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INCOTERMS 2010
Export

ITS Training 2005-2013

INCOTERMS 2010

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INCOTERMS are internationally-recognised contract terms.

They define responsibilities for the seller (shipper) and buyer (consignee) for
these purposes:
1. Costs who pays which charges.
2. Risk where does the risk transfer from the seller to the buyer?

(The definition of risk can be found on the next slide.)

INCOTERMS are an important part of the contract between seller and buyer,
and should there be any disputes, they will be relied upon in a court of law.

ITS Training 2005-2013

Transfer of Risk the definition

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Throughout this lecture we shall be referring to the transfer of risk.. This slide will
explain the main points to consider.
International Trade (all forms of transport) contain a limited liability, which
effectively means the carrier may only be responsible for a small percentage of the
value of the goods lost or damaged.
The INCOTERM decides which party takes the risk and from which point.
There are however two INCOTERMS that require mandatory insurance, these are
CIF & CIP.
On all other INCOTERMS, it is advisable to
obtain marine insurance cover.
If you do not arrange marine insurance on your
goods, and they become damaged or lost court
action becomes necessary to resolve a dispute.
ITS Training 2005-2013

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Quotation
ABC Exporters, 101 High Street, Birmingham, B6 2LG
Freight Quotation
Date: 2nd January 201X
Quotation to:

Reference: 0109

High Quality Supplies

23 Boulevard Place
New York
1923-0772

Re: 5000 Plastic Bottles Cat No. B9662

Always enter the INCOTERM onto

the quotation.
INCOTERMS are updated every 10
years.

We are pleased to submit the following price based upon

DAP Pittsburgh
Subject to INCOTERMS 2010

Enter the following into your

quotation.
This will avoid any disputes.

Product

27,795.00

Subject to our terms and conditions

ITS Training 2005-2013

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Structure
INCOTERMS follow a particular structure

Sea terms

Any Mode

Any Mode

FAS

Ex Works

DAT

FOB

FCA

DAP

CFR

CPT

DDP

CIF

CIP

ITS Training 2005-2013

Packing & Marking Regulations

There are a total of 11 INCOTERMS.

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Example 1

Exporting to Australia

It is always the responsibility of the

seller for packing & marking.

The seller therefore has to take into

consideration overseas country
regulations.

You must not use any wood or straw as

packing material, unless treated to
Australian standards

Example 2

Exporting from USA

Here are two examples of packing and

marking regulations.

ITS Training 2005-2013

You must ensure that the country of

origin is shown in English on all four
sides of the boxes, this may be in
addition to any other language.

Ex Works

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(Named Place)

The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
Buyers Risk
Risk transfers when the goods are made
available to the driver (prior to loading)
at the collection point.
Considerations
Buyer responsible for
export loading.
Buyer responsible for
export customs and
formalities.
Buyer appear on the bill
of lading as Shipper.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Suitable for any mode of

transport

Pittsburgh

New York

Insurance Risk

The Buyers Responsibilities Are...

Arrange both export and import
licence and customs formalities.
Arrange to pay freight charges
from the sellers warehouse to the
final destination.
Recommend Marine Insurance.

FCA - Free Carrier, e.g. FCL

(Named Place)

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
Obtain export licences and deal with export customs formalities.
Buyers Risk
Risk transfers when the goods are
loaded on board the vehicle at the
point of collection.

Pittsburgh

New York

This example is for direct collections only.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Obtain any import licence and deal with
import customs formalities.
Arrange to pay freight charges from the
agreed collection point to the final
destination.
Recommend Marine Insurance.

FCA - Free Carrier e.g. LCL

(Named Place)

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
Obtain export licences and deal with export customs formalities.
Arrange to deliver the good to the consolidation point.
Buyers Risk
Risk transfers when the vehicle arrives at
the consolidation point (prior to unloading).

Pittsburgh

New York

This example is consolidated goods only.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Obtain any import licence and deal with
import customs formalities.
Arrange to pay freight charges from the
agreed collection point to the final
destination.
Recommend Marine Insurance.

Sea Terms for Break Bulk

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The reasons why FAS/FOB/CFR/CIF are only suitable for conventional cargo.
Step 1
Factory Birmingham.

Step 4
Safely on board in good
order and condition.

Step 2
Drums being transported to
the port.

Step 3
When they arrive at the port
they can be checked for
condition/loss before loading
on to the vessel.
ITS Training 2005-2013

Goods arriving at the

port in a container
cannot be checked as
the insurance risk
transfer.

