UNIVERSITY COLLEGE OF MANAGEMENT

STUDIES

INTERNATIONAL TRADE AND FINANCE

PRESENTED BY:

SANDRA OWUSU ASAMOAH - AC/09-2/WDS/1019

GEORGE LARTEY - AC/09-2/WDS/1002
EMMANUEL ODAME AYEH - AC/09-2/WDS/1008
MERCY ESHUN - AC/09-2/WDS/1067
KRAMPAH FORSON - AC/09-2/WDS/1005
INCOTERMS
It stands for the international rules for the interpretation of trade terms. they are a list of

standard terms for foreign trade contracts compiled by international chamber of commerce. It

is important to note that this terms apply to contracts of sale and not contracts of carriage.

However the sales contracts is a times influencing the carriage contracts. for business

technology to be effective, phases must mean the same thing throughout the industry. this is

the major reason why the international chamber of commerce created INCOTEMS in1936.it is

designed to create a bridge between different members of the industry by acting as a uniform

language they can use.

IMPORTANCE
• It reduces and removes uncertainties arising from different interpretations of such
terms in different countries.

• It also deals with the documentation required for global trade by specifying the
responsibilities for each parties for the documents.

• It determines the paper work for shipment

• Incoterms are used to divide cost of transaction between the buyer the seller.

It defines the responsibilities of both the seller and the buyer.

International commerce terms is a universally set of definitions of international trade terms

,such as FOB,CFR and CIF, developed by the international chamber of commerce (ICC) in Paris,

France. It defines the trade contract responsibilities and liabilities between buyer and seller. It is

invaluable and a cost –saving tool. The exporter and the importer need not undergo length

negotiations about conditions of each transactions. Once they have agreed on a commercial

term like FOB the can sell and buy at FOB without discussing who will be responsible for freight,

cargo insurance and other costs of risks. In international trade it will be exporters to refrain,
however possible, from dealing in trade terms that will hold the seller responsible for the

import customers clearance and/or payment of import customs duties and taxes and/or other

costs and risks.

Ex – Works

EX means from. WORKS means factory, mill or ware house which is the seller’s premises.

EXW applies to goods available only at the sellers premises. Buyer is responsible for loading for

the goods on truck or container at the sellers premises and for the subsequent costs and risks.

In practice it is not uncommon that the seller loads the goods on truck or container at the

sellers premises without charging loading fee.

In the quotation indicate the named place ( seller’s premises) after the acronym EXW ,for

example EXW Sandra and EXW mercy Tetteh.The term EXW is commonly used between the

manufacturer (seller) and export trader(buyer) and the export trader resells on other trade

terms to the foreign buyers. some manufacturers may use the term EX factory, which means

the same as EX- WORKS.

If delivery takes place in the sellers premises, the seller is responsible for loading. seller may

however act as buyers agent in arranging transport for a fee. This can be used for all modes of

transport-rail,sea,air,truck or multi mode.

Group F – Main carriage unpaid

FAS-Free Along Side Ship(named loading port)

Sellers are responsible for placing the goods along side ship on the quay at the place named in

the quotation.”Along side” means within the reach of the carrier (ship). From that moment

buyer bear all cost and risk of lost or damage. Sellers are responsible for clearing the goods for

export. This is suitable for maritime transport only.

FOB –Free on board(named loading port)

The seller must load the goods on board the ship at the port named in the sales contract, after

clearing the goods for export. Buyers assume the risk of lost or damage to the goods once they

pass the ship rail.

CFR-cost and freight(named destination port)

Seller must pay cost and freight to bring the goods to the port of destination, after clearing

them for export.however, risk is transferred to the buyer once the goods have crossed the ships

rail in the port of shipment(used for maritime transport only).

