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	Inconterms

Inconterms International Commercial Terms


	The terms or conditions of sale (Incoterms) define, in international transactions of goods, the conditions under which the products must be exported. The rules used for this are defined as Incoterms - International Commercial Terms - according to the version dated January 1st, 2000, edited by the International Chamber of Trade


	These contractual formulas fix rights and obligations, both for the exporter and the importer precisely establishing the significance of the price negotiated between the parties. An international trade operation based on Incoterms reduces the possibility of controversial interpretations and losses for one of the parties involved. The importance of the Incoterms resides in the determination of the precise moment of the transference of obligations, that is, the moment in which the exporter is considered exempt from legal responsibilities of the exported product. The Incoterms define rules only for exporters and importers, and do not produce effects with respect to other parties, such as transporters insurers, forwarders, etc.

Incoterms 2000

In order to aid understanding, the Incoterms have been grouped into four categories:

Group “E” (Starting point)	EXW	EXWorks – From the place of production (...designated place, factory, warehouse, etc)
Group “F” (Main Transport not paid)	FCA	Free Carrier – (…designated place)
	FAS	Free Alongside Ship – (..designated load port)
	FOB	Free on Board – (...designated load port)
Group “C” (Main Transport Paid)	CFR	Cost and Freight – (Main Transport paid)
	CIF	Cost, Insurance and Freight – (..designated destination port)
	CPT	Carriage Paid to... – (place of designated destination)
	CIP	Carriage and Insurance Paid to... – (place of designated destination)
Group “D”(Arrival)	DAF	Delivered At Frontier – (designated place)
	DES	Delivered Ex Ship – (...designated destination port)
	DEQ	Delivered Ex Quay – (..designated destination port)
	DDU	Delivered Duty Unpaid – (..place of designated destination)
	DDP	Delivered Duty Paid –(.place of designated destination)

EXW - Ex Works

The product and the invoice must be available to the importer at the exporter’s establishment. All expenses and any losses and damage after the delivery of the goods, including clearance of the goods internationally are the responsibility of the importer. When requested, the exporter must render service to the importer to obtain the forwarding clearance documents of the product. This mode can be used for any means of transport.

FCA - Free Carrier

The exporter delivers the goods, cleared for export, into the custody of the transporter, at the place designated by the importer, thereby ceasing all the exporter’s responsibilities. This condition can be utilized in any form of transport, including multimodal.

FAZ - Free Along Ship

The obligations of the exporter end on placing the already cleared for export goods, free, on the dock, alongside the vessel. From this point on, the importer assumes all risks, including paying the stowage expenses. The term is used for maritime or waterway transport

FOB - Free on Board

The exporter must deliver the goods, cleared for export, on board the vessel nominated by the importer, in the loading port. This mode of transport is valid for maritime transport or internal waterways. All expenses, up to the moment that the product is placed on board the transport are the responsibility of the exporter. It is up to the importer to pay the expenses and risks of loss of damage of goods from the moment they are stowed on board.

CFR - Cost and Freight

The exporter must deliver the goods to the destination port nominated by the importer. The transport cost, therefore are the responsibility of the exporter. The importer must pay the insurance expenses and for unloading the goods. The use of this term obliges the exporter to clear the goods for export and use only maritime transport or internal waterways. The exporter must deliver the goods in the destination port designated by the importer.

CIF - Cost, Insurance and Freight

the equivalent to CFR, with the difference that the expenses of insurance are the responsibility of the exporter. The exporter must deliver the goods on board the vessel, in the load port, with freight and insurance paid. The responsibility of the exporter ceases at the moment the goods pass over the guard rail of the vessel in the destination port. The mode may only be used for maritime or internal waterway transport..

CIP - Carriage and Insurance Paid to...

A principle adopted similar to CPT. The exporter, as well as paying the expenses for loading the goods and the freight to the place of destination, also pays the expenses of the insurance of the transport of the goods to the designated destination. CIP can be used in any mode of transport, including multimodal.

DAF – Delivered At Frontier

The exporter must place the goods, not cleared for export, at the disposal of the importer on the dock of the designated destination port at the frontier, before, however, the border limit with the country of destination. This term is mainly used in cases of road or rail transport.

DEQ – Delivered Ex Quay

The exporter must place the goods at the disposition of the importer, not cleared for import, on the dock of the designated port of destination. This term is used for maritime, or internal waterway or multimodal transport.

