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Incoterms Reviewer

The document defines various incoterms related to international trade, describing aspects like terms of delivery, payment, and risk/cost transfer. It explains terms at the origin like EXW, FCA, FAS, and FOB, which involve delivery at the seller's premises or port. It also explains destination terms like CFR, CIF, CPT, CIP, DAP, DPU, and DDP, which involve delivery on the vessel or to the buyer's location. Key differences between the terms relate to whether freight and insurance are prepaid or collect and whether costs and risks transfer at the origin or destination.

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Jerick Ornedo
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470 views

Incoterms Reviewer

The document defines various incoterms related to international trade, describing aspects like terms of delivery, payment, and risk/cost transfer. It explains terms at the origin like EXW, FCA, FAS, and FOB, which involve delivery at the seller's premises or port. It also explains destination terms like CFR, CIF, CPT, CIP, DAP, DPU, and DDP, which involve delivery on the vessel or to the buyer's location. Key differences between the terms relate to whether freight and insurance are prepaid or collect and whether costs and risks transfer at the origin or destination.

Uploaded by

Jerick Ornedo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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MAIN CARRIAGE

Refers to freight cost, by air or sea, charged by the carrier (airlines/shipping


lines) or amount paid by the shipper to carrier for the transport of goods
from country of origin to country of destination. (Grp. “C” &“D”)
PRE-CARRIAGE
Refers to the cost of transport for hauling goods from seller’s premises to a
designated point at country of origin. Also known as “Origin Inland Freight”.
(Grp. “F”, “C” & “D”)
ON-CARRIAGE
Refers to the cost of transport for hauling goods from the port of discharge
to buyer’s warehouse or designated place at destination. Also known as
“Destination Inland freight”. (Grp. “D” only)
FREIGHT PRE-PAID
Means the main carriage for the exported goods was paid by seller prior to
departure from country of origin and therefore included in seller’s invoice
price. (Grp. “E”, “C” & “D” only)
FREIGHT COLLECT
Means the main carriage was paid by the buyer upon arrival of imported
goods at country of destination and not included in seller’s invoice price.
(Grp. “E” & “F”)
MULTIMODAL TRANSPORT
Refers to inter-continental transit of goods involving main carriage that can
be carried out both by air or by sea. (EXW, FCA, CPT, CIP, DPU, DAP &
DDP)
PORT TO PORT INSURANCE
Generic name for cargo insurance. It refers to the insurance premium paid
in the international transport of goods by air/sea. This is procured by the
buyer or seller to cover risks against loss or damage to the cargo during
pendency of the voyage from country of origin to destination. (CIF & CIP
only).
INTERNAL INSURANCE
Insurance coverage taken up by seller to cover risks against loss or
damage to the goods while in transit from his premises to a delivery point at
origin. (Grp. “F”, “C” & “D”)
ORIGIN/DESTINATION LCL CHARGES
Refers to cost of handling and moving loose or breakbulk cargoes within a
seaport at country of origin or destination.
ORIGIN/DESTINATION TERMINAL HANDLING CHARGES (THC)
Refers to cost of handling and moving containerized cargoes within the
terminal facilities of a seaport at country of origin or destination.
OTHER CHARGES (O/C)
Refers to incidental expenses (except main carriage and port to port
insurance) incurred by the seller/exporter in relation to fulfilling his
contractual obligation to deliver the goods for each of the 11 Incoterms. (e.
g. pre-carriage/on-carriage, export documentation/clearance fees,
forwarder’s fees, THC/LCL charges, export/import duties & taxes, etc.)
(Grp. “F”, “C” & “D”)
CARRIER
Refers to airlines, shipping lines or their agents (NVOCC/IFF)

