terms of trade or incoterms when a purchase is made who pays what? export packing costs inland...

Terms of Trade or Incoterms

When a Purchase Is Made Who Pays What?

Export packing costsInland transportation to portExport clearanceInternational carrier loading

Main transportation costsCargo insuranceCustoms dutiesRisk in transit

Click on “Page Down” to continue.

INternational Chamber Of COmmerce TERMS

Export packing costsInland transportation to portExport clearanceInternational carrier loading

Main transportation costsCargo insuranceCustoms dutiesRisk in transit

Click on “Page Down” to continue.

Incoterm Definition

International Commerce Term • A formalized international Term of Trade regulated by the

International Chamber of Commerce• Specifies the responsibilities of the exporter and the

responsibilities of the importer in an international transaction– Which tasks will be performed by the exporter– Which tasks will be performed by the importer– Which activities will be paid by the exporter– Which activities will be paid by the importer

– When the transfer of responsibility for the goods will take place

• First codified by the International Chamber of Commerce in 1953. The latest revision is dated 2000

Click on “Page Down” to continue.

INCOTERMS

EXW

CFR

FCA

FOB

FAS

CPTDAF DES

CPT

DEQ

CIF

CFR

CIP

DDU

DDP

Ex Works

Free Carrier

Free Alongside Ship

Free On Board

Cost and Freight

Carriage Paid To

Cost, Insurance, Freight Delivered Ex Ship

Delivered Duty Unpaid

Carriage and Insurance Paid To Delivered at Frontier

Delivered Ex QuayDelivered Duty Paid

Cost, Insurance, FreightDelivered Ex Ship

CPT

Carriage Paid To

Free CarrierCarriage and Insurance Paid To

DDUDelivered Ex Quay

Delivered Ex Quay

Delivered Ex Quay

CFR

Ex Works

Carriage and Insurance Paid To

DEQ

Carriage Paid To

Delivered Duty UnpaidDelivered Ex Ship

Delivered Ex Ship

Delivered Ex Ship

Free Alongside Ship

Free Alongside ShipFree Alongside Ship

Free Alongside ShipCIF

DDUCPT

CPT

CPT

CFR

Cost, Insurance, Freight

Delivered Duty Unpaid

Delivered Duty Unpaid

Delivered Duty Unpaid

Delivered Duty Unpaid

Delivered Duty Unpaid

Delivered Ex Ship

Delivered Ex Ship

Delivered Ex Ship

Delivered Ex Ship

Delivered Ex Ship

Delivered Ex Ship

Delivered Ex Ship

Delivered Ex Ship

Delivered Ex ShipDelivered Ex Ship

Delivered Ex ShipDelivered Ex Ship

Delivered Ex ShipDelivered Ex Ship

Delivered Ex Ship

Delivered Duty UnpaidDelivered Duty Unpaid

Delivered Duty UnpaidDelivered Duty Unpaid

Delivered Duty UnpaidDelivered Duty Unpaid

EXWEXW

EXWEXW

EXWEXW

EXW

DDUDDU

DDUDDU

DDUDDU

DDUvCarriage and Insurance Paid To

Carriage and Insurance Paid ToCarriage and Insurance Paid To

Carriage and Insurance Paid ToCarriage and Insurance Paid To

Carriage and Insurance Paid ToCarriage and Insurance Paid ToCarriage and Insurance Paid To

Free Alongside ShipFree Alongside Ship

Free Alongside ShipFree Alongside Ship

Free Alongside ShipFree Alongside Ship

Free Alongside ShipFree Alongside Ship

Free Alongside ShipFree Alongside Ship

Carriage Paid ToCarriage Paid To

Carriage Paid ToCarriage Paid To

Carriage Paid To

CIF

CIF

CIFCIF

CIF

CIF

CIF

CIFCIF

CIFCIF

CIFCIF

CIFCIF

CIF

Delivered Duty PaidDelivered Duty Paid

Delivered Duty PaidDelivered Duty Paid

Delivered Duty PaidDelivered Duty Paid

??? ?

INCOTERMS

• “E” Terms

INCOTERMS

• “E” Terms.

• “F” Terms.

INCOTERMS

• “E” Terms.

• “F” Terms.

• “C” Terms.

INCOTERMS

• “E” Terms.

• “F” Terms.

• “C” Terms.

• “D” Terms.

INCOTERMS

• “E” Terms.

INCOTERMS

• “E” Terms.

INCOTERMS

• “E” Term.– “Ex Works.”

INCOTERMS

• “E” Term.– “Ex Works.”– Buyer pays everything.

INCOTERMS

• “F” Terms.

INCOTERMS

• “F” Terms.– Seller pays for product to be delivered,

cleared for export, to carrier buyer selects.

INCOTERMS

• “F” Terms.– Seller pays for product to be delivered,

cleared for export, to carrier buyer selects.

• “C” Terms.

INCOTERMS

• “F” Terms.– Seller pays for product to be delivered,

cleared for export, to carrier buyer selects.

• “C” Terms.– Seller pays for main carriage and/or cargo

insurance.

INCOTERMS

• “F” Terms.– Seller pays for product to be delivered,

cleared for export, to carrier buyer selects.

