Fashion Merchandising

INTERNATIONAL COMMERCIAL TERMS

Export documentation &

Trade terms(INCO terms)
International Commercial Terms

Incoterms or( International Commercial

terms)

Incoterms or International Commercial

terms are a series of international sales
with terms, published by International
Chamber of Commerce (ICC) and widely
used in international commercial
transactions.
These are accepted by governments, legal
authorities and practitioners worldwide for
the interpretation of most commonly used
terms in international trade.

Incoterms or
(International Commercial terms)
This reduces or removes altogether
uncertainties arising from different
interpretation of such terms in different
countries.
Scope of this is limited to matters relating to
rights and obligations of the parties to the
contract of sale with respect to the delivery of
goods sold.
They are used to divide transaction costs and
responsibilities between buyer and seller and
reflect state-of-the-art transportation practices.
They closely correspond to the U.N. Convention
on Contracts for the International Sale of Goods

INCO TERMS
INCOTERMSare most frequently
listed by category.

GROUP

International Commercial Terms

( INCOTERMS )
TERM

Stands for

EXW

Ex Works

FCA
FAS
FOB

Free Carrier
Free Alongside Ship
Free On Board

CFR
CIF
CPT
CIP

Cost and Freight

Cost, Insurance and Freight
Carriage Paid To
Carriage and Insurance Paid
To

DAF
DES
DEQ
DDU
DDP

Delivered At Frontier
Delivered Ex Ship
Delivered Ex Quay
Delivered Duty Unpaid
Delivered Duty Paid

Quay--A concrete, stone, or metal platform lying alongside

or projecting into water for loading and unloading ships

INCO terms( International

Commercial Terms)
Terms beginning with F refer to
shipments where the primary cost of
shipping is not paid for by the seller.
Terms beginning with C deal with
shipments where the seller pays for
shipping.
E-terms occur when a seller's
responsibilities are fulfilled when
goods are ready to depart from their
facilities

INCO TERMS
D terms cover shipments where the
shipper/seller's responsibility ends when
the goods arrive at some specific point.
Because shipments are moving into a
country, D terms usually involve the
services of a customs broker and a
freight forwarder.
In addition, D terms also deal with the
pier or docking charges found at virtually
all ports and determining who is
responsible for each charge.

Incoterms 2000
Arrival contract
-(Risk transfers to importer
within import country
- Promise for an arrival of
the goods

13 terms of
Incoterms

E series

EXW

F series

FAS
FOB
FCA
Shipment contract
-(Risk transfers to importer
within export country
-Promise to make shipment
NOT an arrival

C series

CFR
CIF
CPT
CIP

D series

DAF
DES
DEQ
DDU
DDP

FCA

FAS

FOB

loadin
g

Bill of
Lading

Factor
y

Exworks

Custom
s

DD
U

Bringing goods
to the named
destination
without custom
clearance

unloadin
g

DDP
DES

CFR

Export
clearanc
e

DAF before
the customs
border

CI
F
DEQ

12

Insuranc

Terms of trade
FOB
"Free On Board The supplier is responsible for all charges (including
export licenses, export taxes, etc.) and risks until the
goods have passed over the ship's rail at the port of
shipment; the merchandise must be cleared for export.
The buyer contracts and pays for the freight and bears
all risks for loss or damage to the goods as soon as the
merchandise passes the ship's rail. The buyer also pays
for all import duties and clears the goods through
customs at the point of destination.

Terms of trade
FOB Airport (FOA)
This is similar to the term FOB except that the mode of
transportation is an air carrier. The supplier fulfills his
obligations after he has delivered the goods to the air
carrier. The goods must be cleared for export by the
supplier.

Terms of trade
C&F (cost and freight)
The seller/supplier agrees to contract the
freight and pay "cost and freight" for
loading the goods, cleared for export, on
board a vessel and the charges to ship the
goods to destination.
The buyer bears the risk of the goods from
the time they pass the ship's rail at the port
of shipment and pay for the insurance
coverage, and for the unloading costs at
the port of destination.

Terms of trade
CIF (cost, insurance, freight)
The seller's price includes all charges, freight and
insurance up to the point where the ship carrying
the goods arrives at the port of destination; the
goods must be cleared for export by the seller.
From that point the buyer has to bear all charges
and risks, including unloading costs.

Terms of trade
CM
This refers to the manufacturing cost and this term means "cut and
make". The buyer supplies all the materials to the manufacturer.

CMQ
This term means "cut, make and quota" and is similar to 'CM' except
that the manufacturer has to supply the quota as well.

CMT
The term means "cut, make and trim". The buyer provides the fabric,
and the supplier makes the garments.

CMTQ
The term means "cut, make, trim and quota". The buyer has to provide
the fabric and the manufacturer makes the garments as well as
provides the quota.

Terms of trade
Ex-Ship
The supplier is responsible for all costs incurred until the
ship reaches the port of destination where the supplier
delivers the documents and the buyer can clear the goods
on board the ship.
The buyer bears all risks and costs from that point including
unloading charges
EXW (ex- works) / Ex-Factory
The supplier delivers the goods to the buyer at his premises,
i.e., factory, warehouse, etc. He has the minimum
responsibility and does not have to provide minimum
documentation unless upon specific request.
The buyer bears all costs and risks involved upon delivery of
the goods until the desired destination.