DDU – Delivered Duty Unpaid

The exporter must place the goods at the disposal of the importer in the place and point designated abroad. He assumes all expenses and risks to take the goods to the indicated destination except the expenses of Customs duty, taxes and other import expenses. This term is used with respect to any mode of transport.

DDP – Delivered Duty Paid

The exporter assumes the duty of delivering the goods, cleared for import, to the place designated by the importer, paying all expenses including taxes and other import costs. However, it is not the exporter’s responsibility to disembark the goods. The exporter is responsible also for the internal freight from the unloading place to the place designated by the importer. This term can be used with any mode of transport.

Incoterms

Simplified Summary of the main attributes of the import (I) and the exporter (E)

Incoterms Modes

E
X
W

F
A
S

F
O
B

F
C
A

C
F
R

C
P
T

C
I
F

C
I
P

D
A
F

D
E
S

D
E
Q

D
D
U

D
D
P

Attributions

Customs formalities at the country of origin

Insurance

Transport

Unloading

Customs formalities

Transfer mark of the transference of risk of the negotiated goods.

1 - The exporter assumes the risks until the moment of placing the product at the disposal of the importer at the exporter’s establishment.

2 - The exporter assumes the risks until the moment of placing the cleared for export goods alongside the vessel.

3 - The exporter assumes the risks up to the moment when the goods, cleared for export, pass over the guard rail of the vessel in the load port.

4 - The exporter assumes the risks up to the moment of the delivery of the goods, cleared for export, into the custody of the importer.

5 - The exporter assumes the risks up to the moment that the goods are placed at the disposition of the importer, in the transport, not Customs cleared for import, at the designated delivery place at the frontier.

6 - The exporter assumes all the risks up to the moment that the goods are placed at the disposal of the importer at the destination point, aboard the vessel

7 - The exporter assumes all risks up to the moment that the goods, not cleared for import are delivered to the agreed place at the designated destination. The importer is responsible for the import licences.

8 - The exporter assumes all risks up to the moment of delivery of the goods in the agreed port, in the designated place of destination, by any mode of transport, not cleared for import nor unloaded.

9 - The exporter assumes all risks up to the moment when the product is placed at the disposition of the importer, on the transport at the place of destination, not unloaded but Customs cleared

Additional about Incoterms

As from 1990, the exporter can substitute the printed document of proof of delivery of the product for EDI (Electronic Data Interchange, when the parties are in agreement in using this means of communication.

Bearing in mind the periodic alterations to the Incoterms, and in order to avoid commercial disputes, the exporter and importer must expressly and clearly indicate in the contract the use of Incoterms 2000.

Navigation Contracts

Even when not responsible for paying the freight, the exporter shall be responsible for contracting of same. He should therefore pay attention to the following points:

Availability of vehicle with capacity to transport the goods according to the conditions agreed upon with the importer.
Availability of space on the navigation vessel contracted
Freight Costs.

Additionally it is of fundamental importance to identify the persons responsible for the payment of the expenses referring to the loading, stowage and unloading of the goods. It is the responsibility of the ship-owner to explain to the exporter whether the expenses of loading, unloading and stowage are included in the freight costs.

The modes of contracting maritime freight are as follows:

Liner Terms or Berth Terms

The ship-owner is responsible for the expenses that refer to loading, stowage and unloading. It is up to the exporter to place the goods free alongside the vessel. This mode is also known by the acronym FFA -Free From Alongside

FIO (Free In and Out – The ship-owner only transports the goods.)

he expenses with loading, stowage and unloading are for the exporter’s account. A variant of this mode is FIOS – Free In Out and Stowed.

FIOST (Free In Out Stowed and Trimmed – Livre de Entrada e Saída, Arrumação e Distribuição da Carga)

This is another variant of the FIO mode, used mainly in bulk transport.

FI (Free In Out Stowed and Trimmed)

The exporter pays the expenses that refer to loading and stowage. The ship-owner is responsible for paying the unloading costs. Modes FIS (Free In and Stowed; FILO (Free In Liner Out and FISLO Free In Stowed Liner Out are variants of FI.

FO (Free Out – Livre de Saída de Bordo)

The exporter only pays the expenses that refer to unloading. The expenses for loading and stowage are for the ship-owners account. Mode LIFO (Liner In Free Out) are the same as FO - Free Out.


	Source: Departamento de Promoção Comercial (DPR) do Ministério das Relações Exteriores