International Commercial Terms (INCOTERMS) The INCOTERMS is a universally recognized set of definitions of international trade terms, such as FOB, CFR and CIF, developed by the International Chamber of Commerce (ICC) in Paris, France. It defines the trade contract responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving tool.

INCOTERMS 2000 The INCOTERMS was first published in 1936 -INCOTERMS 1936 - and it is revised periodically to keep up with changes in the international trade needs. The complete definition of each term is available from the current publication---INCOTERMS 2000.

Exporter and Importer The exporter and the importer need not undergo a lengthy negotiation about the conditions of each transaction. Once they have agreed on a commercial term like FOB, they can sell and buy at FOB without discussing who will be responsible for the freight, cargo insurance, and other costs and risks.

A common set of rules The Incoterms provide the most often used international terms of trade and an official version of the Incoterms should be referenced in the text of the contract. The goal is to alleviate or reduce confusion over interpretations of shipping terms by outlining who is obligated to take control of and/or insure goods at a particular point in the shipping process. Furthermore, the terms outline the obligations for the clearance of the goods for export or import and packing requirements.

Not appropriate for every contract Specifically, the terms used in a contract state exactly when the shipper unloads and relinquishes obligation and when the buyer takes over for carriage and insurance. The Incoterms are not meant to replace statements in a contract of sale that outline transfers of ownership or title to goods. Therefore, the Incoterms may not be of use when looking to resolve disputes that may arise regarding payment or ownership of goods.

Incoterms groups Incoterms fall into four different groups : Departure (E), Main Carriage Unpaid (F), Main Carriage Paid (C), Arrival (D). The point at which liability and carriage transfer from the seller to the buyer distinguishes the groups and each group’s letter corresponds to the first letter of an INCO Term.

Groups E EXW Ex Works F FAS Free Alongside Ship FCA Free Carrier FOB Free On Board C CFR Cost and Freight (was C&F) CIF Cost, Insurance and Freight CIP Carriage and Insurance Paid To CPT Carriage Paid To D DAF Delivered At Frontier DDP Delivered Duty Paid DDU Delivered Duty Unpaid DEQ Delivered Ex Quay DES Delivered Ex Ship

EXW - EX WORKS Franco fabbrica La merce è a disposizione dell’acquirente presso lo stabilimento del venditore.

FAS - FREE ALONGSIDE SHIP Franco sottobordo (porto di imbarco convenuto) Il venditore adempie i suoi obblighi quando la merce viene posta sotto il bordo della nave sulla banchina o su mezzi galleggianti nel porto d’imbarco convenuto. Da tale momento i rischi e le spese si trasferiscono al compratore.

Franco a bordo (porto di imbarco convenuto ) FOB - FREE ON BOARD Franco a bordo (porto di imbarco convenuto ) Il venditore deve curare che la merce sia messa a bordo della nave. Le spese e i rischi si trasferiscono al compratore al momento del passaggio della merce oltre la murata della nave.

Costo e nolo (porto convenuto) CFR - COST AND FREIGHT Costo e nolo (porto convenuto) Il venditore ha a carico tutte le spese necessarie per il trasporto della merce fino al porto di destinazione convenuto.

CIF - COST INSURANCE FREIGHT Costo assicurazione e nolo (porto di destinazione convenuto). Il venditore ha gli stessi obblighi del CFR con in più quello di stipulare un contratto di assicurazione.

DAF - DELIVERED AT FRONTIER Franco frontiera (luogo di consegna convenuto alla frontiera) Il venditore paga le spese e si accolla i rischi fino al passaggio della frontiera compreso.

DDP - DELIVERED DUTY PAID Reso sdoganato luogo di destinazione convenuto Tutte le spese e i rischi sono a carico del venditore fino alla consegna presso l’acquirente, compreso lo sdoganamento.

Incoterms and transport modes FOB indicates that the shipper (seller) has upheld his/her part of the agreement when the goods pass the ship’s rails at the port of exit. The receiving party (buyer) assumes risk and costs associated with the goods once they pass the ship’s rail in the seller’s homeport. Due to the specific mention of the ship's rails, an aircraft or other mode of transport could not be used with FOB. For a shipment scheduled for delivery by air, rail, or some other form of transport with the same agreement as FOB one would need to use the Incoterm FCA, or Free Carrier. FCA can include other modes of transportation such as road, rail, inland waterway and air.

Applicable trade terms in different modes of transport EXW Ex Works F FAS Free Alongside Ship O FCA Free Carrier L A M FOB Free On Board C CFR Cost and Freight CIF Cost, Insurance and Freight CIP Carriage and Insurance Paid To CPT Carriage Paid To D DAF Delivered At Frontier DDP Delivered Duty Paid DDU Delivered Duty Unpaid DEQ Delivered Ex Quay DES Delivered Ex Ship L land; O ocean; A air; M multimodal.

Responsibilities of the Seller (Exporter) and Buyer (Importer) Trade contract responsibilities EXW FCA FAS FOB Inland freight in Seller's country O Customs clearance in Seller's country Payment of customs charges and taxes in export Loading to the main carrier Main carriage/freight Cargo (marine) insurance Unloading from the main carrier Customs clearance in Buyer's country Payment of customs duties and taxes in import Inland freight in Buyer's country Other costs and risks in Buyer's country O Seller is responsible O Buyer is responsible

Responsibilities of the Seller (Exporter) and Buyer (Importer) Trade contract responsibilities CFR CIF CPT CIP Inland freight in Seller's country O Customs clearance in Seller's country Payment of customs charges and taxes in export Loading to the main carrier Main carriage/freight Cargo (marine) insurance Unloading from the main carrier Customs clearance in Buyer's country Payment of customs duties and taxes in import Inland freight in Buyer's country Other costs and risks in Buyer's country O Seller is responsible O Buyer is responsible

Responsibilities of the Seller (Exporter) and Buyer (Importer) Trade contract responsibilities DAF DES DEQ DDU DDP Inland freight in Seller's country O Customs clearance in Seller's country Payment of customs charges and taxes in export Loading to the main carrier Main carriage/freight Cargo (marine) insurance Unloading from the main carrier Customs clearance in Buyer's country Payment of customs duties and taxes in import Inland freight in Buyer's country Other costs and risks in Buyer's country O Seller is responsible O Buyer is responsible

Examples In the range of Incoterms, DDP (Delivered Duty Paid) entails the most obligations for the seller, whereas EXW (Ex Works) represents the least.

Examples If your agreement with a buyer calls for the seller to release goods at the seller’s location (Departure group), the Incoterms EXW (Ex Works) would be used. Ex Works states principally that the buyer takes over carriage and insurance responsibilities at the seller’s dock.

Examples Alternatively, if the seller were to deliver goods to the buyer’s dock, including all carriage and insurance, a term from the arrival group such as DDP (Delivered Duty Paid) would be appropriate. DDP requires that the seller deliver goods to the buyer’s dock with all carriage, insurance and duties paid.

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