Incoterms Flashcards
Internationally accepted terms defining the responsibilities of exporters and importers
Incoterms 2020
The world’s essential terms of trade for the sale of goods.
Incoterms 2020
Provide specific guidance to individuals participating in the import and export of global trade on a daily basis.
Incoterms 2020
Incoterms serves as:
agreed terms of purchase and delivery.
Incoterms 2020 is launched by:
International Chamber of Commerce (ICC).
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.
MAIN 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”.
PRE-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”.
ON-CARRIAGE
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
FREIGHT PRE-PAID
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.
FREIGHT COLLECT
refers to inter-continental transit of goods involving main carriage that can be carried out both by air or by sea.
MULTIMODAL TRANSPORT
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.
PORT TO PORT 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.
INTERNAL INSURANCE
refers to cost of handling and moving loose or breakbulk cargoes within a seaport at country of origin or destination.
ORIGIN/DESTINATION LCL CHARGES
refers to cost of handling and moving containerized cargoes within the terminal facilities of a seaport at country of origin or destination.
ORIGIN/DESTINATION TERMINAL HANDLING CHARGES (THC)
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.)
OTHER CHARGES (O/C)
refers to airlines, shipping lines or their agents (NVOCC/IFF)
CARRIER
refers to bringing of goods to a specific place or to a carrier/forwarder at country of origin or destination and used as reference point when liability against risk for loss of or damage to the goods passes on from seller to buyer
DELIVERY
INCOTERMS 2020 rules as obligations of seller and buyer to each other classified into:
- General Obligations
- Delivery/Taking Delivery
- Transfer of risk
- Carriage
- Insurance
- Delivery/transport document
- Export/Import clearance
- Checking/packaging/marking
- Allocation of costs
- Notice
INCOTERMS, TRANSACTION ARE BETWEEN:
Seller and buyer
MERCHANT/SHIPPER/EXPORTER)
- INCHARGE FOR THE DELIVERY OF GOODS
- RISK ORIGINATES
Seller
(PURCHASER/IMPORTER)
- INCHARGE FOR TAKING THE DELIVERY OF GOODS
- RISK IS TRANSFERRED
Buyer
SIGNIFICANCE OF DELIVERY IN INCOTERMS
- Risk is transferred from the seller to the buyer
a. Loss, damage, deterioration - Buyer assumes all expenses to bring goods to final place of destination depending on contract price which is expressed in INCOTERMS 2020.
a. Most basic Ex Works: ready for pickup by the buyer.
b. Most complete DDP: delivery is made by the seller to the named place of destination ready for unloading at buyer’s expense and risk - Except “C” Terms: Point of transfer of risk different from starting point buyer assumes costs
Incoterms has four groups, namely:
E GROUP ( EXW)
F GROUP ( FCA, FAS, FOB)
C GROUP ( CFR, CIF, CPT, CIP)
D GROUP ( DAP, DPU, DDP)
E GROUP
EXW
F GROUP
FCA
FAS
FOB
C GROUP
CFR
CIF
CPT
CIP
D GROUP
DAP
DPU
DDP
CATEGORY E
Departure
EXW (Ex Works)
named place of delivery
FREIGHT PRE-PAID/COLLECT
Buyer’s option
CATEGORY F
Shipment
FCA
Free Carrier - named place of delivery
FAS
Free Alongside Ship - named port of shipment
FOB
Free On Board - named port of shipment
MAIN CARRIAGE UNPAID BY SELLER. (
FREIGHT PAID BY BUYER UPON ARRIVAL OF GOODS AT DESTINATION).