FAS - Free Alongside Ship

(Named Port of Loading)

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Deliver the goods to the named port.

Buyers Risk
Risk transfers when the goods have
been delivered to the port of export.

Pittsburgh

Suitable for sea

transport only

New York

Not suitable for containerised cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to pay freight charges from the
named port of export (i.e. Felixstowe) to
their final destination.
Recommend Marine Insurance.

FOB - Free on Board

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(Named Port of Loading)

The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed vessel.

Buyers Risk
Risk transfers when the goods are on
the vessel at the port of export, and
from the agreed date.

Pittsburgh

Suitable for sea

transport only

New York

Not suitable for containerised cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to pay freight charges once the
goods are on-board the export vessel.
Recommend Marine Insurance.

Transfer of Risk

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Under a FOB contract, the Transfer of Risk can happen in two ways.
Risk will transfer from seller to buyer when the goods are on board the vessel at the
port of export and from the agreed date, therefore giving the buyer the greater risk.
If the vessel is delayed, risk will transfer at the agreed date prior to loading onto the
vessel.
The buyer must supply the seller, with sufficient notice, of the vessel name, loading
port and required delivery time.
If the buyer fails to advise these details to the seller, then risk will transfer on expiry of
the agreed delivery period (delivery to the named port)
and therefore the risk will transfer prior to the goods being loaded onto the vessel
ITS Training 2005-2013

CFR - Cost and Freight

(Named Port of Destination)

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all freight charges to the port of destination.
The seller may also be responsible for on-carriage if agreed.
Buyers Risk
Risk transfers when the goods are on the
vessel at the port of export.

Pittsburgh

New York

Not suitable for containerised cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for sea

transport only

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay haulage cost from the named port to
final destination.
Recommend Marine Insurance.

CIF - Cost, Insurance & Freight

(Named Port of Destination)

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all freight charges to the port of destination.
The seller may also be responsible for on-carriage if agreed.
Arrange Marine Insurance on behalf of the buyer
Buyers Risk
Risk transfers when the goods are on the
vessel at the port of export.

Pittsburgh

New York

Not suitable for containerised cargo.

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk

Suitable for sea

transport only

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay haulage cost from the named port to
final destination.

CPT - Carriage Paid To

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(Named Place of Destination)

The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed destination (including unloading at
destination).
Buyers Risk
Risk transfers when the goods have delivered
to the carrier (on-board the vehicle).

Pittsburgh

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

New York

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay any duties, taxes and clearance costs
in the importing (buying) country.
Recommend Marine Insurance.

CIP Carriage, Insurance Paid To coast

(Named Place of Destination)

The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the
contract, taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export
licences).
Pay all charges to the agreed destination (including unloading at
destination).
Seller arranges marine insurance on behalf of the buyer.
Buyers Risk
Risk transfers when the goods have delivered
to the carrier (once on-board the vehicle).

Pittsburgh

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

New York

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Pay any duties, taxes and clearance costs
in the importing (buying) country.

DAT Delivered at Terminal

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed terminal.
Recommend Marine Insurance.
Buyers Risk
Risk transfers when the goods have delivered
to the agreed terminal.

Pittsburgh

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

New York

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to unload the goods upon arrival at
the terminal.
Pay any duties, taxes and clearance costs in
the importing (buying) country.

DAP Delivered at Place

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export clearance and formalities (including export licences).
Pay all charges to the agreed destination.
Recommend Marine Insurance.
Buyers Risk
Risk transfers when the goods have delivered
to the agreed destination.

Pittsburgh

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

New York

Insurance Risk

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Arrange for import licence and deal with
import customs formalities.
Arrange to unload the goods upon arrival at
the buyers warehouse.
Pay any duties, taxes and clearance costs in
the importing (buying) country.

DDP Delivered Duty Paid

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The Sellerss Responsibilities Are...

Provide the goods, pack and mark in accordance with the contract,
taking into consideration overseas country regulations.
Arrange export and import clearance and deal with other formalities
(including licences).
Arrange Customs Clearance on import.
Pay any duties/taxes (and if agreed local taxes) in the buying country.
Recommend Marine Insurance.
Buyers Risk
Risk transfers when the goods have delivered
to the agreed destination.

Pittsburgh

New York

Suitable for any mode of

transport

The Buyers Responsibilities Are...

Pay any local import sales taxes.
e.g. VAT, this should however be confirmed
prior to agreeing this INCOTERM

Cost by Buyer
ITS Training 2005-2013

Costs by Shipper

Insurance Risk