#INCOTERM -2010# By SN Panigrahi The Incoterm Rules or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) (@iccwbo) widely used in international commercial transactions. First published in 1936 by International Chamber of Commerce International Chamber of Commerce (ICC)

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SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler & Public Speaker.
He is an International-Corporate Trainer, Mentor & Author
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic
Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes –
GST etc.
He had done more than 150 Workshops on above
Published more than 500 Articles
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India
Champion
Also a Certified Lean Six Sigma Green Belt from Exemplar Global
Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India)
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Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution to business thoughts.
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
Hyderabad

3. By
SN Panigrahi

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The Incoterm Rules or International Commercial Terms are a series of pre-defined
commercial terms published by the International Chamber of Commerce
(ICC) (@iccwbo) widely used in international commercial transactions. First published in
1936 by International Chamber of Commerce
A series of three-letter trade terms related to common sales practices, the Incoterms
rules are intended primarily to clearly communicate the tasks, costs and risks associated
with the transportation and delivery of goods.
The Incoterms® 2010 rules* (International Commercial Terms) were developed by the
International Chamber of Commerce (ICC) as a uniform set of rules to clarify the costs,
risks and obligations of buyers and sellers in international commercial
transactions. Because they address issues relating to import and export, Incoterms® 2010
rules are most appropriate for use in international shipping.
The Incoterms® 2010 rules, the 7th revision are effective as of January 1, 2011.

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The terms are structured to increase incrementally the obligations (control, risk and cost) on one party
while decreasing the obligations of the other, depending on the specific term chosen.
Each term clarifies which party is responsible for:
Inland freight (transportation within the origination country)
Forwarder selection
Export clearance
Carrier selection and scheduling
International freight
Import clearance
Delivery occurs (and risk of loss transfers) at the point designated by the term selected.
Transfer of title is NOT covered by any of the Incoterms® 2010 rules and must be separately
specified by the parties.
Cont…

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3 Letter trade terms that relate to common sales practices:
STANDARDIZE
They provide uniform compliance of all parties, buyer and seller for all types of international and
domestic sales transactions
DEFINE RESPONSIBILITY
They determine what party is responsible for the goods and up to what point.
OUTLINE COSTS
To determine what fees and charges need to be included in the sales price in addition to the costs of
goods
REVEAL GAPS
What is not specified in the terms?
DETERMINE DELIVERY POINT & TRANSFER RISKS
Up to what point do you want your responsibility to end? What risks are involved in the delivery of
goods from the Seller to the Buyer

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3 Letter trade terms that relate to common sales practices:
How will the goods be shipped?
Who will pay the costs of the transportation and Insurance?
Have all the necessary costs been included in the final pricing?
What risks are involved with the terms that are being used?
What is the exact location point where risk transfers from seller to buyer?
It is not mandatory to use Incoterms in a sales contract.
Incoterms Define:
Obligations, transfer of risks and allocation of costs in connection to delivery of a consignment
from seller to buyer.
Up to which place the risks are borne by seller.
Up to which place the costs are borne by seller.
Which responsibilities are borne by the seller.
Which responsibilities are borne by the buyer.

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INCOTERMS - Apply to Contract of Sale. Not for Service Contracts
:Incoterms DO NOT define
Transfer of Ownership / Title of Goods Liability and Warranty
Terms of Payment Breach of Contract or Remedies
Credit Terms Court of Jurisdiction and Applicable Law
Date of Delivery Replacement Delivery
Financing Copyrights
Incoterms : Do not protect parties from their own risk of loss
Do not cover goods before or after delivery
Incoterms are Not
Contract of Carriage Contract of Insurance
Documents related to financing Even if those documents and the Incoterm Rule chosen
have some implications for one another

