Lecture Notes on Incoterms

Introduction to Incoterms

• Definition: Incoterms (International Commercial Terms) are delivery terms used in international trade.
• Purpose: To clarify the obligations of buyers and sellers in shipping goods to their final destinations.
• Focus: Incoterms 2020 (minimal changes from previous versions).

Shipping Process Overview

1. Pickup: Goods are collected from the supplier's location.
2. Transport to Terminal: Goods are transported to a sea port, airport, or rail terminal.
3. Customs Clearance: Goods must clear customs before leaving the country of origin.
4. Transport to Destination: Goods travel by air, sea, or land to the destination country.
5. Final Delivery: Unloading, customs clearance, and transport to the final destination.

Key Incoterms Discussed

1. EXW (Ex Works)

• Meaning: Supplier offers no delivery; buyer picks up goods from supplier’s location.
• Usage: Written as EXW followed by the location.

2. FOB (Free on Board)

• Meaning: Risk transfers to the buyer when goods are loaded on the vessel.
• Seller's Responsibility: Costs and risks until loading at the port.
• Buyer's Responsibility: All costs post-loading (ocean freight, customs, transport to final destination).
• Contract Example: FOB Shenzhen, FOB Shanghai.

3. CFR (Cost and Freight) and CIF (Cost, Insurance, and Freight)

• CFR: Seller pays carriage to the destination port; risk transfers on loading.
• CIF: Similar to CFR, but seller also obtains insurance for goods.
• Buyer's Responsibility: Local charges at the destination port and transport to final destination.

4. DDP (Delivery Duty Paid)

• Meaning: Seller bears all risks and costs until goods are ready for unloading at the final destination.
• Responsibility: Seller handles delivery, import formalities, and duties.

5. DDU (Delivery Duty Unpaid)

• Meaning: Similar to DDP but excludes import duties and formalities.
• Usage: Still common; must specify "as per Incoterms 2000" in documents.
• Related Term: DAP (Delivered at Place) from Incoterms 2020, which has similar responsibilities to DDU.

Conclusion

• Impact on Costs: Delivery terms significantly affect product and shipping costs.
• Negotiation Importance: Essential to understand and choose appropriate delivery terms when negotiating with customers or suppliers.
• Next Steps: Further discussions on delivery terms in the next video.

Call to Action

• Engagement: Like the video and subscribe for more content.