Day Progress
✈️ 15 Days Export from India Challenge
# DAY 12
INCOTERMS 2020
Complete Guide for Indian Exporters
EXW · FCA · FAS · FOB · CFR · CIF · CPT · CIP · DPU · DAP · DDP · Risk Transfer · GST Implications
📌 Day 12 — The Rules That Govern Every Export Transaction
Every time an Indian exporter raises an export invoice, they write a term like “FOB Delhi”, “CIF New York”, or “EXW Factory”. These are INCOTERMS — International Commercial Terms published by the International Chamber of Commerce (ICC). They define who bears freight, who bears insurance, and — most critically — at what point risk transfers from the seller to the buyer. Getting this wrong can cost you money, refunds, and legal liability.
📦 Classification
INCOTERMS 2020 — 11 Terms, 2 Categories
Sea & Inland Waterway Only
For ocean, river and port-to-port shipments
EXWFCAFAS
FOBCFRCIF
Any Mode of Transport
Air, sea, road, rail, multimodal
CPTCIPDPU
DAPDDP
📝 Day 12 Class Notes
Handwritten Notes — All 11 INCOTERMS with Risk Table
Day 12 — Mode of Transport Rules (Globally Accepted) · Risk Transfer Table · EXW to DDP
Click image to zoom · Download full notes on WhatsApp Channel
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📖 Deep Dive
All 11 INCOTERMS — Explained
EXW
Ex Works
Maximum obligation on BUYER
⚡ Risk transfers at seller’s factory/warehouse
- S→Pack goods · Make available at factory
- B→Loading · Transport · Export clearance · Freight · Insurance · Import clearance
⚠️ Indian exporters avoid EXW — export documents in buyer’s name makes GST refund claims difficult
FCA
Free Carrier
Most preferred for Indian exporters
⚡ Risk transfers when goods handed to carrier
- S→Packing · Export clearance · Deliver to carrier
- B→Main freight · Insurance · Import clearance
✅ Best for GST refunds — export documents stay with seller · Shipping Bill in seller’s name
FAS
Free Alongside Ship
Seller brings goods to port side
⚡ Risk transfers alongside the vessel at named port
- S→Transport to port · Export customs clearance
- B→Loading onto vessel · Freight · Insurance · Import
✅ Suitable for bulk cargo — minerals, agri commodities, heavy industrial goods
FOB
Free On Board
Most common for Indian sea exports
⚡ Risk transfers once goods are LOADED on vessel
- S→Export clearance · Port handling · Load on vessel
- B→Freight · Insurance · Import clearance
✅ GST Critical: FOB value = basis for Shipping Bill, export turnover, customs valuation & GST refunds
CFR
Cost & Freight
Seller pays freight to destination port
⚡ Risk transfers when loaded on vessel (NOT at destination!)
- S→Export clearance · Loading · Ocean freight to destination
- B→Insurance · Import duties · Destination charges
⚠️ Common mistake: Seller pays freight BUT risk transfers at port of loading — not destination
CIF
Cost, Insurance & Freight
CFR + minimum insurance by seller
⚡ Risk transfers when goods loaded on vessel
- S→Freight · Minimum insurance · Export clearance
- B→Import duties · Destination handling
✅ CIF value (FOB+F+I) increases export invoice value → higher foreign exchange realization
CPT
Carriage Paid To
Any mode · Seller pays freight to named place
⚡ Risk transfers when handed to first carrier
- S→Export clearance · Pay freight to destination
- B→Risk from first carrier · Insurance · Import
✅ Used for air, road, multimodal exports — suitable for FedEx/DHL courier shipments
CIP
Carriage & Insurance Paid To
CPT + comprehensive insurance by seller
⚡ Risk transfers when handed to first carrier
- S→Freight + comprehensive insurance to destination
- B→Risk in transit (buyer named as beneficiary of insurance)
✅ CIP requires ALL-RISK insurance (higher than CIF’s minimum insurance)
DPU
Delivered at Place Unloaded
Seller unloads at destination
⚡ Risk transfers after goods are UNLOADED at named destination
- S→All costs + risk until unloading complete at destination
- B→Import duties · Customs clearance at destination
ℹ️ Only Incoterm where seller is responsible for unloading at destination
DAP
Delivered at Place
Seller delivers to destination — unloading by buyer
⚡ Risk transfers when goods arrive at destination ready for unloading
- S→All costs + risk until arrival at destination
- B→Unloading · Import duties · Customs clearance
ℹ️ Popular for door-to-door delivery — seller bears transit risk to destination
DDP
Delivered Duty Paid
Maximum obligation on SELLER
⚡ Risk transfers when goods arrive at destination, duty paid
- S→All costs · All duties · Import customs clearance · Delivery to buyer
- B→Minimal — only take delivery of goods
⚠️ Most complex for Indian exporters — must deal with foreign country’s customs & import duties
