incoterms cbt handout

Incoterms2010-CBT Ham MS-CT

This additional training material shall help you during your training. Please make it available during your CBT session.

Now please go back to the CBT and continue with your training!

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Welcome to our CBT about Incoterms. For this training you will need either headphones or speakers and a mouse! Please press "Start training" to begin with the CBT


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Now take a few moments to make yourself familiar with the CBT navigation. Most of it will look familiar to you from previous CBTs.

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Before you start with your training session please click on the link: Handout. This additional training material will support you during your CBT session. You can either make notes during your training or look up trained contents afterwards. Slide4

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First published in 1936 by the ICC, Incoterms are a series of pre-defined commercial rules that are commonly used in both international and domestic trade contracts. Incoterms, short for "International Commercial Terms", are reviewed every 10 years by the ICC to ensure that they still reflect current trade practices. Current version, including 11 incoterms, is valid since january 2011 and called Incoterms 2010. Incoterms generally define transport-related costs, risks and obligations of shipper and consignee.

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The purpose of Incoterms is to reduce uncertainties of country specific terms of trade. Furthermore they clarify responsibilites of shipper and consignee in regards of costs, meaning all transport related costs, risk, meaning the possibility of loss or damage of the goods, and insurance which protects the parties against financial loss of their cargo. Slide7


Incoterms don´t apply automatically, thus they need to be specified in a contract. In general they do not define contractual rights and obligaions other than for transport. Incoterms don´t specify details of transfer, transport and delivery of goods neither. And also the ownership is not defined by Incoterms. Last but not least: Incoterms don´t replace a transport insurance.

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Incoterms 2010 are organized into two categories: Incoterms on the left hand side can be used for any mode of transport whereas the incoterms mentioned on the right hand side are for sea and inland waterways only.


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In the following section we will go through some "good-to-know"-facts before we take a look at each incoterm. Slide10


Let´s start with the typical transport chain for international shipments. Take your time to have a closer look at it - it already looks familiar hm? On the one side we usually have a seller who provides cargo that shall be exported. In order to ship the goods to another country successfully certain export documents need to be filled correctly. These documents accompany every shipment and ensure a smooth flow of goods and payments across international frontiers. Export Documents are for instance the Bill of Lading, Commercial Invoice, Certificate of Origin and Packaging list. Once the goods are ready for shipment, they are picked up from the shipper and transported to the port of loading- usually by train, truck or barge. After arrival at the port, customs clearance needs to be processed. In a next step the cargo will be moved within the terminal and loaded onto the vessel. Depending on agreed mode of transport, the main transport is done by seafreight or airfreight. Arriving at the Port of destination, goods are being unloaded and stored on the destination side. As soon as import documents formalities have been clarified arriving goods are delivered to the consignee.


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Okay, one last thing before we go into more detail: do we have a common understanding of the most important terms used within the Incoterms? The Inland freight includes the costs for the transport of goods between an inland point and the seaport-terminal. Customs Clearance is the act of passing goods through customs so that they can enter or leave the country. Slide12

Terminal handling charges (THC) are charges that are paid to the carrier for the manipulation of the container at the terminal, including the container load onto the vessel or unload from the vessel. The Ocean freight refers to the costs for the seafreight transportation.


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Now let´s take a closer look at the incoterms. We start with those that can be used for any mode of transport.

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"Ex Works" is the lowest obligation of a shipper under Incoterms. The shipper agrees to make the goods available to the consignee at the shipper´s premises or at another named place (ie plant, factory, warehouse, etc). All other transportation costs and risks are assumed by the consignee.


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FCA stands for "free carrier". The shipper delivers the goods, export cleared, to the carrier or another party authorized to pick up goods at the shipper´s named place or premises.

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"Carriage paid to" means that the shipper must pay all transportation costs to the named destination. The risk of damage or loss of the cargo is already transferred to the consignee, once the cargo is transferred to a carrier.


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"Carriage and Insurance paid to" is mainly CPT + Insurance, Shipper pays for carriage and insurance to the named place at destination whereas the the risk passes to the consignee when the goods are handed over to the first carrier.

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DAP means "delivered at place". The shipper comes up for the costs of the transportation to the named place, except for costs related to the import customs clearance. The shipper bears all risks involved in bringing the goods to the named place.


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"Delivered at Terminal" means that the shipper pays for the transport to the terminal of destination. Costs related to import customs clearance have to be paid by the consignee. The shipper bears all risks up to the point where the goods are unloaded at the terminal at destination.

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Just as EXW represented the shipper´s minimum obligation in an international transaction, DDP would represent the shipper´s maximum obligation. Under DDP, the shipper agrees to all costs and risks, including customs clearance fees and payment of import duties, up to the named place/point.


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Now you know which incoterms can be used for sea and airfreight. In the following section we will take a closer look at the incoterms that apply to seafreight only. Slide22

FAS- Free Alongside Ship. Under FAS terms, the shipper is required to deliver the goods alongside the ship at the named port of loading. The shipper must also clear the goods for export. The consignee bears all costs and risk from port of origin.


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Under FOB the shipper must load the goods on board of the vessel, nominated by the consignee. The export customs clearance is also subject to the shipper. Costs and risk are transferred to the consignee as soon as the goods are loaded onto the vessel. Slide24

Under CFR, the risk changes to the consignee once the shipper delivers the goods on board of the vessel, just as in FOB terms. However, the cost allocation is different. For goods shipped CFR, the shipper pays all costs up to the named port of destination to deliver the goods.


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The last Incoterm we would like to introduce to you is "CIF". CIF is exactly the same as CFR but in addition the shipper must procure and pay a transport insurance.

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