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Incoterms do NOT address transfer of legal title of the goods.
Rather, title passage is usually addressed in the sales/purchase contract or, if not, by default it is
addressed by sovereign (local) law.
FYI . . . in most transactions, passage of legal ownership from the seller to the buyer usually requires two
events:
Delivery + Payment = Title Transfer
Incoterms are not law and do NOT automatically apply to every sales transaction
of tangible goods.
The parties must specify that their transaction is subject to Incoterms® 2010.
By themselves, Incoterms do not determine revenue or expense recognition in
financial statements.
By themselves, Incoterms do not specify
• how goods are to be packed for shipment
or
• how the goods are to be loaded and stowed onto transport equipment (as in a container, on a truck, rail
car, aircraft, ocean vessel, etc.).
Incoterms are not Payment Terms (although payment timing is commonly tied to the event of delivery).
Payment Terms + Incoterms = Terms of Sale

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 Terms covered by Incoterms
– Warehousing
– Packing and Loading
– Inland Freight
– Terminal Charges
– Freight Forwarder’s Fees
– Ocean/Air Freight
– Duty, Taxes, & Customs Clearance
– Delivery
– Security Clearances (new to 2010)

11. Following three terms have been replaced by one term DAP (Delivered at Place)
DAF (Delivered at Frontier) – Rarely used and limited to ground transport
DES (Delivered Ex-Ship) – Limited to water shipments only
DDU (Delivered Duty Unpaid) – Not appropriate for domestic shipments since
duty was implied
DAP can be used with any mode of transport – domestic or international
DEQ (Delivered Ex-Quay) replaced by DAT (Delivered at Terminal)
DEQ required the seller (shipper) to unload at the quay
DEQ was limited to water transport
DAT
Requires the seller to unload at the quay, terminal, or warehouse
Can be used with any mode of transport
The number of terms are reduced to 11 in INCOTERMS 2010 from 13in INCOTERMS 2000.
INCOTERMS 2010 also attempt to better take into account the roles cargo security and electronic data
interchange now play in international trade

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 In the sales contract, buyers and sellers should refer to the appropriate version of the Incoterms
e.g. FOB Navasheva, India, Incoterms 2010.
 It is possible to add clauses or change the wording of Incoterms.
Examples:
CFR Charleston port USA incl. THC, CUC, ISPS in Charleston
FCA Vienna Airport loaded on aircraft
DDP Hanoi Vietnam VAT unpaid
Bear in mind that a change in the transfer of costs can result in a changed transfer of
risks.
Terminal Handling Charges Now specifically allocated so that buyer is not
charged twice (seller and terminal)
How To Use Incoterm

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Incoterms® 2010
Multi-modal
(available for
multiple forms of
transport, including
land, rail, air and
waterway
transportation)
Seven Incoterms
EXW, FCA, CPT,
CIP, DAT, DAP,
DDP
Marine Only
Mode
(applicable only to
sea & inland
waterway
transportation)
Four Incoterms
FAS, FOB,CFR
& CIF
The 11 Incoterms® 2010 rules are presented in two distinct
classes:
Incoterms® 2010 rules formally recognizes that they are available for
application to both international and domestic sale contracts

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Incoterms®
2010
Freight
Collect
Terms
Four
Incoterms
EXW, FCA,
FAS, FOB
Freight Pre-
Paid
CFR, CIF,
CPT, CIP,
DAT, DAP,
DDP
The 11 Incoterms® 2010 rules are presented in two distinct
classes:
Incoterms® 2010 rules formally recognizes that they are available for
application to both international and domestic sale contracts

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• The Seller’s only responsibility is to make the goods available at the Seller’s
premises. The Buyer bears full costs and risks of loading and moving the goods
from there to destination. Seller does not need to load the goods on any
collecting vehicle, nor does it need to clear the goods for export
EXW – EX WORKS
(… named place of
delivery)
• The Seller delivers the goods, cleared for export, to the carrier
selected by the Buyer. The Seller loads the goods if the carrier
pickup is at the Seller’s premises. From that point, the Buyer bears
the costs and risks on moving the goods to destination. Seller does
clear goods for export; import formalities are buyer’s responsibility.
Seller may contract for carriage at buyer’s expense and risk
FCA – FREE
CARRIER (… named
place of delivery)
• The Seller pays for moving the goods to destination. From
the time the goods are transferred to the first carrier, the
Buyer bears the risks of loss or damage.
CPT – CARRIAGE
PAID TO (… named
place of destination)
Used for any Mode of Transport

