INCOTERMS are a set of international commercial terms published by the International Chamber of Commerce that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts. First published in 1936, INCOTERMS have been updated several times, most recently in 2020. They provide clarity on issues such as the transfer of risks and costs during international commercial transactions. While INCOTERMS define obligations for delivery, they do not determine other aspects of contracts such as payment terms, remedies for breach, or dispute resolution procedures.

1. INTERNATIONAL FREIGHT FLOWS
Supplier Inland freight Export customs
Import customs
Inland freight
Buyer

2. What does INCOTERM stand for?
• Def: the word ‘INCOTERM’ is an abbreviation for International
Commercial Terms which provide a common set of rules used for
defining the responsibilities of sellers and buyers in the delivery of
goods under sales contracts
• They are widely used in international commercial transaction

3. When & Where did they appear?
• First conceived by International Chamber of Commerce (ICC) in 1921
and implemented starting from 1936, since they have been updated
9 times in order to keep pace with the evolution of international
trade
• In 1923, a Trade Terms Committee developed the first 6 rules: FOB,
FAS, FOT, FOR, Free Delivered CIF and C&F, as the precursor for what
would later be known as INCOTERM rules.

4. Why is that?
• Because they:
• Set International rules for commonly used terms in foreign trade
• Define obligations of both parties involved in the transaction
• Determine the distribution & transfer of risks regarding the goods delivered
from seller to buyer
• State the clear sharing of expenses between the parties during transport

5. INCOTERMS HAS FIXED FIVE POINTS
5 POINTS WHERE RISK OF DAMAGE GETS SHIFTED FROM SELLER TO BUYER
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6. Transportation Definitions
• Pre-carriage: inland transportation on the seller’s side
• Domestic: from the place where the shipment starts to any subsequent
transportation carriage
• International: from the place where the shipment starts to the departure
point on the seller’s side
• Main Carriage:
• Domestic: Subsequent transportation beyond pre-carriage
• International: Transportation from the point of departure on the arrival point
on the buyer’s side
• On-carriage:
• Domestic: Subsequent transportation beyond main carriage
• International: transportation from the arrival point on the buyer’s side

8. Transportation Definitions
• Transhipment
• Transhipments is the shipment of goods or containers to an intermediate destination, then
to yet another destination
• Door-To-Door
• Contract of carriage that includes pre-carriage, main carriage and on-carriage by the same
carrier
• Door-To-(Air) Port
• Contract of carriage including pre-carriage and main carriage to airport or ocean port or
truck terminal port or rail port
• (Air) Port-To-(Air) Port
• Contract of carriage of main carriage only
• (Air) Port-To-Door
• Contract of carriage including main carriage and on-carriage

9. Are they
important ?

10. What Incoterms 2020 do…
• Rules are not designed for a specific type of trade or commodity
• It can be used for any type of trade
• It describes:
• Obligations between buyer and seller.
• Risks – when the risk is transferred from seller to buyer
• Costs – for whose account at which stage

11. What INCOTERMS Rules do…
• Obligations:
• Who does what – between buyer and seller
• Delivery of goods
• Come and take the goods from my place
• Will deliver the goods at your place
• Organizing carriage
• Insurance to cover the transit risk
• Obtaining shipping documents
• Export / import clearance

12. What INCOTERMS Rules do…
• Risks
• Where and when seller delivers the goods
• Where risk transfers from seller to buyer
• Costs
• Party responsible for which costs
• Packing / Checking / loading and unloading / Security related costs

13. Who has to take care and pay for the
transport of the goods
Who has to take care and pay for the
insurance of the goods
Who has to take care and pay for other costs
like, e.g. customs, handling…
Define the place where the seller has to
deliver to the buyer
Define clearly the place and time when the
risk is transferred from one party to another
INCOTERMS What do they define?

14. What Incoterm Rules do not do
• Rules are not substitute to ‘contract of sale’ though it is a part of
‘contract’
• Do not deal with:
• Specification of goods
• Payment terms – when, where, how much to be paid and in which currency
to be settled
• Remedies for breach of contract
• Method, venue or law of dispute resolution in case of such breach of
contract
• Consequences of delay in delivery
• Effect of sanctions
• Imposition of tariffs
• Imposition of prohibitions for entry of goods.
• Force majeure or hardships or
• Intellectual Property Rights

15. INCOTERMS do not ……
• They do not:
• Apply to contracts for services.
• Define contractual rights and obligations other than for delivery.
• Specify details of the transfer, transport, and delivery of the goods.
• Determine how title to the goods will be transferred.

