The document discusses Incoterms, which are standardized trade definitions published by the International Chamber of Commerce (ICC) that clarify responsibilities of importers and exporters in international trade contracts. It provides background on the ICC and history of Incoterms, explains the 13 Incoterms rules and how they are grouped, and describes some key Incoterms like EXW, FCA, FAS, and FOB.

1. INCOTERMS

2. INTRODUCTION Language is one of the most complex and important tools of International Trade. As in any complex and sophisticated business, small changes in wording can have a major impact on all aspects of a business agreement. Word definitions often differ from industry to industry. This is especially true of global trade. Where such fundamental phrases as "delivery" can have a far different meaning in the business than in the rest of the world.

3. For business terminology to be effective, phrases must mean the same thing throughout the industry. That is why the International Chamber of Commerce created "INCOTERMS" in 1936. INCOTERMS are designed to create a bridge between different members of the industry by acting as a uniform language they can use

4. Costs : who is responsible for the expenses involved in a shipment at a given point in the shipment's journey? Control : who owns the goods at a given point in the journey? Liability : who is responsible for paying damage to goods at a given point in a shipment's transit? NECESSITY

5. HISTORY OF THE INTERNATIONAL CHAMBER OF COMMERCE The International Chamber of Commerce was founded in 1919 with an overriding aim that remains unchanged: to serve world business by promoting trade and investment, open markets for goods and services, and the free flow of capital. Much of ICC's initial impetus came from its first president, Etienne Clémentel, a former French minister of commerce. Under his influence, the organization's international secretariat was established in Paris and he was instrumental in creating the ICC International Court of Arbitration in 1923.

6. INITIATION OF INCOTERMS ICC introduced the first version of Incoterms - short for "International Commercial Terms" - in 1936. Since then, ICC expert lawyers and trade practitioners have updated them six times to keep pace with the development of international trade.

7. UNDERSTANDING INCOTERMS Incoterms are standard trade definitions most commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they are at the heart of world trade. Incoterms" is an ICC trademark, registered in the European Union and elsewhere

8. The English text is the original and official version of Incoterms 2000, which have been endorsed by the United Nations Commission on International Trade Law (UNCITRAL). Authorized translations into 31 languages are available from ICC national committees.

9. PREAMBLES The Preambles explain the areas the terms cover but do not spell out the obligations of buyer and seller - information that can be obtained only by consulting the full published texts of the 13 Incoterms. FAS FREE ALONGSIDE SHIP states that under FAS the seller delivers when the goods are placed alongside the vessel at the named port of shipment. "The buyer has to bear all costs and risks of loss of or damage to the goods from that moment.“

10. WHY INCOTERMS Incoterms are international rules that are accepted by governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade. They either reduce or remove altogether uncertainties arising from differing interpretations of such terms in different countries

11. What are the 13 Incoterms? Each Incoterm is referred to by a three-letter abbreviation.

12. EXW EX WORKS (named place) FCA FREE CARRIER (named place) FAS FREE ALONGSIDE SHIP (named port of shipment) FOB FREE ON BOARD (named port of shipment) CFR COST AND FREIGHT (named port of destination) CIF COST, INSURANCE AND FREIGHT (named port of destination) CPT CARRIAGE PAID TO (named place of destination) CIP CARRIAGE AND INSURANCE PAID TO (named place of destination) DAF DELIVERED AT FRONTIER (named place) DES DELIVERED EX SHIP (named port of destination) DEQ DELIVERED EX QUAY (named port of destination) DDU DELIVERED DUTY UNPAID (named place of destination) DDP DELIVERED DUTY PAID (named place of destination)

13. EXW EX WORKS (named place) FCA FREE CARRIER (named place) FAS FREE ALONGSIDE SHIP (named port of shipment) FOB FREE ON BOARD (named port of shipment) CFR COST AND FREIGHT (named port of destination) CIF COST , INSURANCE AND FREIGHT (named port of destination)

14. CPT CARRIAGE PAID TO (named place of destination) CIP CARRIAGE AND INSURANCE PAID TO (named place of destination) DAF DELIVERED AT FRONTIER (named place) DES DELIVERED EX SHIP (named port of destination) DEQ DELIVERED EX QUAY (named port of destination) DDU DELIVERED DUTY UNPAID (named place of destination) DDP DELIVERED DUTY PAID (named place of destination)

15. ICC recommends that "Incoterms 2000" be referred to specifically whenever the terms are used, together with a location. For example, the term "Delivered at Frontier" (DAF) should always be accompanied by a reference to an exact place and the frontier to which delivery is to be made.

