place , which can be a port OR an inland destination.
Insurance is contracted and paid for on behalf of the Buyer. **
Risk passes to Buyer at first point of handover to Carrier
CIP
CARRIAGE AND INSURANCE PAID TO
(...named place of destination)
Transport :
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations

10. Incoterms DAT Key Points : Irrespective of mode of transport.
2010
Key Points :
Irrespective of mode of transport.
Delivery : Unloaded from arriving means of transport, placed at disposal of Buyer.
Specify point within the Terminal / Port
Do not use if Seller has to arrange transport further.
Arrival dates become an issue (all ‘D’ terms)
Seller’s risk upto destination !!
DELIVERED AT TERMINAL
(...named Terminal at Port or place of destination)
DAT
Transport :
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations

11. Incoterms DAP Key Points : Irrespective of mode of transport.
2010
Key Points :
DELIVERED AT PLACE
(...named Place of destination)
Irrespective of mode of transport.
Delivery : Placed at disposal of Buyer in arriving transport.
Seller has no obligation to clear the goods for import.
Arrival dates become an issue
Note movement of Seller’s risk to destination !!
DAP
Transport :
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations

12. Incoterms DDP Key Points : Irrespective of mode of transport.
2010
Key Points :
Irrespective of mode of transport.
Delivery : Goods are cleared for import, placed at disposal of Buyer on the arriving transport.
Maximum obligations for the Seller.
Requires payment of all duties and taxes by the Seller, at import into the destination country.
Seller should not use DDP if unable to obtain import clearance.
DELIVERED DUTY PAID
(...named place of destination)
DDP
Transport :
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations

13. Incoterms FAS Key Points : For sea or inland waterway transport.
2010
Key Points :
For sea or inland waterway transport.
Delivery : goods are placed alongside the vessel (quay/barge) nominated by Buyer.
Costs for loading to main carrier are for the Buyer
No obligations on the Seller for freight and/or insurance.
For containers, FCA to be used.
Seller to clear goods for export.
FREE ALONGSIDE SHIP
(...named port of shipment)
FAS
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations

14. Situation …. Seller : Warehouse in Jebel Ali, 2 kms from Port
Buyer : Customer in Kuwait
Goods : Chemicals in drums
Sale terms : FOB Jebel Ali
Discharge port : Kuwait
Who arranges contracts of carriage?
Operations
Container / Truck arranged by forwarder nominated by Buyer
Seller loads goods onto the container at Seller’s premises
Truck leaves for port and meets with accident en route.
Container falls on the quay while loading on ship
Container falls on the deck while loading

15. Incoterms FOB Key Points : For sea or inland waterway.
2010
Key Points :
For sea or inland waterway.
Delivery : Risk passes when the goods are delivered on board the vessel.
Costs for loading are for the Seller.
Seller is responsible for the Export formalities
No obligations on the Seller for freight and/or insurance
Right of access only for carrier’s receipt.
Do not use for containers.
FREE ON BOARD
(...named port
of shipment)
FOB
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations
If the parties do not intend to deliver the goods across the ship’s rails, the FCA term should be used.
When selling containers on FOB, control is passed to the carrier or agent but Seller retains the risk.
Seller must provide the Buyer at the Seller’s expense with the usual proof of delivery.
Functions of B/L – Receipt of goods, Document of Title, evidence of contract of carriage.

16. Incoterms CFR Key Points : As FOB, except
2010
Key Points :
COST AND FREIGHT
(...named port of
destination)
CFR
As FOB, except
Seller contracts for the freight to the destination port on behalf of the Buyer. **
Discharge & transit costs, except where included in the freight, are for the Buyer
No obligation on Seller to provide (where relevant) copy of Charter Party
Seller has right of access of B/L
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations

17. Incoterms CIF Key Points : As CFR, except
2010
Key Points :
CIF
COST INSURANCE AND FREIGHT
(...named port of destination)
As CFR, except
Seller contracts for insurance to the destination port .
Insurance is contracted on behalf of the Buyer. **
Transport :
Sea - conventional
Sea - containerised
Road
Rail
Air
Combinations

18. On-line resources http://www.iccwbo.org/incoterms/