International Commercial (INCO) Terms used in International Trade

The shipment of an export item from the seller's warehouse to the buyer involves various steps including packing, loading, domestic inland transport, terminal port's charges, loading on to the ship/flight, Insurance & Freight charges, arrival charges, Duties and taxes and finally the delivery to the buyer.
While the buyer would definitely pay for the export item, there might be confusion about who would pay for the additional costs ? This is determined by the International Commercial(INCO) terms which the buyer and seller agree to. These INCO terms are discussed in this video.
This video is developed by the Office of the Additional Director General of Foreign Trade, Bengaluru as part of an initiative under the Niryat Bandhu Scheme of Government of India.
Disclaimer :: This video is for information and educational purposes only. For more details contact you may contact a DGFT office

[@directorategeneralofforeig3800]

We have with us again the new exporter Nikkoo whom DGFT is trying to assist in establishing her trade.
Nikoo is now stuck with a problem. Nikoo has found a buyer for her goods in the middle east.
The shipment of her export item from her warehouse to her buyer in the Middle East would involve various steps including packing --> loading --> domestic inland transport --> terminal charges at the port --> loading on to the ship/ flight --> Insurance charges --> Freight charges --> Arrival charges at destination port --> Duties and taxes --> Delivery to the buyer.
While the buyer would pay her for the export item, Nikkoo is confused who would pay for the additional costs in the transportation? And who would pay for the insurance of goods while in transit.
Well, this is determined by the INCO terms agreed between Nikkoo and her buyer in the middle east.
What are INCO terms?
To facilitate exporters and importers across the world the International Chamber of Commerce has developed some standard International commercial terms called INCO terms. These terms establish buyer and seller responsibilities at each stage of the shipment to avoid misunderstanding. Nikkoo must agree to a particular INCO term with her buyer while generating the export invoice itself. The INCO term also becomes a part of the agreement between the buyer and the seller and is mentioned clearly on all documents involved in the transaction.
How does it help?
Each INCO term clearly details the break-up of the costs involved and the buyer seller responsibilities. For example,
If the INCO term is EXW (Ex Works) Nikkoo only pays till packing and delivery right outside her factory gate. The remaining responsibilities, to pick it up and get it delivered to the place of choice, rests with the buyer. Similarly if the agreed INCO term is FOB, that is Free on Board, the seller’s responsibility would involve transporting the good from the seller’s premises up to the departing Ship or the flight.
What are the different types of INCO terms?
There are 4 categories -
E terms
Most popular is EX-Works. As already explained, if the agreed INCO term is EX works, or EXW, The Seller makes the good available at her premises for the buyer to collect. This term carries the minimum obligation for the seller.
F terms
Seller must deliver to the carrier, rail, flight or ship, of choice of the buyer. Seller would deliver the goods till the career, and Buyer is responsible for carriage from that point onwards. 3 types of F INCO terms are
• FOB: Free on board
• FCA: Free carrier
• FAS: Free alongside ship
FCA can be used for any mode of transport. While FCA or FOB are used only for sea/ waterways
C terms
Seller must also contract and pay for the carriage, that is freight or carrying cost, of the choice of the buyer. However, the risk of damage or loss during transit on carriage rests with the Seller. The 4 C INCO terms are -
• CIF Cost insurance and Freight
• CFR Cost and Freight
• CPT Carriage paid to
• CIP Carriage and insurance paid to
CIF or CFR can only be used for transporting on sea/waterways.
D Terms
Under DAT seller bears the risk till unloading and clearance at the destination terminal or place as per the specific term. The 3 D terms are --
• DAT Delivered at terminal
• DAP Delivered at place
• DDP Delivered duty paid
Which INCO term should Nikkoo use?
The INCO term may be decided by the terms offered by the buyer. For example the buyer might ask for price of the export item at their destination port. This would usually mean CIF.
Further, in choosing the INCO term one must also look at the mode of transport to be used and who is willing to bear the risk and cost of delivery. For example, Nikkoo tries to bargain for Ex Works to start with, and finally agrees for FOB. This means that she is responsible to deliver the goods up to the ship departing from India. Once the ship leaves with the goods, her responsibility is over.
Please Note
To be clear on the risks it is important to include the correct INCO term in the sale agreement, and the invoice. One should also refer to the latest version of INCO terms being used.
This is only a summary. Each INCO term contains a set of rules and clauses and you may read then in detail to get a thorough understanding of the same. For more details you may write or speak to the Niryat Bandhu officer at the nearest DGFT office.

[@user-bb8dz1ys8y]

if i have iec , m provide to transporter shipping bill and iec , is that any other document left , to provide any govt. department

[@silverslavia0516]

It is a good video for duty free imports for manufacturing and export exports

[@byeankur]

At 3.58 there is an error . FAS and FOB used for waterways and not FOB and FCA . Good video though

[@jaideeptomar3685]

byeankur j
jaideep may contact no 9813214605 in india

[@shajahanbiotech]

Byeankur ji can you help me how to export live plants or any help from your side, how to find demands of country's

[@tapashchatterjee6849]

An INFORMATIVE VIDEO....For EXPORT/IMPORT Professionals .A MUST WATCH.......

[@niravgabani9928]

Her voice is so irritative... male person is doing very very good jobb👍👍

[@srikanthbogam346]

My favorite RUclips channel

[@srikanthbogam346]

Very beautiful explanation

[@Shiven.007]

Really Appreciate it..!

[@shajahanbiotech]

Niku found buyer that's great but how she found? Please tell us

[@vandanaram5596]

Too good

[@sujatanayak8518]

thanks for explaining.

[@chetanzalte]

plz correct FCA free alongside ship see(3:53 minute) it shoul be FAS

[@subikumar7352]

FOB will be used only with vessel not with Aircraft,for aircraft FCA and DPU will be used in general.

[@CodeBreaker1971]

Can you tell me what is U pass?

[@ClixxCafe]

INCO-TERMS A MUST To Have Grasped Before Being Into The EXPORT/IMPORT/SHIPPING Business

[@abhijit921]

Niku is Hot! ♥

[@devdattpatel7513]

There is mistake FAS !!!!

[@ashokpatrakaar]

Hindi m btao

[@yuvisingh9795]

hindi m bol skte ho

[@ClixxCafe]

INCO-TERMS A MUST To Have Grasped Before Being Into The EXPORT/IMPORT/SHIPPING Business