logistics and incoterms what you need to know

1. INCO Terms
by Sujith BR

2. 2. Determine (Incoterms) Terms of Sale
• Exporter must know the terms before
preparing a quotation or a pro forma
invoice.
• Incoterms are standardized names
created by the International Chamber of
Commerce (ICC) for describing terms of
sale.

3. Diagram of INCO terms
http://www.export911.com/e911/export/incot
erm

5. Most Common Incoterms
Term Definition Risk Cost Include on
Quotation
EXW Ex
Works
Buyer arranges for
pick up of goods at
the seller’s location.
Seller is responsible
for packing, labeling,
and preparing the
goods for shipment
on a specified date or
time
Buyer assumes
all risk
Buyer pays all
transportation
costs
N/A
FCA Free
Carrier
Seller is responsible
for costs until the
buyer’s named freight
carrier takes charge
Seller and
Buyer
Split N/A
FAS Free
Alongside
Ship (over
water only)
Buyer arranges for
the ocean transport.
Seller is responsible
for packing labeling,
preparing the goods
for shipment, and
delivering the goods
to the dock.
Seller: until the
goods reach
the dock.
Buyer: from
dock to
destination
Buyer: all ocean
transport costs.
Seller is
responsible for
costs associated
with transporting
the goods to the
dock.
Costs of
transporting
goods to the
dock.

6. Most Common Incoterms
Term Definition Risk Cost Include on
Quotation
FOB* Free
On Board
FOB should
also never be
used unless you
specify what
and where such
as "FOB ocean
vessel at New
York City
Seller arranges for
ocean transport of the
goods, preparing the
goods for shipment,
and loading the goods
onto the vessel. The
goods ship ocean
freight collect.
Buyer: Once
the items are
on board
Seller: Wharfage
(charges to load
the goods onto the
ship) and freight
forwarder fees.
Costs, until on
board
CFR Cost
and Freight
Seller has the same
responsibilities as
when shipping FOB,
but shipping costs are
prepaid by the seller,
instead of shipping
collect.
Seller:
assumes the
risk until the
shipment
reaches the
overseas dock.
Seller: costs of
freight fees up to
destination.
Add Freight to
cost of product.
CIF Cost,
Insurance,
and Freight
Seller has the same
responsibilities as
when shipping CFR
with addition of
including a marine
insurance policy
Seller:; until the
shipment
reaches the
overseas dock.
Seller insurance
and freight
forwarder fees.
Insurance,
freight and cost
of goods

7. FOB Example
FOB, New Orleans for 3 ice makers. You as the
exporter are responsible for all costs in delivering the
goods to New Orleans and loading the icemakers on
board a vessel named by the German firm. You are
responsible for arranging any export clearances
(licenses, taxed, fees). The German firm is
responsible for booking space for cargo and pays for
the ocean freight.

8. CIF Example
CIF (Named foreign port of destination) YCI quotes its
German customer CIF Bremerhaven for 3 ice makers.
YCI arranges for and pays all transportation costs to the
Port of Bremerhaven. YCI arranges and pays for the
marine insurance policy. YCI, however, is only
responsible for risk of loss until loading of the icemakers
on board the vessel in New Orleans.

9. FAS Example
YCI, the U.S. exporter, quotes the German firm FAS, New
Orleans for 3 ice makers. YCI is responsible for all costs in
getting the goods to the Port of New Orleans alongside the
nominated vessel prior to sailing time. The German buyer is
responsible for booking space, paying ocean freight and
arranging for all export clearances.

10. Source for INCOTERMS
For a complete list of INCOTERMS,
including responsibilities of the parties,
see Incoterms 2000.
http://www.dsl.co.nz/index.asp?
page=incoterm.htm