Introduction to Inco Terms

1. Inco Terms
Aaron Arjuna
Feb 2017

2. Inco Terms?

3. Inco Terms?
 Inco Terms define the responsibilities for bearing transportation costs for both the buyer
and seller. Simply put, it determined who pays for each charge in the transportation of
goods.
E F C D
N O O O
D W U O
. A N R Customers
. R T .
. D Y Customers .
 The starting point for cost determination for Inco Terms begins when goods are packed and
ready to be shipped / transported.
 The 4 main Inco Term categories correlate to 4 key landmarks.
1. Your Facility where the good are made ready for shipping / transportation. This can
either be a warehouse or production facility.
2. The Same Country where the goods are made available.
3. The Destination / Delivery Country indicated by the customer.
4. The Customers Door.

5. EFCD Inco Terms
 There are 4 main categories in info terms. They are:
 The “E” Inco Term, i.e. EXW – Ex-Works
This Inco Term is they one that all sellers / shippers usually prefer as there is no
additional cost incurred outside from getting the goods ready for handover to the
customer at their area / location of operations. The seller / shippers responsibility ends
once the buyer / consignee is alerted of cargo availability and picks up the goods.
 The “F” Inco Term, i.e. FCA - Free Carrier, FAS - Free Along Side Ship, FOB – Free On
Board
This Inco Term usually requires the goods to be delivered somewhere locally from where
the goods are made available. Note though there is an exception if the FCA term
indicates a specific country and the goods availability are not from the same country.
Then the Inco Terms would be very similar to a “C” Inco Term.
 The “C” Inco Term, i.e. CPT – Carriage Paid To, CIP – Carriage and Insurance Paid To,
CFR – Cost and Freight, CIF, Cost, Insurance and Freight.
This Inco Term usually requires shipping to another country with handoff upon cargo
arrival into the destination country.
 The “D” Inco Term, i.e. DAT – Delivery at Terminal, DAP – Delivery at Place and DDP –
Delivery Duties Paid.
This Inco Term is usually the preferred for most buyers / consignees as most of the cost
of getting the goods to the buyers / consignees door step is borne by the seller.

6. Inco Term by Transport Model?
 Airfreight
 Inco Terms for Airfreight:
EXW, FCA, CPT, CIP, DAT, DAP, DDP
 Service options for economies of scale:
Light weight / courier service, Medium to Heavy weight freight service, Value Heavy
Weight freight service.
 Ocean Freight
 Inco Terms for Ocean Freight
EXW, FAS, FOB, CFR, CIF
 Service options for economies of scale:
Full Container Load (FCL) Service, Less Than Full Container Load (LCL).
 Road Freight
 Inco Terms for Road Freight - suggested
EXW, FCA, CPT, CIP, DAT, DAP, DDP
 Service options for economies of scale:
Full Truck Load (FTL) Service, Less Than Full Truck Load (LTL).

9. Cost Factors By Inco Terms?
1. "E" Inco Terms
Only Origin / Cargo Release Side cost incurred.
2. "F" Inco Terms
Origin / Cargo Release Side, Origin / Cargo Release Service Provider and
Origin Customs / OGA cost incurred.
Note if FCA Inco Term indicate with a country or city different from the country or city
where the goods are made available, the Inco Term then becomes similar to a “C” Inco
Term.
3. "C" Inco Terms
Origin / Cargo Release Side, Origin / Cargo Release Service Provider, Origin Customs /
OGA, Origin Airport / Seaport, Origin Airline / Ocean Liner, and In Transit cost incurred.
For CPT and CIP term, there will be additional cost of Destination airport / seaport.
4. "D" Inco Terms
Origin / Cargo Release Side, Origin / Cargo Release Service Provider, Origin Customs /
OGA, Origin Airport / Seaport, Origin Airline / Ocean Liner, In Transit, Destination
Airline / Ocean Liner, Destination Customs and OGA, Destination Service Provider
Activity and Destination Delivery Location cost incurred.