1	Incoterms International Terms of Sale
2	What are Incoterms? The word Incoterms stands for international commercial terms. The chosen Incoterm is a term of the contract of sale. Their purpose is to: Standardize the trade terms used in international contracts of sale. Develop the rules of interpretation for these terms. Explain the division of costs and risks between the various parties to an international sale.
3	Where do Incoterms come from? Developed and published by the International Chamber of Commerce First edition published in 1936 Revised every ten years or so Preceding revision dating back to 1990 Current version released in 2000 improved consistency of application updated to reflect current commercial practice
4	The 13 Incoterms EXW – Ex Works FCA – Free Carrier FAS – Free Alongside Ship FOB – Free On Board CFR – Cost and Freight CIF – Cost, Insurance & Freight CPT – Carriage Paid to CIP – Carriage & Insurance Paid to DAF – Delivered at Frontier DES – Delivered Ex Ship DEQ – Delivered Ex Quay DDU – Delivered Duty Unpaid DDP – Delivered Duty Paid
5	Some Terminology… In the Incoterm DEQ - Delivered Ex Quay, the word ‘quay’ means wharf or pier. It is pronounced ‘key’. Pre-carriage is inland transportation in the origin country – in other words, the transport from the factory to the port. Main carriage is the transportation from port to port or the line haul. On-carriage is the inland transportation in the destination country – in other words, the transport from the port to the customer.
6	EXW – Ex Works (named place) Mode of Transportation: Determined by buyer (all modes) Seller’s Responsibility: Goods Export Packing Buyer’s Responsibility: Pre-Carriage Export Clearance Main Carriage Import Clearance On-Carriage Passage of Risk: When the goods are made available by the seller at named location.
7	FCA – Free Carrier (named place) Mode of Transportation: All modes Seller’s Responsibility: Goods Export Packing Loading on Vehicle Pre-Carriage Export Clearance Buyer’s Responsibility: Main Carriage Import Clearance On-Carriage Passage of Risk: When the goods are delivered to the carrier at named place.
8	FAS – Free Alongside Ship (named port of shipment) Mode of Transportation: Ocean only Seller’s Responsibility: Goods Export Packing Pre-Carriage Export Clearance Buyer’s Responsibility: Vessel Loading Main Carriage Import Clearance On-Carriage Passage of Risk: When the goods are delivered alongside the ship specified by the buyer.
9	FOB – Free on Board (named port of shipment) Mode of Transportation: Ocean only Seller’s Responsibility: Goods Export Packing Pre-Carriage Export Clearance Vessel Loading Buyer’s Responsibility: Main Carriage Import Clearance On-carriage Passage of Risk: When the goods cross the ship’s rail at the port of shipment.
10	CFR – Cost and Freight (named port of destination) Mode of Transportation: Ocean only Seller’s Responsibility: Goods Export Packing Pre-Carriage Export Clearance Vessel Loading Main Carriage Payment Buyer’s Responsibility: Goods in Main Carriage Transit Import Clearance On-Carriage Passage of Risk: When the goods cross the ship’s rail at the port of shipment. Buyer secures own insurance.
11	CIF – Cost, Insurance and Freight (named port of destination) Mode of Transportation: Ocean only Seller’s Responsibility: The same as CFR plus ocean cargo insurance. Buyer’s Responsibility: The same as CFR Passage of Risk: When the goods cross the ship’s rail at the port of shipment. If loss or damage is sustained, the buyer files the claim.
12	CPT – Carriage Paid To (named place of destination) Mode of Transportation: All modes Seller’s Responsibility: Goods Export Packing Export Clearance Delivery to First Carrier Main Carriage Payment Buyer’s Responsibility: Goods in Carrier Custody Goods in Main Carriage Transit Import Clearance On-Carriage Passage of Risk: When the goods are delivered by the seller to the first carrier. Buyer secures own insurance.
13	CIP – Carriage and Insurance Paid To (named place of destination) Mode of Transportation: All modes Seller’s Responsibility: The same as CPT plus cargo insurance Buyer’s Responsibility: The same as CPT Passage of Risk: When the goods are delivered by the seller to the first carrier. If loss or damage is sustained, the buyer files the claim.
14	DAF – Delivered at Frontier (named place) Mode of Transportation: Typically rail or motor; can be for all modes Seller’s Responsibility: Goods Export Packing Pre-Carriage to Border Export Clearance Buyer’s Responsibility: Import Clearance On-Carriage from Border Passage of Risk: When the goods are handed over to the buyer at the named frontier port.
15	DES – Delivered Ex Ship (named port of destination) Mode of Transportation: Ocean only Seller’s Responsibility: Goods Export Packing Pre-Carriage Export Clearance Vessel Loading Main Carriage to Named Port Buyer’s Responsibility: On-Carriage Import Clearance Passage of Risk: When the goods are ready for unloading by the buyer at the port of destination.
16	DEQ – Delivered Ex Quay (named port of destination) Mode of Transportation: Ocean only Seller’s Responsibility: Goods Export Packing Pre-Carriage Export Clearance Vessel Loading/Unloading Main Carriage Buyer’s Responsibility: On-Carriage Import Clearance Passage of Risk: When the goods are placed on the dock or in a terminal at the destination port.
17	DDU – Delivered Duty Unpaid (named place of destination) Mode of Transportation: All modes Seller’s Responsibility: Goods Export Packing Pre-Carriage Export Clearance Main Carriage On-Carriage Buyer’s Responsibility: Import Clearance Passage of Risk: When the goods are delivered at the location specified. Seller should insure the goods.
18	DDP - Delivered Duty Paid (named place of destination) Mode of Transportation: All modes Seller’s Responsibility: Everything associated with the shipment Buyer’s Responsibility: Take delivery of the goods at the buyer’s premises Passage of Risk: When the goods are delivered to the buyer at the specified location. Seller should insure the goods.
19	Incoterms - An Illustration
20	Incoterms vs. UCC FOB terms The primary material difference between the UCC and Incoterms is that the UCC addresses the passage of title, while Incoterms address the passage of risk and responsibility. In an international sales transaction, the sales contract must specify the passage of title to the goods. This distinction is important.