• “C” Terms.– Seller pays for main carriage and/or cargo

insurance.

• “D” Terms.

INCOTERMS

• “F” Terms.– Seller pays for product to be delivered,

cleared for export, to carrier buyer selects.

• “C” Terms.– Seller pays for main carriage and/or cargo

insurance.

• “D” Terms.– Seller pays all costs of delivery.

INCOTERMS

• “E” Terms.– “Ex Works.”– Buyer pays everything.

Incoterms: EXW

• Used with any merchandise or form of transportation.

• Easiest Incoterm for exporter, most difficult for importer.

• Basically, exporter says: “Here is product. Come get it.”

SellerPrepare order

Mfg.Pick itemsPack items

Buyer

SellerPrepare order

Mfg.Pick itemsPack items

Buyer

Buyer pays:Export packing costsInland transportation to portExport clearanceInternational carrier loading

Main transportation costsCargo insuranceCustoms dutiesRisk in transit

Incoterms: FCA

• “Free Carrier.”• For goods shipped multi-modal without

handling.• Oriented toward containerization.• Exporter delivers goods to carrier that

importer selects.• Responsibility shifts from exporter when

goods are delivered to carrier’s vehicle, either at exporter’s plant or carrier’s premises.

Land Incoterm: DAF

• “Delivered at Frontier.”

• For any merchandise, but specifically refers to land transportation.

• Transfer of responsibility from exporter to importer is at city named in Incoterm.

• Usually goods remain on vehicle to final destination.

Ocean Incoterms

• FAS: “Free Along Ship.”– Exporter brings goods to port.– At port, importer takes responsibility for

goods.

• FOB: “Free on Board” Port of Departure.– Exporter responsible for goods until they are

on the ship, then importer is responsible.– Dividing point is ship’s rail.

Ocean and Corresponding Non-Ocean Incoterms

OCEAN TERM:– CFR “Cost and Freight”

• Exporter responsible for goods until on ship.

– CIF “Cost, Insurance and Freight”

• Same as CFR except exporter pays marine insurance.

NON-OCEAN TERM:– CPT “Carriage Paid To”

• Exporter responsible for goods until on carrier.

– CIP “Carriage and Insurance Paid to”

• Same as CIF except it’s a non-ocean shipment.

Ocean and Corresponding Non-Ocean Incoterms

OCEAN TERM:– CFR “Cost and Freight”

• Exporter responsible for goods until on ship.

– CIF “Cost, Insurance and Freight”

• Same as CFR except exporter pays marine insurance.

NON-OCEAN TERM:– CPT “Carriage Paid To”

• Exporter responsible for goods until on carrier.

– CIP “Carriage and Insurance Paid to”

• Same as CIF except it’s a non-ocean shipment.

Click on “Page Down” to continue.

Ocean and Corresponding Non-Ocean Incoterms

OCEAN TERM:– DES “Delivered ex Ship”

• Exporter responsible or goods (usually bulk commodities) until importer gets them at port of destination.

– DEQ “Delivered ex Quay” • Usually bulk

commodities for which exporter pays for ship unloading.

NON-OCEAN TERM:– DDU “Delivered Duty

Unpaid” • Exporter performs most

tasks in shipment except unloading costs.

– DDP “Delivered Duty Paid”• Exporter pays for

everything in the shipment.

Ocean and Corresponding Non-Ocean Incoterms

OCEAN TERM:– DES “Delivered ex Ship”

• Exporter responsible or goods (usually bulk commodities) until importer gets them at port of destination.

– DEQ “Delivered ex Quay” • Usually bulk

commodities for which exporter pays for ship unloading.

NON-OCEAN TERM:– DDU “Delivered Duty

Unpaid” • Exporter performs most

tasks in shipment except unloading costs.

– DDP “Delivered Duty Paid”• Exporter pays for

everything in the shipment.

Click on “Page Down” to continue.

Incoterms by Transport ModeMode E

XW

FCA

FAS

FOB

CFR

CIF

CPT

CIP

DES

DEQ

DAF

DDU

DDP

Break-bulk ocean cargo

X X X X X X X X X

Bulk ocean cargo X X X X X X X X X

RORO X X X X X X X

Multimodal FCL X X X X X X X

Multimodal LCL X X X X X X X

Rail X X X X X X X

Road X X X X X X X

Air X X X X X X X

Incoterms by Transport ModeMode E

XW

FCA

FAS

FOB

CFR

CIF

CPT

CIP

DES

DEQ

DAF

DDU

DDP

Break-bulk ocean cargo

X X X X X X X X X

Bulk ocean cargo X X X X X X X X X

RORO X X X X X X X

Multimodal FCL X X X X X X X

Multimodal LCL X X X X X X X

Rail X X X X X X X

Road X X X X X X X

Air X X X X X X XClick on “Page Down” to continue.

Incoterm STRATEGY

• Incoterm determined by exporter’s strategy and…– Type of product.– Method of shipment.– Ability of both parties to perform tasks in

shipment.– Trust parties have toward one another.

• Exporter always chooses Incoterm.

End of Program