Terms of trade
Landed Duty Paid (LDP)/ Delivered Duty Paid
(DDP)
The seller fulfills his obligation to deliver when the goods
have been made available at the named place in the
country of importation. The seller bears the risks and
costs, including duties, taxes and other charges of
delivering the goods thereto, cleared for importation.
Under these terms, the seller bears the maximum
responsibility, and in this case, the seller has to clear the
goods both for export and import.

Terms of trade-documents
Packing List
This is a document that indicates the contents of each
individual carton/ package in the container. The packing
list includes the cubic measurement of the
cartons/package, the weight, the number of
cartons/packages, the breakdown of the goods by
size/colour/quantity. This document is prepared by the
seller, and the buyer can specify which information
should be included.

Terms of trade-documents
Bill of Lading (B/L)

A B/L is a receipt for a consignment; the

shipping company or carrier certifies that it
has received the goods mentioned in the B/L
for transportation to the specified destination
It is evidence of a contract between shipper
and shipping company for the transportation
of the goods mentioned in the B/L
A B/L is a title deed, i.e., it is a document
which proves ownership of the goods
mentioned in the B/L

Terms of trade-documents
Importance of B/L
-

a B/L is a negotiable document which can be used to

transfer the ownership of the goods named on it to
somebody else
- it is evidence of the goods being shipped
- it is evidence of the goods being in apparent good
condition when shipped
- it is evidence of the contract of carriage, and a promise
by the carrier to deliver the goods
- in international trade where payment by Letter of Credit
is arranged, a clean B/L is required by the banks before
any payments will be made

A Clean Bill of Lading states that the consignment is in

apparent good order and condition when shipped on board,
and the carrier accepts the liability of delivering the goods
in this same condition to the consignee.

Terms of trade-documents

AirWay Bill(AWB)
An Air Waybill is a documentary proof of the contract of carriage between the
shipper and the carrier.
It also serves as:
- a receipt of goods for shipment
- a dispatch note, bearing a list of all accompanying documents, and any
special instructions given by the shipper
- a form of invoice for the carriage of the goods
- a document required for Customs clearance
- a delivery receipt
- an insurance certificate (if the insurance cover was arranged through the
airline)

An Air Waybill is not a title document, it is not negotiable.

An Air Waybill is a document which has the same importance in airfreight as a
Bill of Lading has in sea freight, but, whereas a B/L is a title document, (i.e. it is
a document which proves ownership of the goods mentioned in the B/L, and
which can be bought and sold, entitling the buyer to ownership of the goods),
an AWB cannot be used in this way.
The words non-negotiable are printed at the top of the Air Waybill, and must not
be changed or removed.

Proforma Invoice
The starting point of the export contract is in
the form of offer made 'by the exporter to the
foreign customer.

The offer made by the exporter is in the form

of a proforma invoice.

It is a quotation given as a reply to an inquiry.

Commercial Invoice

A commercial invoice is a business document which records the sale of

goods or services between two parties, and by which the seller informs
the buyer of the amount to be paid for the goods. Usually, the original and
four copies are stipulated in the L/C.
A commercial invoice normally includes the following information:
Date and authorized signature
The correct name and address of both buyer and seller (or the name of the
consignee if the goods are not consigned to buyer)
A detailed description of the merchandise purchased strictly corresponding with
the description given in the letter of credit, along with quantity, unit price, and total
price, all deductions and additional charges included in the price
Weight of the goods, number of packages, any identifying shipping marks, any
import license number, contract number or any other details requested and
stipulated in the L/C
Terms of delivery and payment (FOB, CIF, C&F)

The name of the issuing bank and the letter of credit number
The port of entry for which the merchandise is destined
The type of currency and rate of exchange

Terms of trade
Consignee
The person whose name appears on the bill of lading or
airway bill as the party to whom the goods are to be
delivered by the carrier.
Shipper
This is the person whose name appears on the bill of
lading or airway bill as the party who has contracted the
carrier to dispatch the goods.

Terms of trade
FCL (full container load)
A fully loaded container which may be in weight or cubic
measurement terms, contracted by one shipper, and
conveyed to one consignee and to one destination.
LCL (less container load)
A consignment of cargo which does not fill a full
container, grouped with other consignments for the
same destination.

Terms of trade
Shipping Marks
These are marks essential to identifying cargo and linking that
cargo with specific documents. Because these marks are
important as identifiers, the marks and numbers should be as
simple as possible. Shipping marks include the abbreviated
name of buyer, reference number, destination, package number,
and container number (if applicable).
Garment on Hangers (GOH)
The garments are packed into the container on hangers.
Flat Packed
The goods are packed into cartons.