⚡ Quick Reference
Risk Transfer & Cost Summary Table
| INCOTERM | Export Clearance | Load on First Carrier | Main Freight | Insurance | Risk Transfer Point | Import Clearance |
|---|---|---|---|---|---|---|
| EXW | BUYER | BUYER | BUYER | BUYER | At seller’s premises | BUYER |
| FCA | SELLER | SELLER | BUYER | BUYER | Hand to first carrier | BUYER |
| FAS | SELLER | BUYER | BUYER | BUYER | Alongside vessel at port | BUYER |
| FOB | SELLER | SELLER | BUYER | BUYER | On board vessel at port | BUYER |
| CFR | SELLER | SELLER | SELLER | BUYER | On board vessel at port | BUYER |
| CIF | SELLER | SELLER | SELLER | SELLER | On board vessel at port | BUYER |
| CPT | SELLER | SELLER | SELLER | BUYER | Hand to first carrier | BUYER |
| CIP | SELLER | SELLER | SELLER | SELLER | Hand to first carrier | BUYER |
| DPU | SELLER | SELLER | SELLER | SELLER | After unloading at destination | BUYER |
| DAP | SELLER | SELLER | SELLER | SELLER | Arrival at destination (ready to unload) | BUYER |
| DDP | SELLER | SELLER | SELLER | SELLER | Destination, import duties paid | SELLER |
💰 GST Perspective
INCOTERMS & GST Implications
FOB Value & GST Refunds
Shipping Bill reflects FOB value. Export turnover for Rule 89(4) refund formula is based on FOB. Correct FOB value is critical for maximum refund calculation.
FCA — Best for Refund Claims
FCA keeps export documentation (Shipping Bill, LEO) in seller’s name. GST refund and ICEGATE validation are smoother. Indian exporters widely prefer FCA.
EXW — Refund Risk
EXW export documents may be in buyer’s name. Shipping Bill evidence may be unavailable to Indian seller. GST refund claims may face rejection or scrutiny.
CIF Increases Forex Realization
CIF invoice includes freight + insurance. Higher invoice value = more foreign currency received = better FEMA compliance and potentially larger export turnover reported.
DDP — Complex for Indian Exporters
DDP requires seller to handle foreign import duties. Indian exporters rarely use DDP due to complexity of navigating foreign customs laws.
LUT/IGST Not Affected by Incoterm
The choice of LUT route or IGST payment route is independent of Incoterm selection. Both options remain available regardless of the trade term used.
🎯 Summary
Key Takeaways — Day 12
🎯 What You Must Remember
- ✓INCOTERMS are published by ICC (International Chamber of Commerce) — globally accepted rules defining cost, risk and responsibility allocation
- ✓INCOTERMS 2020 has 11 terms: 6 for Sea/Waterway (EXW, FCA, FAS, FOB, CFR, CIF) + 5 for Any Mode (CPT, CIP, DPU, DAP, DDP)
- ✓EXW = minimum seller obligation · DDP = maximum seller obligation
- ✓FOB — risk transfers when goods are ON BOARD the vessel (not when placed alongside)
- ✓CFR & CIF — seller pays freight/insurance BUT risk still transfers at port of loading (common misconception)
- ✓FCA is most preferred for Indian exporters — keeps Shipping Bill and export evidence in seller’s control for GST refunds
- ✓EXW should be avoided by Indian exporters — export documents in buyer’s name creates GST refund problems
- ✓FOB value is the basis for Shipping Bill, export turnover for Rule 89(4) formula, and customs valuation
- ✓CIF = CFR + Minimum Insurance · CIP = CPT + Comprehensive (All-Risk) Insurance
- ✓DPU is the only Incoterm where the seller is responsible for unloading at the destination
Catch Up — Days 1 to 11
Day 1–11: Export Intro · IGST vs LUT · Invoice · LUT · Refund · Returns · Shipping Bill · Goods vs Services · CSB-V · Time Limit · Registrations
🎬 Instagram Reel
Day 12 Video Summary
📱
Instagram Reel — Day 12 · INCOTERMS 2020 Complete Guide for Indian Exporters
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⚠️ Disclaimer
The content shared on this channel is purely for educational purposes. As a Chartered Accountant, I strive to provide accurate and insightful information related to GST, Income Tax, Accounting, and Tax Planning. However, please note that the content should not be considered as professional advice or a substitute for personalized consultation. For specific matters, please consult a qualified professional.
The content shared on this channel is purely for educational purposes. As a Chartered Accountant, I strive to provide accurate and insightful information related to GST, Income Tax, Accounting, and Tax Planning. However, please note that the content should not be considered as professional advice or a substitute for personalized consultation. For specific matters, please consult a qualified professional.
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