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Incoterms (International Commercial Terms) are a set of international sales terms widely used throughout the globe. Their purpose is to clarify transaction costs and responsibilities between
buyer and seller and reflect standard transportation practices. They are closely related to the U.N. Convention on Contracts for the International Sale of Goods.
• Group E - Departure:
EXW: Ex Works (designated place): the seller makes the goods available at his premises.
FAS: Free Alongside Ship (designated loading port): the seller must place the goods alongside the ship at the designated port. The seller must clear the goods for export; (this changed in the
2000 version of the Incoterms.) Suitable for maritime transport only.
FOB: Free On Board (designated loading port):an often-used maritime trade term, Free On Board: seller must load the goods on board the ship nominated by the buyer, cost and risk being
divided at ship's rail. The seller must clear the goods for export. Applicable to maritime transport only.
CIF: Cost, Insurance and Freight (designated destination port): the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Applicable to maritime
transport only.
CPT: Carriage Paid To (designated place of destination): the general/containerized/multimodal equivalent of CFR. The seller pays for carriage to the designated point of destination, but the risk
transfers when the goods are handed over to the first carrier.
CIP: Carriage and Insurance Paid to (designated place of destination): the containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named
destination point, but risk transfers when the goods are handed over to the first carrier.
• Group D - Arrival:
DAF: Delivered At Frontier (designated place): It can be used when the goods are transported by rail and road. The seller pays for transportation to the designated place of delivery at the
frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The transfer of risk occurs at the frontier.
DES: Delivered Ex Ship (designated port): Where goods are delivered ex ship, the transfer of risk does not occur until the ship has arrived at the designated port of destination, and the goods
are 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 designated 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, and dry chemicals, and where the seller either owns or has chartered their own vessel.
DEQ: Delivered Ex Quay (designated port): It means the same as DES, but the transfer of risk does not occur until the goods have been unloaded at the port of destination.
DDU: Delivered Duty Unpaid (designated destination place): This means that the seller delivers the goods to the buyer to the designated 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 wants 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 on in the contract of sale.
DDP: Delivered Duty Paid (designated destination place): It means that the seller pays for all transportation costs and bears all risk until the goods have been delivered and also pays the duty.
Often used interchangeably with the term "Free Domicile".
Responsibilities of the Seller
With regards to the terms below, "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 the transport is the responsibility of the buyer.
Word definitions often differ from industry to industry. This is especially true of global trade. Where such
fundamental phrases as "delivery" can have a far different meaning in the business than in the rest of the world.
For business terminology to be effective, phrases must mean the same thing throughout the industry. That is why the
International Chamber of Commerce created "INCOTERMS" in 1936. INCOTERMS are designed to create a
bridge between different members of the industry by acting as a uniform language they can use.
Each INCOTERM refers to a type of agreement for the purchase and shipping of goods internationally. There are
13 different terms, each of which helps users deal with different situations involving the movement of goods. For
example, the term FCA is often used with shipments involving Ro/Ro or container transport; DDU assists with
situations found in intermodal or courier service-based shipments.
INCOTERMS also deal with the documentation required for global trade, specifying which parties are responsible
for which documents. Determining the paperwork required to move a shipment is an important job, since
requirements vary so much between countries. Two items, however, are standard: the commercial invoice and the
packing list.
INCOTERMS were created primarily for people inside the world of global trade. Outsiders frequently find them
difficult to understand. Seemingly common words such as "responsibility" and "delivery" have different meanings in
global trade than they do in other situations.
In global trade, "delivery" refers to the seller fulfilling the obligation of the terms of sale or to completing a
contractual obligation. "Delivery" can occur while the merchandise is on a vessel on the high seas and the parties
involved are thousands of miles from the goods. In the end, however, the terms wind up boiling down to a few basic
specifics:
Costs: who is responsible for the expenses involved in a shipment at a given point in the
shipment's journey?
Control: who owns the goods at a given point in the journey?
Liability: who is responsible for paying damage to goods at a given point in a shipment's
transit?
It is essential for shippers to know the exact status of their shipments in terms of ownership and responsibility. It is
also vital for sellers & buyers to arrange insurance on their goods while the goods are in their "legal" possession.
Lack of insurance can result in wasted time, lawsuits, and broken relationships.
INCOTERMS can thus have a direct financial impact on a company's business. What is important is not the
acronyms, but the business results. Often companies like to be in control of their freight. That being the case, sellers
of goods might choose to sell CIF, which gives them a good grasp of shipments moving out of their country, and
buyers may prefer to purchase FOB, which gives them a tighter hold on goods moving into their country.
In this glossary, we'll tell you what terms such as CIF and FOB mean and their impact on the trade process. In
addition, since we realize that most international buyers and sellers do not handle goods themselves, but work
through customs brokers and freight forwarders, we'll discuss how both fit into the terms under discussion.
INCOTERMS are most frequently listed by category. Terms beginning with F refer to shipments where the primary
cost of shipping is not paid for by the seller. Terms beginning with C deal with shipments where the seller pays for
shipping. E-terms occur when a seller's responsibilities are fulfilled when goods are ready to depart from their
facilities. D terms cover shipments where the shipper/seller's responsibility ends when the goods arrive at some
specific point. Because shipments are moving into a country, D terms usually involve the services of a customs
broker and a freight forwarder. In addition, D terms also deal with the pier or docking charges found at virtually all
ports and determining who is responsible for each charge.
Recently the ICC changed basic aspects of the definitions of a number of INCOTERMS, buyers and sellers should
be aware of this. Terms that have changed have a star alongside them.
EX-Works
One of the simplest and most basic shipment arrangements places the minimum responsibility on the seller with
greater responsibility on the buyer. In an EX-Works transaction, goods are basically made available for pickup at the
shipper/seller's factory or warehouse and "delivery" is accomplished when the merchandise is released to the
consignee's freight forwarder. The buyer is responsible for making arrangements with their forwarder for insurance,
export clearance and handling all other paperwork.
LD-7
(Equivalent to IATA Type 5)
External Displacement:
379.9 cu ft/10 cu m
Maximum Gross Weight:
10,200 lb/4,627 kg
Maximum External Dimensions:
(L x W x H) Contoured
125" x 88" x 63"
317 cm x 223 cm x 160 cm
P9A Lower Deck Pallet
(Equivalent to IATA Type 6)
External Displacement:
242 cu ft/6.9 cu m
Maximum Gross Weight:
7,000 lb/3,175 kg
Maximum External Dimensions:
(L x W x H) Contoured
125" x 60" x 63"
317 cm x 152 cm x 160 cm
LD-11
(Equivalent to IATA Type 6)
Internal Capacity:
242 cu ft/6.9 cu m
Maximum Gross Weight:
7,000 lbs/3,176 kg
Maximum External Dimensions:
(L x W x H) Contoured
125" x 60" x 64"
317 cm x 162 cm x 162 cm
LD-8
(Equivalent to IATA Type 6A)
Internal Capacity:
243 cu ft/6.9 cu m
Maximum Gross Weight:
5,400 lb/2,450 kg
Maximum External Dimensions:
(L x W x H) Contoured
96" x 60" x 64"
228 cm x 152 cm x 162 cm
LD-4
(Equivalent to IATA Type 7A)
Internal Capacity:
174 cu ft/5 cu m
Maximum Gross Weight:
5,400 lb/2,450 kg
Maximum External Dimensions:
(L x W x H) Contoured
96" x 60" x 64"
228 cm x 152 cm x 162 cm
LD-3
(Equivalent to IATA Type 8)
Internal Capacity:
150 cu ft/4 cu m
Maximum Gross Weight:
3,500 lb/1,588 kg
Maximum External Dimensions:
(L x W x H) Contoured
61" x 60" x 64"
154 cm x 152 cm x 162 cm
LD-2
(Equivalent to IATA Type 8D)
Internal Capacity:
120 cu ft/3 cu m
Maximum Gross Weight:
2,700 lb/1,225 kg
Maximum External Dimensions:
(L x W x H) Contoured
47" x 60" x 64"
119 cm x 152 cm x 162 cm
Length
millimeter x 0.0394 = inches
Area
sq. cm. x 0.155 = sq. inches
Weight
grams x 0.0353 = ounces
Volume
milliliters x 0.0338 = fluid ounces
Temperature
centigrade x 1.8(+32) = fahrenheit
temperature temperature
To calculate the approximate U.S. measure equivalent to a known metric measure, simply multiply the metric
quantity by the conversion factor in the center column. Example: 38 kilograms = 84 pounds, approximately (38 x
2.2046 = 83.78).
Length
inches x 2.54 = centimeters
Area
sq. inches x 6.452 = sq. cm.
Weight
ounces x 28.3495 = grams
Volume
fluid ounces x 29.574 = milliliters
Temperature
fahrenheit -32(/1.8) = centigrade
temperature temperature
To calculate the approximate metric measure equivalent to a U.S. measure, simply multiply the U.S. quantity by the
conversion factor in the center column. Example: 563 miles = 900 kilometers, approximately (563 x 1.6093 =
906.04).
Metric Basics
The three basic metric units are the meter (length), the gram (weight), and the liter
(volume). The key to metric prefixes are:
• 1000 = kilo
• 100 = hecto
• 10 = deca
• 0.1 = deci
• 0.01 = centi
• 0.001 milli
COMMON MEASUREMENTS
Length
1 kilometer = 0.62137 mi
1 meter = 3.2808 ft
1 centimeter = 0.3937 in
1 mile = 1.6093 km
1 foot = 0.3048 m
1 inch = 2.54 cm
Weight
1 gram = 0.0353 oz
1 ounce = 28.3495 g
Volume
Area
EASY CONVERSIONS
tonnes
Weight t 1.1 short tons
(1,000 kq)