16. CORRECT USE Here are three examples of correct use of Incoterms: EXW EX WORKS (Lalu Khet) Incoterms 2000 FCA Kuala Lampur Incoterms 2000 FOB Karachi Incoterms 2000 DDU Frankfurt Schmidt GmbH Warehouse 4 Incoterms 2000 DAF Mona Bao Bonded Ware house Incoterms 2000

17. WHY DO INCOTERMS NEED REVISING PERIODICALLY? The main reason is the need to adapt Incoterms to contemporary commercial practice. For instance, in the 1990 version, the clauses dealing with the seller's obligation to provide proof of delivery allowed paper documentation to be replaced by e-mail for that purpose for the first time

18. Under FAS (FREE ALONGSIDE SHIP) the seller is required to clear the goods for export. This is a reversal from previous Incoterms versions, which required the buyer to arrange for export clearance.

19. Under DEQ (DELIVERED EX QUAY) the buyer is required to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. This is a reversal from previous Incoterms versions, which required the seller to arrange for import clearance.

20. What are "E"-terms “F"-terms “C"-terms and “D"-terms. What does that mean?

21. THE GROUPS E EXW (DEPARTURE) F FCA – FAS – FOB (MAIN CARRIAGE UN PAID) C CFR- CIF - CPT – CIP (MAIN CARRIAGE PAID) D DAF- DES - DEQ – DDU – DDP (ARRIVAL)

22. EXW Under the "E"-term (EXW), the seller only makes the goods available to the buyer at the seller's own premises . It is the only one of that category. Deals With Departure the seller makes the goods available at his premises.

23. F TERMS Under the "F"-terms (FCA, FAS and FOB), the seller is called upon to deliver the goods to a carrier appointed by the buyer. Main carriage Unpaid

24. C TERMS Under the "C"-terms (CFR, CIF, CPT and CIP), the seller has to contract for carriage, but without assuming the risk of loss or damage to the goods or additional costs due to events occurring after shipment or dispatch. Main carriage paid

25. D TERMS Under the "D"-terms (DAF, DES, DEQ, DDU and DDP), the seller has to bear all costs and risks needed to bring the goods to the place of destination. Arrival

26. INCO TERMS EXW (ex works) at a named point of origin ( NAMED PLACE) (e.g., ex factory, ex mill, ex warehouse). Under this term, the price quoted applies only at the point of origin and the seller agrees to place the goods at the disposal of the buyer at the specified place on the date or within the period fixed. All other charges are for the account of the buyer .

27. One of the simplest and most basic shipment arrangements places the minimum responsibility on the seller with greater responsibility on the buyer . In an EX-Works transaction, goods are basically made available for pickup at the shipper/seller's factory or warehouse and "delivery" is accomplished when the merchandise is released to the consignee's freight forwarder. The buyer is responsible for making arrangements with their forwarder for insurance, export clearance and handling all other paperwork. EX-WORKS

28. FCA (FREE CARRIER) In this type of transaction, the seller is responsible for arranging transportation, but he is acting at the risk and the expense of the buyer. Where in FOB the freight forwarder or carrier is the choice of the buyer, in FCA the seller chooses and works with the freight forwarder or the carrier. "Delivery" is accomplished at a predetermined port or destination point and the buyer is responsible for Insurance Main carriage unpaid

29. FCA (free carrier) to a named place This term replaces the former 'FOB named inland port" to designate the seller's responsibility for the cost of loading goods at the named shipping point. It may be used for multimodal transport, container stations, and any mode of transport, including air. Main carriage unpaid

30. FAS (free alongside ship) at a named port of export. This includes the price for the goods, plus charges to deliver the goods from the factory to alongside the vessel at the exit port. The seller handles the cost of unloading and wharfage . The buyer covers the cost to load the goods on the vessel and all the insurance and transportation costs to the destination port. Main carriage unpaid

31. FAS (Free Alongside Ship) In these transactions, the buyer bears all the transportation costs and the risk of loss of goods. FAS requires the shipper/seller to clear goods for export, which is a reversal from past practices. Companies selling on these terms will ordinarily use their freight forwarder to clear the goods for export. "Delivery" is accomplished when the goods are turned over to the Buyers Forwarder for insurance and transportation. Main carriage unpaid

32. FOB (Free On Board) One of the most commonly used-and misused-terms, FOB means that the shipper/seller uses his freight forwarder to move the merchandise to the port or designated point of origin . Though frequently used to describe inland movement of cargo, FOB specifically refers to ocean or inland waterway transportation of goods . "Delivery" is accomplished when the shipper/seller releases the goods to the buyer's forwarder. The buyer's responsibility for insurance and transportation begins at the same moment. Main carriage unpaid

33. CLARIFICATION FOB (free on board) at a named port of export. This includes the FAS cost, plus the cost to load the goods on the vessel. The buyer pays for insurance and transportation to the foreign port.