CIF-Cost Insurance and Freight (Named Destination Port)

This is similar to CFR, but seller must also procure and pay for insurance for the buyer. Sellers

contract with the insures and pay the premiums, but buyer assumes risk of loss from the time

the goods pass the ships rail in the port of shipment. This is used for transport by water (sea or

inland).
CPT – Carriage paid to (Named Place of Destination)

The seller clears the goods for export and pays the cost and freight necessary to bring them to

named destination. However, risks pass when the goods are handed over the first carrier. This

is used in any form of transport (air, sea, rail, truck or multi-modes)

Group D – Arrival

DAF – Delivered At Frontier (named place)

This term can be used when the goods are transported by rail and road. The seller pays

for transportation to the named place of delivery at the frontier. The buyer arranges for

customs clearance and pays for transportation from the frontier to his factory. The

passing of risk occurs at the frontier.

DES – Delivered Ex Ship (named port)

Where goods are delivered ex ship, the passing of risk does not occur until the ship has

arrived at the named port of destination and the goods made available for unloading to

the buyer. The seller pays the same freight and insurance costs as he would under a CIF

arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but

also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading

the goods and any duties, taxes, etc… are for the Buyer. A commonly used term in

shipping bulk commodities, such as coal, grain, dry chemicals - - - and where the seller

either owns or has chartered, their own vessel.

DEQ – Delivered Ex Quay (named port)

This is similar to DES, but the passing of risk does not occur until the goods have been unloaded

at the port of destination.

DDU – Delivered Duty Unpaid (named destination place)

This term means that the seller delivers the goods to the buyer to the named place of

destination in the contract of sale. The goods are not cleared for import or unloaded

from any form of transport at the place of destination. The buyer is responsible for the

costs and risks for the unloading, duty and any subsequent delivery beyond the place of

destination. However, if the buyer wishes the seller to bear cost and risks associated

with the import clearance, duty, unloading and subsequent delivery beyond the place of

destination, then this all needs to be explicitly agreed upon in the contract of sale.

DDP – Delivered Duty Paid (named destination place)

This term means that the seller pays for all transportation costs and bears all risk until

the goods have been delivered and pays the duty. Also used interchangeably with the

term "Free Domicile". The most comprehensive term for the buyer. In most of the

importing countries, taxes such as (but not limited to) VAT and excises should not be

considered prepaid being handled as a "refundable" tax. Therefore VAT and excises

usually are not representing a direct cost for the importer since they will be recovered

against the sales on the local (domestic) market.

buyer or the seller depending on who owns the cargo at time of transport. In the case of CFR

terms, it would be the buyer while in the case of CIF or CIP terms, it would be the seller.
The Summary of the selllers and the buyers risks

NOTE: The following information refers to Incoterms 2000 and is now replaced with different

information in Incoterms 2010 For a given term, "Yes" indicates that the seller has the

responsibility to provide the service included in the price. "No" indicates it is the buyer's

responsibility. If insurance is not included in the term (for example, CFR) then insurance for

transport is the responsibility of the buyer or the seller depending on who owns the cargo at time

of transport. In the case of CFR terms, it would be the buyer while in the case of CIF or CIP

terms, it would be the seller.

Unlo
Unload
ad Landi Landin Entry
Expo onto Entry -
Transp from ng Transp g Transpo -
Load rt- trucks Custo
Inco- ort to truck charge ort to charges rt to Insuran Dutie
to duty from ms
terms exporte at the s at importe at destinati ce s and
truck paym the clearan
r's port origin origin' r's port importe on Taxe
ent importe ce
's s port r's port s
rs' port
port
EXW No No No No No No No No No No No No
FCA Yes Yes Yes No No No No No No No No No
FAS Yes Yes Yes Yes No No No No No No No No
FOB Yes Yes Yes Yes Yes No No No No No No No
CFR Yes Yes Yes Yes Yes Yes Yes No No No No No
CIF Yes Yes Yes Yes Yes Yes No No No Yes No No
CPT Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No
CIP Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No
DAF Yes Yes Yes Yes Yes Yes No No No No No No
DES Yes Yes Yes Yes Yes Yes No No No No No No
DEQ Yes Yes Yes Yes Yes Yes Yes No No No No No
DDU Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No
DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes