Term in International CUSTOM AND FREIGHT

FOWARDING
MANAGEMENT
Trade BSM32024
 • Roles and functions of in
coterms in commercial task
• In coterms commercial terms
• In coterms abbreviations

INTRODUCTION TO
INTERNTIONAL
INCOTERMS
INCOTERMS are UNCITRAL recognized as global standards for
interpretation of terms in foreign trade that provides
internationally accepted rules specifying standards and definitions
of performance for most common trading terms. INCOTERMS rules
specify:

Establishment of seller and buyer

Point in journey where risk transfers from seller to buyer

Obligation of each party (buyer and seller)

INCOTERMS safeguards the following issues in international trade contract
and Foreign Trade contract;

To determine critical point of transfer of risks of seller to buyer, in the

process of goods forwarding (risks of loss, robbery or deterioration of
goods) allowing the person supporting these risks to prepare enough,
especially in terms of insurance taking

To specify and subscribe the contract of carriage i.e. the seller or buyer

To define the party responsible for packaging, operations handling, on

loading and off loading of the goods or porting and discharge of containers,
and operations of inspection.

To distribute logistic and administration expenses between seller and buyer

in various stages of the trading process

To fix obligations for achievement of the formalities, payments of rights,

importation and supply of the documents
In coterms 2010: Transfer of obligation for charges & risks
(Importer/exporter)
 • Ex Works (EXW)

Rules for any •

•
Free Carrier (FCA)

Carriage Paid To (CPT)

mode of •

•
Carriage and Insurance Paid To (CIP)

Delivered at Terminal (DAT)

transport • Delivered at Place (DAP)

• Delivered Duty Paid (DDP)

 Ex works

In this INCOTERM, the seller

minimizes risk, as the goods
are made available to his
business premise. This means
that the buyer bears the risks
of loss after the goods leave
the exporters (exporter)
premises
Ex – Work
• Notes
• Seller has no obligation to load goods, even if better-suited to do
so
• If seller does load goods, it does so at buyer’s expense and risk
• Better-suited to domestic transport (no obligation that seller clear
goods for export—only provide assistance if necessary at buyer’s
expense and risk)
• Buyer bears all risk of loss from time seller places goods at buyer’s
disposal
Free carrier
(FCA).
• Free carrier (FCA). Seller
(Exporter) clears goods being
exported and hands them
over to the carrier at a place
designated by the buyer.
FCA – Free Carrier
• Notes
• Seller does clear goods for export; import formalities are
buyer’s responsibility
• Seller may contract for carriage at buyer’s expense and risk
(CPT). Carriage
paid to

•CPT stands for Carriage Paid To

and is an international trade
term which means that the
seller delivers the goods at their
expense to a carrier or another
person nominated by the seller
CPT – Carriage Paid To
• 2 points of importance
• Place of delivery of goods to carrier
• Seller’s delivery obligation is complete
• Risk of loss passes
• Place of destination
• Seller contracts for and pays for carriage to the place of
destination

• Carriage paid to (CPT). It is similar to CIF but in this case,

the seller obtains insurance for the merchandise in
transit and names the buyer as the insured party.
CPT – Carriage Paid To
• An Example:
• Contract says seller is to deliver goods to shipping warehouse in Charleston, WV.
Terms of sale are “CPT buyer’s facility, 24 Waffle Place, #1, Singapore 048621
(Incoterms 2010).”
• Delivery obligation is fulfilled when seller delivers to the shipping facility in
Charleston.
• Risk of loss passes at the moment the goods are handed over to the carrier in
Charleston.
• But seller pays for carriage to Singapore.
CPT – Carriage Paid To
• Notes
• Seller clears goods for export and pays for transport through any country
necessary to delivery
• Seller has no obligation to pay for insurance but must provide buyer
information to buy insurance at buyer’s risk and expense
• Buyer obtains import licenses and carries out customs formalities
• Seller pays for both loading and unloading if covered by contract of carriage
(CIF). Cost ,
Insurance and
Freight
•Cost, Insurance and Freight
(CIF). It is similar to the above
named CFR only that the seller
insures the goods. The goods are
said to be delivered upon arrival
at the port of destination
CIF – Cost Insurance and Freight

• Cost Insurance and Freight

• Seller delivers the goods on board the vessel or procures the goods already so
delivered.
• The risk of loss of damage to the goods passes when the goods are on board
the vessel.
• The seller must contract for and pay the costs and freight necessary to bring
the goods to the named port of destination.
CIF – Cost Insurance and Freight

• Notes
• Like CFR but with additional obligation to procure insurance to port of
destination
• Insurance requirement is minimum cover (institute cargo clause c) in the amount
of contract price plus 10% from point of delivery to point of destination
• Seller clears goods for export but not import
(DAT ).
Delivery at
Terminal
•Delivered at terminal (DAT). The
exporter covers the carriage
costs for up to the terminal. This
however excludes all costs
related to clearance. The seller
bears all risks up to the
unloading point at the terminal.
DAT – Delivery at Terminal

• Delivered at Terminal
• Seller delivers when the goods, once unloaded from the arriving means of
transport, are placed at the disposal of the buyer at a named terminal at
the named port or place of destination.
• “Terminal” includes any place, whether covered or not, such as a quay,
warehouse, container yard or road, rail or air cargo terminal.
• The seller bears all risks involved in bringing the goods to and unloading
them at the terminal at the named port or place of destination.
DAT – Delivery at Terminal

• Notes
• Seller’s obligation is fulfilled and risk of loss passes at same time: when the
goods are unloaded at the arriving terminal and placed at buyer’s disposal
• Can specify a point within the terminal at which time the obligation is
complete
• Seller clears goods for export but not for import
• No requirement of insurance
• If the intention is to carry seller’s obligation further into buyer’s country, use
DAP or DDP
(DAP). Delivery
at Place

•Delivered at place (DAP. The

seller will be responsible to cater
for all costs up to a certain
named place that was agreed
upon by the buyer and seller.
This however excludes clearance
costs.
DAP – Delivery at Place

• Delivered at Place
• Seller delivers when the goods are placed at the disposal of the buyer on the
arriving means of transport ready for unloading at the named place of
destination.
• The seller bears all risks involved in bringing the good to the named place.
DAP – Delivery at Place

• Notes
• Much like DAT, but with additional obligation by seller into country of delivery
• Goods are placed at buyer’s disposal at named location ready for unloading;
risk passes at that point
• Seller clears goods for export but not import (use DDP if intent is to require
seller to clear goods for import also).
• No obligation on seller to purchase insurance
(DDP). Delivery
Duty Paid

•Delivered duty paid (DDP). The

seller is responsible for the costs
involved from the goods’ point
of manufacture up to the
buyer’s point of reception
DDP – Delivery Duty Paid

• Delivered Duty Paid

• Seller delivers the goods when the goods are placed at the disposal of the
buyer, cleared for import on the arriving means of transport ready for
unloading at the named place of destination.
• The seller bears all the costs and risks involved in bringing the goods to
the place of destination and has an obligation to clear the goods not only
for export but also for import, to pay any duty for both export and import
and to carry out all customs formalities.
DDP – Delivery Duty Paid

• Notes
• Like DAP, but including seller’s obligation to clear goods for
import—pay for any necessary licenses
• Maximum obligation for seller
• If seller is not well-suited to clear goods for import, DAP
should be used
• No obligation to pay for insurance
Rules for Sea • Free Alongside Ship (FAS)
and Inland • Free On Board (FOB)
Waterway • Cost and Freight (CFR)

Transport • Cost Insurance and Freight (CIF)

(FAS). Free
Alongside ship

•Free Alongside Ship (FAS). The

seller transports his goods from
premise, clears the goods for
export and places them on the
ship. It’s from there that the risk
is transferred to the buyer
(importer)
FAS – Free Alongside Ship
• Free Alongside Ship
• Seller delivers when the goods are placed alongside the vessel (e.g., on a quay
or a barge) nominated by the buyer at the named port of shipment.
•
• The risk of loss of or damage to the goods passes when the goods are
alongside the ship, the buyer bears all costs from the moment onwards.
FAS – Free Alongside Ship
• Notes
• Usage: “FAS Charleston, SC, USA (Incoterms 2010)”
• Can be used in a string sale where seller procures goods already delivered for
shipment