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• The Seller pays for moving the goods to destination. From the time
the goods are transferred to the first carrier, the Buyer bears the
risks of loss or damage. The Seller, however, purchases the
cargo insurance.
CIP – CARRIAGE AND
INSURANCE PAID TO
(… named place of
destination)
• The Seller delivers when the goods, once unloaded from the arriving means of
transport, are placed at the Buyer’s disposal 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 – DELIVERED AT
TERMINAL (… named
terminal at port or place
of destination)
• The Seller delivers when the goods are placed at the
Buyer’s disposal on the arriving means of transport ready
for unloading at the named place of destination. The Seller
bears all risks involved in bringing the goods to the
named place.
DAP – DELIVERED AT
PLACE (… named place
of destination)
Used for any Mode of Transport

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• The Seller delivers the goods -cleared for import – to the Buyer
at destination. The Seller bears all costs and risks of moving the
goods to destination, including the payment of Customs duties
and taxes.
DDP –
DELIVERED
DUTY PAID
(… named place)
Used for any Mode of Transport

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• The Seller delivers the goods to the origin port. From that point, the
Buyer bears all costs and risks of loss or damage.
FAS – FREE
ALONGSIDE SHIP (…
named port of
shipment)
• The Seller delivers the goods on board the ship and clears the goods for
export.
• From that point, the Buyer bears all costs and risks of loss or damage.
FOB – FREE ON
BOARD (… named
port of shipment)
• The Seller clears the goods for export and pays the costs of
moving the goods to destination.
• The Buyer bears all risks of loss or damage.
CFR – COST AND
FREIGHT (… named
port of destination)
These terms do not apply to any other means of transport except Marine.

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• The Seller clears the goods for export and pays the
costs of moving the goods to the port of destination.
• The Buyer bears all risks of loss or damage. The
Seller, however, purchases the cargo insurance.
CIF – COST
INSURANCE
AND FREIGHT
(… named port
of destination)
These terms do not apply to any other means of transport except Marine.

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Be Specific:
If you use INCOTERMS in the Sales Contract or Purchase Order, you should identify the
appropriate INCOTERM Rule [e.g. FCA, CPT, etc.], state "INCOTERMS 2010" and specify
the place or port as precisely as possible.
Terminal : Terminal includes any place, whether covered or not. It can
be a quay, a warehouse, a container yard, a road, rail or air cargo terminal.
Electronic communication
Articles A1/B1 of the Incoterms® 2010 rules, now give electronic means of communication
the same effect as paper communication if agreed or common practice between the
contracting parties
Insurance Cover
The Incoterms® 2010 rules place information duties relating to insurance in articles A3/B3,
which deal with contracts of carriage and insurance
The seller is obliged to arrange transport insurance only under CIP and CIF terms.
But
 This is necessary only for the part of transport, for which the seller carries the costs and
the buyer carries the risk.
 The seller is obligated to arrange insurance with minimum cover only (Institute Cargo
Clause C).
Recommended
Insurance cover in accordance with Institute Cargo Clause A

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Institute cargo clauses are attached to a type of marine insurance that covers cargo in
transit. These clauses are to specify what items in the cargo are covered should there be
damage or loss to the shipment. Institute cargo clauses can cover everything from the
cargo itself to the container that holds it to the mode of transportation used to ship it.
There are three basic sets of institute cargo clauses; A, B, C. Just like you are able to
get insurance on smaller, domestic packages; bulk freight is insured too.
These clauses were developed by the International Chamber of Commerce as a means of
insurance for cargo while it is being shipped from the original location to its final
destination.
Just like auto insurance, the higher premium you pay the more coverage you get. The
three clauses are briefly described the same way:
– Institute Cargo Clause A is considered the widest insurance coverage and you should
expect to pay the highest premium because you are asking for total coverage.
– Institute Cargo Clause B is considered a more restrictive coverage and you should
expect to pay a moderate premium because perhaps you are only requesting the more
valuable items in your cargo to be covered or only partial cargo coverage.
– Institute Cargo Clause C is considered the most restrictive coverage and you will
probably pay the lowest premium but your cargo coverage will be much less.

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•Institute Cargo Clauses (C) covers very limited risks as a result it is called as
a minimum cover cargo insurance policy.
•Institute Cargo Clauses (A) covers wide range of risks as a result it is called
as a "All Risks" cargo insurance policy.
•Insurance premium, which should be paid to the insurance company in order
to get the insurance policy issued, would be substantially different between
these two policy types.
•Institute Cargo Clauses (C) is the cargo insurance policy type which is
requested by the Incoterms 2010 rules.
•Institute Cargo Clauses (A) is the cargo insurance policy type which is
requested by the issuing banks under letter of credit transactions.

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Institute Cargo Clauses (C):
Institute Cargo Clauses (C) covers very limited risks most of them which must be happen during the carriage in
forms of accidents. Below you can find the details of the risk coverage of this type of insurance policy.
Loss of or damage to the subject-matter insured reasonably attributable to
•fire or explosion
•vessel or craft being stranded, grounded, sunk or capsized
•overturning or derailment of land conveyance
•collision or contact of vessel craft or conveyance with any external object other
than water
•discharge of cargo at a port of distress
Loss of or damage to the subject-matter insured caused by
•general average sacrifice
•jettison
Definitions: General Average Sacrifice: There is a general average act when, and only when, any
extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety
for the purpose of preserving from peril the property involved in a common maritime adventure.
Jettison:The intentional throwing overboard of part of the cargo or some piece of the ship in order to save the
ship or its cargo.

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Institute Cargo Clauses (A) covers maximum risks as a result it is also known as All Risks cargo
insurance policy. Below you can find the details of the risk coverage of this type of insurance policy.
Insurance Cargo Clauses (A) covers all the risks of loss of or damage to the goods except
following conditions:
Risks that have been caused by following reasons will not be covered under Insurance Cargo
Clauses (A)
All Risks Cargo Insurance Policy

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All risks cargo insurance policy will not be covering loss or damages arising from the
following reasons:
•General Exclusion Clauses
•
Loss damage or expense attributable to wilful misconduct of the Assured
•Ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured
•Loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject matter insured to
withstand the ordinary incidents of the insured transit where such packing or preparation is carried out by the Assured or their
employees or prior to the attachment of this insurance (for the purpose of these Clauses "packing" shall be deemed to include
stowage in a container and "employees" shall not include independent contractors)
•Loss damage or expense caused by inherent vice or nature of the subject-matter insured
•Loss, damage or expense caused by delay, even though the delay be caused by a risk insured against
•Loss, damage or expense caused by insolvency or financial default of the owners, managers, charterers or operators of the
vessel where, at the time of loading of the subject-matter insured on board the vessel, the Assured are aware, or in the ordinary
course of business should be aware, that such insolvency or financial default could prevent the normal prosecution of the voyage.
This exclusion shall not apply where the contract of insurance has been assigned to the party claiming hereunder who has bought or
agreed to buy the subject-matter insured in good faith under a binding contract
•Loss, damage or expense directly or indirectly caused by or arising from the use of any weapon or device employing atomic
or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

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•Exclusion Clauses Covering Insufficiency of the Vessel or Containers etc.
•Loss damage or expense arising from unseaworthiness of vessel or craft or unfitness of vessel or craft for the
safe carriage of the subject-matter insured, where the Assured are privy to such unseaworthiness or unfitness, at
the time the subject-matter insured is loaded therein
•Loss damage or expense arising from unfitness of container or conveyance for the safe carriage of the subject-
matter insured, where loading therein or thereon is carried out prior to attachment of this insurance or by the
Assured or their employees and they are privy to such unfitness at the time of loading.
•Exclusion Clauses Covering War related Risks
•Loss damage or expense caused by war civil war revolution rebellion insurrection, or civil strife arising
therefrom, or any hostile act by or against a belligerent power.
•Loss damage or expense caused by capture seizure arrest restraint or detainment (piracy excepted), and the
consequences thereof or any attempt thereat.
•Loss damage or expense caused by derelict mines, torpedoes, bombs or other derelict weapons of war.
•Exclusion Clauses Covering Strikes, Riots and Civil Commotions Risks
•Loss damage or expense caused by strikers, locked-out workmen, or persons taking part in labour disturbances,
riots or civil commotions.
•Loss damage or expense resulting from strikes, lock-outs, labour disturbances, riots or civil commotions.

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Recognize Where The Risk Of Loss Transfers:
A common misconception when the Seller pays the freight is that the Seller has the risk of loss until the goods
are delivered to the place or port specified on the bill of lading or airway bill.
Actually, when using INCOTERMS CPT, CIP, CFR or CIF, Seller fulfills its obligation to deliver when it
hands the goods over to the carrier at origin, and risk transfers to the Buyer at that point and not when
the goods reach the place of destination
Understand that under CIP and CIF, the Seller is only obliged to obtain Insurance
Understand Who Has Responsibility For Loading And Unloading Charges. For Example:
DAT obliges the Seller to place the goods at the Buyer's disposal after unloading at the named terminal at port
or place of destination.
DAP obliges the Seller to place the goods at the Buyer's disposal on the delivering carrier ready for unloading
at the named place of destination.
CPT, CIP, CFR or CIF on the other hand, require the parties to identify as precisely as possible the point at the
agreed port of destination because the costs up to that point are for the account of the seller

28. Understand Who Has Responsibility For Customs Entry Declarations & Import Clearance :
DDP is the only INCOTERM where the Seller has responsibility for Customs Entry Declaration & Import Clearance
Security-related clearances and information required for such clearances
There is heightened concern nowadays about security in the movement of goods, requiring verification that the
goods do not pose a threat to life or property for reasons other than their inherent nature. Therefore, the Incoterms®
2010 rules have allocated obligations between the buyer and seller to obtain or to render assistance in obtaining
security-related clearances, such as chain-of-custody information, in articles A2/B2 and A10/B10 of various
Incoterms® rules.
Terminal handling charges
Under Incoterms® rules CPT, CIP, CFR, CIF, DAT, DAP, and DDP, the seller must make arrangements for the
carriage of the goods to the agreed destination. While the freight is paid by the seller, it is actually paid for by the
buyer as freight costs are normally included by the seller in the total selling price. The carriage costs will sometimes
include the costs of handling and moving the goods within port or container terminal facilities and the carrier or
terminal operator may well charge these costs to the buyer who receives the goods. In these circumstances, the
buyer will want to avoid paying for the same service twice: once to the seller as part of the total selling price and
once independently to the carrier or the terminal operator. The Incoterms® 2010 rules seek to avoid this happening
by clearly allocating such costs in articles A6/B6 of the relevant Incoterms rules.

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String sales :
In the sale of commodities, as opposed to the sale of manufactured goods, cargo
is frequently sold several times during transit “down a string”. When this
happens, a seller in the middle of the string does not “ship” the goods because
these have already been shipped by the first seller in the string.
The seller in the middle of the string therefore performs its obligations towards
its buyer not by shipping the goods, but by “procuring” goods that have been
shipped. For clarification purposes, Incoterms® 2010 rules include the
obligation to “procure goods shipped” as an alternative to the obligation to ship
goods in the relevant Incoterms rules.

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https://www.youtube.com/channel/UCVZ
ScNa_leR8XbYINEwTFwQ/videos
SN Panigrahi

34. 34SN Panigrahi

35. Session - 1
Overview of
International
Trade
How to Start
Export Business
Session – 2
How to Identify
Export Product &
Customers
Product X Market
Selection
Session – 7
Packing, Labeling
& Quality
Standards;
Risks in
International
Business
Session – 4
Export Costing –
Pricing
How to Negotiate
International
Contracts
Session – 3
Export Logistics:
Air, Sea, Road
Transportation
INCOTERMS; Port
& Shipping
Formalities
Session - 6
Export
Procedures &
Documentation
Customs
Clearances
Export - Import
Session – 5
Introduction to
Foreign Trade
Policy; Export
Incentives &
Export Promotion
Schemes
Session – 8
Export Payment
Methods
Payment Risks
Export Finance :
Pre & Post Export
Finance
SN Panigrahi
Two Days Workshop on
Export – Import Management

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37. Contact Details:
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com 37