Terms of trade-payment
termsDocument Against Acceptance (D/A)
The buyer is allowed to make payment for the goods on credit,
as agreed between him and the seller. Payment for the
merchandise is commonly 60 or 90 days after acceptance of
documents. The buyer gains the advantage of not having to pay
for the goods for a period of time after accepting the documents.
The supplier bears some risk because he will not receive
payment until a specified period after the documents and titles to
the merchandise have been accepted.
Documents Against Payment (D/P)
The supplier agrees to release any documents referring to the
transfer of title for the merchandise upon payment. Since the
goods are produced and shipped before the supplier tenders the
required documents for payment, there is some risk to the
supplier for demurrage charges if the buyer does not accept the
documents and title to the goods.

Methods Of International Payment

Telegraphic Transfer (or) TT

Foreign demand draft
Traveller s cheque,
SWIFT (Society for world wide Inter
bank Telecommunication system)

Terms of trade-payment
terms
Open Account
This method of payment does not involve the
services of a bank, but is based upon an
agreement between the supplier and the buyer.
The buyer has no legal obligation to pay the
supplier and payment is normally made directly to
the supplier. The supplier bears some risks as the
goods and documents are usually delivered to the
buyer before payment is made.

Terms of trade-payment
termsLetter of Credit (L/C)
A letter of credit (also known as documentary credit) is a
document issued by a bank on behalf of an applicant (the buyer)
undertaking to make payment to a beneficiary (the seller) up to a
stated amount of money, within a prescribed time limit and
against stipulated documents.
There are usually two banks involved in a letter of credit
operation.
The issuing bank is the bank of the buyer and issues the credit
The advising bank, usually located in the seller's country, is the
bank through which the advising bank sends the credit to the
beneficiary.
Types of credit:
There are three common types of credit: revocable, irrevocable,
and irrevocable and confirmed

Letter of Credit: Concept

Advising / Negotiating Bank

Seller

Letter of Credit

Issuing Bank

Buyer

Negotiable Documents
Goods & Services

Terms of trade-payment
terms
Letter of Credit (L/C)
Revocable credit: this type of credit can be amended or cancelled by the
applicant without any prior warning or notice to the beneficiary. More risks are
involved for the seller (the beneficiary) as he will then have to deal directly with
the buyer to obtain payment. However the buyer has more flexibility.
Irrevocable credit: this type of credit can be amended or cancelled only with the
agreement of all parties concerned. It also represents a definite undertaking
by the issuing bank to pay provided that the stipulated documents are
presented and that the terms and conditions of the credit are complied with.
Irrevocable and confirmed credit: this type of credit involves the undertaking of
the advising bank in addition to that of the issuing bank; it means that the
issuing bank requests a second bank to add its own confirmation to the credit
so that the confirming bank is responsible to make payment if the issuing bank
fails to pay the beneficiary.

Terms of trade-payment
terms
Letter of Credit (L/C)

A letter of credit should usually stipulate a requirement for the following

documents:
bill of lading
copy of the certificate of origin
commercial invoice
export license
packing list

Mate's receipt
Mate's receipt is a receipt issued by the
Commanding Officer of the ship when the
cargo is loaded on the ship.
The mate's receipt is a prima fade
evidence that goods are loaded in vessel.
The mate's receipt is first handed over to the Port
Trust Authorities.
After making payment of all port dues, the
exporter or his agent collects the mate's
receipt from the Port Trust Authorities.
The mate receipt is freely transferable. It must be
handed over to the shipping company in order to
get the bill of lading. Bill of lading is prepared on
the basis of the mate's receipt

.
1. Ship on Board - Goods or container is on
board the vessel. Usaully seen on BIll of
Lading issue by shipping company or agents.
2. Bill Of Lading - Is a document proof of
shipment issued by shipping company or
agents.

Feeder Vessel - Vessels plying short distance. Or transporting

goods from a smaller seaport to a major seaport.

Mother Vessel - Vessels plying long distance, From 1 country to

another.
20 feet Container - Containers used for containing goods for
shipping by Sea. The Internal diamention is (L) 19 ft 4.17 in (W) 7
ft 8.44 in (H) 7 ft 9.90 in
40 feet Container - (L) 39 ft 5.66 in (W) 7 ft 8.44 in (H) 7 ft 9.90 in
Transit Time - Duration of the vessel travel from port to port.

.
ETA - Estimated Time of Arrival
ETD - Estimated Time of Departure
Marine Insurance - Insurance coverage for the duration of the goods on
board vessel.
Voyage - Identification of the vessel's route. Similar to flight number.
Liner - The shipping company. Ships owner
THC - Terminal Handling Charges

TT - Transtainer Time. Transtainer is the crane operating within the seaport

area, lifting the containers from the container yard for storage or for
export.
For some ports, TT means this will be latest time you can send in the
container for export.
Sea Freight - The cost of transoprting by sea.
Dumerage - The cost of using the container after the free use time as per
the shipping company's terms.
Clearing Agent - The agent who are clearing the goods from a port to your
warehouse. Provide documentation, transportation for the goods owner.
Forwarding Agent - which is also the clearing agents in some countries,
they are the agent of the forwarder(Origin).
CBM - Cubic Meter. LxBxH of the goods or cartons. example: 1meter x
1meter x 1meter =1CBM