• Seller is obligated to clear goods for export but not import

• Seller has no obligation to pay for contracts of carriage or insurance but may
contract for carriage and must assist buyer by providing necessary
information for insurance
FAS – Free Alongside Ship

• Notes
• Not appropriate when goods in container and delivered to
carrier at terminal; use FCA
• Might want to define what it means to be “alongside” ship
(FOB). Free
On Board
•Free Alongside Ship (FAS). The
seller transports his goods from
premise, clears the goods for
export and places them on the
ship. It’s from there that the risk
is transferred to the buyer
(importer)
FOB – Free On Board
• Free on Board
• Seller delivers the goods on board the vessel nominated by
the buyer at the named port of shipment or procures the
goods already so delivered.
• The risk of loss of or damage to the goods passes when the
goods are on board the vessel, and the buyer bears all
costs from that moment onwards.
FOB – Free On Board
• Notes
• Notice change in 2010: “free on board” no longer means across the ship’s rail;
now means on board the vessel
• Another change in 2010: if requested by buyer or if it is commercial practice
and buyer does not instruct otherwise, seller may contract for carriage at
buyer’s risk and expense; seller may decline but must notify buyer promptly
• Therefore, may want to exclude if that is the intent
• Like FAS but goods must be placed on board
• Usage: “FOB Charleston, SC, USA (Incoterms 2010)”
CFR – Cost Freight
• Notes
• Notice change in 2010: “free on board” no longer means across the ship’s rail;
now means on board the vessel
• Another change in 2010: if requested by buyer or if it is commercial practice
and buyer does not instruct otherwise, seller may contract for carriage at
buyer’s risk and expense; seller may decline but must notify buyer promptly
• Therefore, may want to exclude if that is the intent
• Like FAS but goods must be placed on board
• Usage: “FOB Charleston, SC, USA (Incoterms 2010)”
 (CFR). Cost
Freight

•Cost and Freight (CFR).

Involves the responsibilities
similar to those of Free On
Board (FOB) only that the
exporter in addition, incurs
the international freight cost
for the goods being exported.
CFR – Cost Freight Insurance
• 2 places of importance
• Place of delivery of goods
• Seller’s delivery obligation is fulfilled when goods are on board the vessel
• Risk of loss passes when the goods are on board the vessel
• Port of destination
• Seller pays for carriage to port of destination
CFR – Cost Freight Insurance
• Examples:
• Contract says: Seller is to deliver goods on board vessel at Port of Charleston,
SC, USA. Terms of sale are: “CFR, Shanghai (Incoterms 2010).”
• Seller’s delivery obligation is fulfilled when the goods are on board the vessel in South
Carolina; risk of loss passes then also
• Seller must pay for shipment to Shanghai
• Contract says terms of sale are: “CFR, Shanghai (Incoterms 2010).” Silent as
to port of shipment
• Seller’s delivery obligation is fulfilled when the goods are on board the vessel in the port
selected by seller; risk of loss passes then also
• Seller must pay for shipment to Shanghai
 (CIF). Cost
Freight

•Cost and Freight (CFR).

Involves the responsibilities
similar to those of Free On
Board (FOB) only that the
exporter in addition, incurs
the international freight cost
for the goods being exported.
CIF – Cost Freight Insurance

• Cost Insurance and Freight

• Seller delivers the goods on board the vessel or procures
the goods already so delivered.
• The risk of loss of damage to the goods passes when the
goods are on board the vessel.
• The seller must contract for and pay the costs and freight
necessary to bring the goods to the named port of
destination.
CIF – Cost Freight Insurance
• 2 places of importance
• Place of delivery of goods
• Seller’s delivery obligation is fulfilled when goods are on board the vessel
• Risk of loss passes when the goods are on board the vessel
• Port of destination
• Seller pays for carriage to port of destination
CIF – Cost Freight Insurance
• Notes
• Like CFR but with additional obligation to procure insurance to port of
destination
• Insurance requirement is minimum cover (institute cargo clause c) in the
amount of contract price plus 10% from point of delivery to point of
destination
• Seller clears goods for export but not import
Thank You