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What are Incoterms?
Contractual terms developed by the International
Chamber of Commerce (ICC) in Paris
A standard three-letter abbreviated terminology
Translated into various languages
Covers thirteen main options
The purpose is to clearly describe the key
obligations of sellers, buyers and carriers with
regard to:
Incoterms

Delivery of the Goods
Transfer of Risks
Transfer of Costs

ITC

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...
2-2

Incoterms: There are 4 groups
The E group:
 The carriage is arranged by the buyer
 Risks & costs are transferred to the buyer when the goods are
made available

The F group:
 The carriage is arranged by the buyer
 Risks & costs are transferred to the buyer as from just after export
clearance

The C group:
 The carriage is arranged by the seller
 Risks are transferred to the buyer just after export clearance
but costs are on the seller up to import clearance at named destination

The D group:
 The carriage is arranged by the seller
 Risks are transferred just before import clearance but costs are on the
seller up to import clearance when duty is unpaid or including import
clearance when duty is paid
...
2-3

The 13 Incoterms:
Group E - Departure
EXW “EX WORKS” (…named place)
The seller delivers when he places the goods at
the disposal of the buyer at the seller’s premises
or another named location (I
...
, works, factory,
warehouse, etc
...

Mode of transport: Any mode

ITC

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...
2-1

Delivery Ex-Works (EXW)
Based on the Incoterms definition of the Ex Works
term, is Lemunge & Sons liable to as the price as
claimed by Fibro A/S?

Who bears the risk for the damage caused to the
goods by the fire?

ITC

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...
named place)
The seller delivers the goods, cleared for export, to the carrier
nominated by the buyer at the named place
...

If delivery occurs at any other place, the seller is not
responsible for loading from its own vehicles
...
2-6

Group F - Main carriage not paid by seller
2) FAS “FREE ALONGSIDE SHIP” (…named port of shipment)

The seller delivers when the goods (cleared for
export) are placed alongside the vessel at the
named port of shipment
...


Mode of Transport: Maritime and
inland waterway only
ITC

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...

The buyer has to bear all costs and risks of loss of
or damage to the goods from that point
...

Mode of Transport: Maritime
and inland waterway only

ITC

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...
2-2

Delivery FOB
Who bears the risk of such loss under the
Incoterms?

Who bears the risk if the thef occurs on the night
of 8 to 9 May?

Can Fibro A/S, having delivered the goods to the
port of Copenhagen and otherwise performed its
obligations, collect payment under the letter-ofcredit?
ITC

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...
2-2 (Cont’d)

Delivery FOB
What would be a reasonable way of handling the
described situation, assuming that the Tanzania
National Shipping Line is not unable to designate a
vessel but simply delayed temporarily in doing so?

What would be the responsibility of Lemunge &
Sons ’ forwarding agent, Fixit Transports, in a
situation of this kind?

ITC

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...
2-2 (Cont’d)

Delivery FOB
Lemunge & Sons seek your advice on the statement
by Fibro A/S that the goods had « been set aside
for delivery »: what would that expression mean in
practice?

ITC

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...

The seller pays the cost & freight to bring the goods to the named port
of destination BUT the risk of loss of or damage & any related costs are
transferred to the buyer
...

The CFR terms require the seller to clear the goods for export
...
2-12

Group C - Main carriage paid by seller
2) CIF “COST INSURANCE AND FREIGHT”

(…named port of destination)

Same as CFR but here the seller also has to procure
marine insurance against the buyer’s risk of loss of or
damage to the goods during the carriage
...


Mode of Transport: Maritime
and inland waterway only

ITC

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...

The buyer bears all risks and any other costs
occurring after the goods have been delivered
...
2-14

Group C - Main carriage paid by seller
4) CIP “CARRIAGE AND INSURANCE PAID TO”

(…named place of destination)

Same as CPT but here the seller also has to procure
insurance against the buyer’s risk of loss or damage
to the goods during the carriage
...

Mode of Transport: Any mode
ITC

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...
2-16

Action Point

6
...
According to a report on
an inspection performed upon the arrival of the
goods at Mombasa, the damage arose because the
equipment was not stored on board in an airconditioned facility
...
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Group D - Delivered by seller (5 terms)
1) DAF “DELIVERED AT FRONTIER” (…named place)
The seller delivers when the goods are placed 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, but before the customs
border of the adjoining country
...
It is therefore important to
define the it very precisely
...
2-18

Group D - Delivered by seller
2) DEQ “DELIVERED EX SHIP” (…named port of

destination)

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
...


Mode of Transport: Maritime and
inland waterway only
ITC

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...

The seller has to bear costs and risks involved in bringing the
goods to the named port of destination and discharging the
goods on the quay (wharf)
...


Mode of Transport: Maritime and
inland waterway only
ITC

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...

The seller has to bear the costs and risks involved in bringing the
goods to the named place of destination
...


Mode of Transport: Any mode

ITC

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...


Mode of Transport: Any mode

ITC

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...
2-23

DAF terms are commonly used
for land transport
COUNTRY OF EXPORT

COUNTRY OF IMPORT

Customs
Douane

Customs

DAF

Douane

Delivered at
frontier, export
customs cleared
ITC

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...
2-25

TRANSFER OF COSTS

takes place at points that are sometimes different

Customs

Customs

Seller

Buyer
EXW FCA

FAS FOB

DES
CFR
CIF

Export clearance costs
on account of the seller

DEQ

*

Waterborne transport only

Transport
by land
insurance
* Transport
costs on account of
the seller

ITC

Customs

Customs

DAF

DDU
DDP
CPT
CIP

*
Import clearance
costs on account
of the buyer

Unloading costs on account
of the seller only if in its
contract of carriage
M8:U6:6
...
buyer’s payment
Who is responsible for licenses, authorisations and other
formalities
Who is responsible for contracts of carriage & insurance
Delivery by seller & taking delivery by buyer
Transfer of risks
Division of costs between buyer & seller
Respective notices to the buyer or seller
Proof of delivery, transport documents, etc

ITC

Risks
& Costs

Checking, packing & marking for the seller vs
...
2-27

Each of the Incoterms has an impact on:
The least onerous position for the seller is under the
E-terms
The least onerous position for the buyer is under the
D terms
If no Incoterm is used, you will
need to specify in detail how
the various issues related to
delivery, costs & transfer of
risks will be dealt with

ITC

Risks
& Costs

M8:U6:6
...
2-4

INCOTERMS in action
For any two products that your enterprise imports, or
would like to import, identify the most appropriate
Incoterm to use and indicate why this term is the most
appropriate for your company
...


ITC

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...

 Transfer of risk is not equivalent to
transfer of ownership
 Transfer of risk is when the risk of loss or
damage passes from the supplier to the buyer

ITC

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...
3-2

Incoterms– Point of delivery of the goods and transfer of risk

D

DAF

Delivered at
frontier

DES

Delivered
ex ship

When goods are placed at the disposal of the
buyer on board the ship (named port of
destination)

DEQ

Delivered
ex quay

When goods are placed at the disposal of the
buyer at the quay (named port of destination)

DDU

Delivered
duty unpaid

DDP

Delivered
duty paid

Upon delivery of goods at frontier (named place)
- not unloaded

Upon delivery of goods (at named place of
destination) not cleared for import and not
unloaded
Upon delivery of goods cleared for import (at
named place of destination), duty paid but not
unloaded
Customs
Douane

ITC

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5-1

Modifications to Incoterms
Indicate which modifications to Incoterms you have
previously made (or in future might like to make) in your
contracts in order to adapt these to the specific
circumstances of your company ’s business
...
5-1



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