34. CFR (cost and freight) to a named overseas port of import . Under this term, the seller quotes a price for the goods that includes the cost of transportation to the named point of debarkation. The cost of insurance is left to the buyer's account. (Typically used for ocean shipments only.) Main carriage paid

35. CFR (COST AND FREIGHT) This term formerly known as CNF (C&F) defines two distinct and separate responsibilities-one is dealing with the actual cost of merchandise "C" and the other "F" refers to the freight charges to a predetermined destination point. It is the shipper/seller's responsibility to get goods from their door to the port of destination . "Delivery" is accomplished at this time. It is the buyer's responsibility to cover insurance from the port of origin or port of shipment to buyer's door. Given that the shipper is responsible for transportation, the shipper also chooses the forwarder. Main carriage paid

36. CIF (COST, INSURANCE AND FREIGHT) This arrangement similar to CFR, but instead of the buyer insuring the goods for the maritime phase of the voyage, the shipper/seller will insure the merchandise. In this arrangement, the seller usually chooses the forwarder. "Delivery" as above, is accomplished at the port of destination. This includes the FOB cost, plus all insurance and transportation to costs to the foreign port. Main carriage paid

37. CPT (CARRIAGE PAID TO) In CPT transactions the shipper/seller has the same obligations found with CIF, with the addition that the seller has to buy cargo insurance , naming the buyer as the insured while the goods are in transit. Main carriage paid

38. CIP (CARRIAGE AND INSURANCE PAID TO) This term is primarily used for multimodal transport. Because it relies on the carrier's insurance, the shipper/seller is only required to purchase minimum coverage. When this particular agreement is in force, Freight Forwarders often act in effect, as carriers. The buyer's insurance is effective when the goods are turned over to the Forwarder. Main carriage paid

39. DAF (DELIVERED AT FRONTIER) Here the seller's responsibility is to hire a forwarder to take goods to a named frontier, which usually a border crossing point, and clear them for export. "Delivery" occurs at this time. The buyer's responsibility is to arrange with their forwarder for the pick up of the goods after they are cleared for export, carry them across the border, clear them for importation and effect delivery. In most cases, the buyer's forwarder handles the task of accepting the goods at the border across the foreign soil. Arrival

40. DES (DELIVERED EX SHIP) In this type of transaction, it is the seller's responsibility to get the goods to the port of destination or to engage the forwarder to the move cargo to the port of destination uncleared. "Delivery" occurs at this time. Any destination charges that occur after the ship is docked are the buyer's responsibility Arrival .

41. DEQ (DELIVERED EX QUAY) In this arrangement, the buyer/consignee is responsible for duties and charges and the seller is responsible for delivering the goods to the quay, wharf or port of destination. In a reversal of previous practice, the buyer must also arrange for customs clearance. Arrival

42. DDP (DELIVERED DUTY PAID) DDP terms tend to be used in intermodal or courier-type shipments. Whereby, the shipper/seller is responsible for dealing with all the tasks involved in moving goods from the manufacturing plant to the buyer/consignee's door. It is the shipper/seller's responsibility to insure the goods and absorb all costs and risks including the payment of duty and fees. Arrival

43. DDU (DELIVERED DUTY UNPAID) This arrangement is basically the same as with DDP, except for the fact that the buyer is responsible for the duty, fees and taxes. Arrival

44. DDP Delivered to the buyer's door duty paid. Arrival

46. EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP SERVICES Ex Works Free Carrier Free Alongside Ship Free Onboard Vessel Cost & Freight Cost Insurance & Freight Carriage Paid To Carriage Insurance Paid To Delivered At Frontier Delivered Ex Ship Delivered Ex Quay Duty Unpaid Delivered Duty Unpaid Delivered Duty Paid Warehouse Storage Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Warehouse Labor Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Export Packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading Charges Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Inland Freight Buyer Buyer/ Seller* Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Terminal Charges Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Forwarder's Fees Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading On Vessel Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Ocean/Air Freight Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Charges On Arrival At Destination Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Buyer Buyer Seller Seller Seller Duty, Taxes & Customs Clearance Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Delivery To Destination Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller

47. Load to truck Export- duty payment Transport to exporter's port Unload from truck at the origin's port Landing charges at origin's port Transport to import's port Landing charges at importer's port Unload onto trucks from the importers' port Transport to destination Insurance Entry -Customs clearance Entry -Taxation EXW No No No No No No No No No No No No FCA Yes Yes Yes No No No No No No No No No FAS Yes Yes Yes Yes No No No No No No No No FOB Yes Yes Yes Yes Yes No No No No No No No CFR Yes Yes Yes Yes Yes Yes No No No No No No CIF Yes Yes Yes Yes Yes Yes No No No Yes No No CPT Yes Yes Yes Yes Yes Yes No No No No No No CIP Yes Yes Yes Yes Yes Yes No No No Yes No No DAF Yes Yes Yes Yes Yes Yes No No No No No No DES Yes Yes Yes Yes Yes Yes No No No Yes No No DEQ Yes Yes Yes Yes Yes Yes Yes No No Yes No No DDU Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