ORIGIN
1. EXW (Ex Works)…named place of delivery
Terms of Delivery: Seller’s warehouse, factory or plant not loaded
Terms of Payment: Collect or Prepaid at buyer’s option, not included in seller’s invoice
“Ex Works” means that the seller delivers when it places the goods at the disposal of
the buyer at the eller’s premises or at another named place (e.i. works, factory,
warehouse, etc.)
The seller does not need to load the goods on any collecting vehicle (if he does so, it
will be at the buyer’s risk and expenses). Seller is not bound to organize the export
clearance.
EXW represents the minimum obligation for the seller and may be used for multimodal
mode of transport. It is also suitable for domestic use, while FCA is more appropriate for
international trade.
The seller has no obligation to the buyer to make a contract of insurance.
Seller quoted EXWORKS at his factory. Buyer provided collecting vehicle to pick up the
goods, while loading to buyer’s vehicle, the goods sustained

2. FCA (Free Carrier)…named place of delivery


Terms of Delivery: Carrier or forwarder
Terms of Payment: Freight Collect by the buyer
“Free Carrier” means that the seller delivers the goods to the carrier or another person
nominated by the buyer at the seller’s premises or another named place. The risks
passes on to the buyer at the delivery point.
FCA requires the seller to clear the goods for export but has no obligation to contract for
carriage nor to clear the goods for import, pay any import duty or carry out any import
customs formalities.
The seller has no obligation to the buyer to make a contract of insurance

3. FAS (Free Alongside Ship)…named port of shipment


Terms of Delivery: Alongside the carrying vessel not unloaded from lighter or truck.
Terms of Payment: Freight Collect by the buyer
Free Alongside Ship” means that the seller delivers when the goods are placed
alongside the vessel (e. g., on a quay/dock or a barge/lighter) nominated by the buyer at
the named port of shipment.
The risk of loss or damage to the goods passes to the buyer when the goods are
alongside the ship and he bears all costs from that moment onwards.
FAS requires the seller to clear the goods for export but has no obligation to contract for
carriage nor to clear goods for import, pay any import duty, carry out any customs
formalities and to make a contract of insurance.
4. FOB (Free on Board)…named port of shipment
Terms of Delivery: On board the Vessel
Terms of Payment: Freight Collect by the buyer
“Free on Board” means that the seller delivers the goods on board the vessel nominated
by the buyer at the named port of shipment. The risk of loss or damage to the goods
passes on to the buyer when goods are on board the vessel, and the buyer bears all
costs from that moment onwards.
FOB is not appropriate for containerized cargoes since they are first handed over to the
carrier and delivered at a container terminal before they are placed on board the vessel.
In such situations, FCA should be used.
FOB requires the seller to clear the goods for export but has no obligation to contract for
carriage nor to clear goods for import, pay duty, carry out any import customs formalities
and to make a contract of insurance.

DESTINATION
5. CFR (Cost & Freight)…named port of destination
Terms of Delivery: on board the vessel
Terms of Payment: Freight Prepaid by the seller
6. CIF (Cost, Insurance & Freight)…named port of Destination)
Terms of Delivery: On board the vessel
Terms of Payment: Freight Prepaid by the seller
Insurance: Included in seller’s invoice
7. CPT (Carriage Paid to)…named destination
Terms of Delivery: Carrier or Forwarder
Terms of Payment: Freight Prepaid by the seller
8. CIP (Carriage & Insurance Paid to)…named destination
Terms of Delivery: Carrier or Forwarder
Terms of Payment: Freight Prepaid by the seller
Insurance: Included in the seller’s invoice
9. DAP (Delivered At Place)…named destination
Terms of Delivery: Designated place or warehouse by the buyer at destination and not
unloaded from the vehicle
Terms of Payment: Freight Prepaid by the seller
10. DPU ( Delivered at Place Unloaded)…named destination
Terms of Delivery: Designated place or warehouse by the buyer at destination and
unloaded from the vehicle
Terms of Payment: Freight Prepaid by the seller
11. DDP (Delivered Duty Paid)…named destination
Terms of Delivery: Designated place or warehouse by the buyer at destination and not
unloaded from the vehicle
: Seller included all expenses from seller’s warehouse up to the buyer’s
Warehouse, including payment for import duties/taxes.
Terms of Payment: Freight Prepaid by the seller

In naming the incoterms


1. Terms of Delivery
2.Terms of Payment
- Freight Collect or Freight Prepaid
- Insurance

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