16. INCOTERMS do not ……
• Protect a party from his / her own risk of loss.
• Define the remedies for breach of contract.

17. What Incoterm Rules DO NOT DO
• Most important :
• These Rules DO NOT deal with:
• Transfer of property
• Transfer of title
• Transfer of ownership of the goods sold
• To be more specific:
• Incoterms Rules are not themselves a contract of sale
• Becomes part of an existing contract when incorporated

18. INCOTERMS and Insurance:
• INCOTERMS deal only with the seller’s obligation to take out
insurance to the benefit of the buyer under CIF and CIP.
• Under all other terms, it is for the parties themselves to arrange
insurance as they see fit.

19. INCOTERMS & Customs Assessment
• Assessable Value:
• Import : CIF
• Export : FOB

20. INCOTERMS
 Delivery to named port/place
 Deliver goods into custody of freight agent,
carrier or owner
 Transport methods:
Rail
Road
Sea
Air
Inland waterway
Multi-modal (combination)

21.  EXW – Ex Works
 FCA – Free Carrier
 FAS – Free alongside Ship
 FOB – Free on Board
 CFR – Cost & Freight
 CIF – Cost Insurance & Freight
 CPT – Carriage Paid to
 CIP – Carriage Insurance Paid
 DAF – Delivered at Frontier
 DES – Delivered Ex Ship
 DEQ – Delivered Ex Quay
 DDU – Delivered Duty Unpaid
 DDP – Delivered Duty Paid
INCOTERMS 2000

22. INCOTERMS 2000
 Origin Term (EXW) : {Departure}
Seller only makes goods available at the seller’s
own premises
 F – Terms ( FCA,FAS,FOB)
{Main Carriage Unpaid}
Seller is called upon to deliver the goods to a carrier
appointed by the purchaser. Seller will be responsible
only for handing over the goods to the purchaser’s
international carrier in the country of export

23. INCOTERMS 2000
 C – Terms (CFR,CIF,CPT,CIP)
{Main Carriage Paid}
Seller will be responsible for handing over the goods
to the purchaser’s international carrier in the country of
export duly paid for freight and/or insurance till port of
entry/destination in the importer’s country
 D – Terms (DAF,DES,DEQ,DDU,DDP)
{Arrival}
Seller will be responsible for handing over the goods to
the purchaser in the purchaser’s country at the port of
entry/final destination duty cleared/ uncleared

24. Supplier Inland freight Export customs
Import customs
Inland freight
Buyer
EXW
FOB
FCA
FAS
DES
DAF
DEQ
DDU
CIF
CFR
CIP
CPT
DDP
DAT
DAP
INTERNATIONAL FREIGHT FLOWS
INCOTERMS 2000
INTERNATIONAL FREIGHT FLOWS
INCOTERMS 2010

25. INTERNATIONAL FREIGHT FLOWS
INCOTERMS 2010
Supplier Inland freight Export customs
Import customs
Inland freight
Buyer
EXW
FOB
FCA
FAS
CIF
CFR
CIP
CPT
DDP
DAT
DAP

26.  EXW – Ex Works
 FCA – Free Carrier
 FAS – Free alongside Ship
 FOB – Free on Board
 CFR – Cost & Freight
 CIF – Cost Insurance & Freight
 CPT – Carriage Paid to
 CIP – Carriage Insurance Paid
 DAT – Delivered at Terminal
 DAP – Delivered at Place
 DDP – Delivered Duty Paid
INCOTERMS 2010

27. INCOTERMS 2020®
Sr. No. INCOTERMS 2010® INCOTERMS 2020®
1 EXW EXW
2 FCA FCA
3 FAS FAS
4 FOB FOB
5 CPT CPT
6 CIF CIF
7 CFR CFR
8 CIP CIP
9 DAT DPU
10 DAP DAP
11 DDP DDP

29. Division of Incoterms 2020
INCOTERMS are now classified according to risk and responsibilities

30. INCOTERMS 2020® Structure
RULES FOR ANY MODE OR MODES OF TRANSPORT
RULES FOR SEA AND INLAND WATERWAY
TRANSPORT
EXW FAS
FCA FOB
CPT CFR
CIP CIF
DPU
DAP
DDP

32. Using INCOTERMS correctly by…
• Following the three letters of the appropriate chose term with the
exact destination place to which the delivery of goods is to be made,
and afterwards the expression ‘INCOTERMS 2020’
• Such as:
FCA Port of New Orleans, USA, Incoterms 2020
Or
CIP Tianjin airport, China, Incoterms 2020
Will certainly benefit…

33. Using INCOTERMS correctly by…
All the parties involved
as
• INCOTERMS have become an essential framework in daily language
of trade, providing clear rules and guidance to importers, exporters,
lawyers, forwarders, insurers, carriers and mainly everybody taking
part in international trade transactions.
Leading to:

34. HOWEVER IF USED CORRECTLY
• Your contract may be ambiguous, lacking some important details or
even impossible to perform, causing lots of misunderstanding and
prejudices
Which can turn into…
And eventually cause…

35. UNDESIRABLE EFFECTS
Such as
So…

36. THANK YOU
ANY QUESTIONS?