50. GROUPS Group E - where the goods are made available to the buyer at the seller's premises; Group F - where the seller must deliver the goods to a carrier appointed by the buyer; Group C - where the seller must contract for the carriage of the goods without assuming risk of loss of, or damage to the goods or additional costs due to events occurring after shipment; Group D - where the seller has to bear all costs and risks required to bring the goods to the place of destination

51. Group E Departure EXW - Ex Works Named place - Any mode of transport The seller must place the goods at the disposal of the buyer at the seller's premises or another named place not cleared for export and not loaded on any collecting vehicle

52. Group F Main Carriage Unpaid FCA - Free Carrier Named place - Any mode of transport The seller must deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place. FAS - Free Alongside Ship Named port of shipment - Maritime and inland waterway transport only The seller must place the goods, cleared for export, alongside the vessel at the named port of shipment. FOB - Free on Board Named port of shipment - Maritime and inland waterway transport only The seller delivers the goods, cleared for export, when they pass the ship's rail at the named port of shipment.

53. Group C Main Carriage Paid CFR - Cost and Freight Named port of destination - Maritime and inland waterway transport only The seller delivers the goods when they pass the ship's rail in the port of shipment and must pay the costs and freight necessary to bring the goods to the named port of destination. The buyer bears all additional costs and risks after the goods have been delivered (over the ship's rail at the port of shipment). CIF - Cost Insurance and Freight Named port of destination - Maritime and inland waterway transport only The obligations are the same as under CFR with the addition that the seller must procure insurance against the buyer's risk of loss of, or damage to the goods during carriage.

54. CPT - Carriage Paid To Named place of destination - Any mode of transport The seller delivers the goods to the nominated carrier and must also pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all additional costs and risks after the goods have been delivered to the nominated carrier. CIP - Carriage and Insurance Paid To Named place of destination - Any mode of transport The obligations are the same as under CPT with the addition that the seller must procure insurance against the buyer's risk of loss of, or damage to the goods during carriage.

55. Group D Arrival DAF - Delivered at Frontier Named place - Any mode of transport The seller must place the goods at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export but not cleared for import, at the named point and place at the frontier. DES - Delivered Ex Ship Named port of destination - Maritime and inland waterway transport only The seller delivers when the goods are placed at the disposal of the buyer on board the ship, not cleared for import, at the named port of destination. DEQ - Delivered Ex Quay Named port of destination - Maritime and inland waterway transport only The seller delivers when the goods are placed at the disposal of the buyer, not cleared for import, on the quay at the named port of destination.

56. DDU - Delivered Duty Unpaid Named place of destination - Any mode of transport The seller must deliver the goods to the buyer, not cleared for import, and not unloaded at the named place of destination. DDP - Delivered Duty Paid Named place of destination - Any mode of transport The seller must deliver the goods to the buyer, cleared for import, and not unloaded at the named place of destination. As can be seen this list runs from the term where the buyer has most of the responsibility (EXW) through to that where the seller has the majority of the responsibility (DDP). It is worth noting that in Incoterms 2000 the only term that requires the buyer to clear the goods for export (including obtaining any export licence necessary) is EXW and the only term that requires the seller to clear the goods for import (including obtaining any import licence necessary) is DDP.

58. Group F – Main carriage unpaid FCA – Free Carrier (named place) the seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail, road, and containerised / multi-modal transport. FAS – Free Alongside Ship (named loading port) the seller must place the goods alongside the ship at the named port. The seller must clear the goods for export; this changed in the 2000 version of the Incoterms. Suitable for maritime transport only. FOB – Free On Board (named loading port) the classic maritime trade term, Free On Board: seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export. Maritime transport only

59. Group C – Main carriage paid CFR – Cost and Freight (named destination port) seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail. Maritime transport only. CIF – Cost, Insurance and Freight (named destination port) exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Maritime transport only. CPT – Carriage Paid To (named place of destination) the general/containerised/multimodal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier. CIP – Carriage and Insurance Paid to (named place of destination) the containerised transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.

60. Group D – Arrival DAF – Delivered At Frontier (named place) It can be used when the goods are transported by rail and road. The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier. DES – Delivered Ex Ship (named port) Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc… are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals - - - and where the seller either owns or has chartered, their own vessel. DEQ – Delivered Ex Quay (named port) It means the same as DES, but the passing of risk does not occur until the goods have been unloaded at the port of destination.

61. DDU – Delivered Duty Unpaid (named destination place) It means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination. However, if the buyer wishes the seller to bear cost and risks associated with the import clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all needs to be explicitly agreed upon in the contract of sale. DDP – Delivered Duty Paid (named destination place) It means that the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used interchangeably with the term "Free Domicile