PEDREZA CUSTOMS & TARIFF WEBINARS

410 Burke Street, Brgy. 290, Binondo, Manila

Globe: 09063811016 / 09068172757 Landline: 82423398
Email: [email protected] FB: www.facebook.com/clap.stacruz/

2021 PRACTICAL COMPUTATIONS REVIEW – DAY 1

INCOTERMS 2020 (COMPUTATIONS)
Prof. RUBEN C. PEDREZA, CB, EE, MCA

ICC INCOTERMS TERMINOLOGIES

MAIN CARRIAGE
refers to freight cost, by air or sea, charged by the carrier (airlines/shipping lines) or amount paid by the
shipper to carrier for the transport of goods from country of origin to country of destination. (Grp. “C” &
“D”)

PRE-CARRIAGE
refers to the cost of transport for hauling goods from seller’s premises to a designated point at country of
origin. Also known as “Origin Inland Freight”. (Grp. “F”, “C” & “D”)

ON-CARRIAGE
refers to the cost of transport for hauling goods from the port of discharge to buyer’s warehouse or
designated place at destination. Also known as “Destination Inland freight”. (Grp. “D” only)

FREIGHT PRE-PAID
means the main carriage for the exported goods was paid by seller prior to departure from country of
origin and therefore included in seller’s invoice price. (Grp. “E”, “C” & “D” only)

FREIGHT COLLECT
means the main carriage was paid by the buyer upon arrival of imported goods at country of destination
and not included in seller’s invoice price. (Grp. “E” & “F”)

MULTIMODAL TRANSPORT
refers to inter-continental transit of goods involving main carriage that can be carried out both by air or by
sea. (EXW, FCA, CPT, CIP, DPU, DAP & DDP)

PORT TO PORT INSURANCE

generic name for cargo insurance. It refers to the insurance premium paid in the international transport of
goods by air/sea. This is procured by the buyer or seller to cover risks against loss or damage to the
cargo during pendency of the voyage from country of origin to destination. (CIF & CIP only)

INTERNAL INSURANCE
Insurance coverage taken up by seller to cover risks against loss or damage to the goods while in transit
from his premises to a delivery point at origin. (Grp. “F”, “C” & “D”)

ORIGIN/DESTINATION LCL CHARGES

refers to cost of handling and moving loose or breakbulk cargoes within a seaport at country of origin or
destination. (ORIGIN – Grp “F”, “C”, & “D”) (DESTINATION – Grp “D”)

ORIGIN/DESTINATION TERMINAL HANDLING CHARGES (THC)

refers to cost of handling and moving containerized cargoes within the terminal facilities of a seaport at
country of origin or destination. (ORIGIN – Grp “F”, “C”, & “D”) (DESTINATION – Grp “D”)

OTHER CHARGES (O/C)

refers to incidental expenses (except main carriage and port to port insurance) incurred by the
seller/exporter in relation to fulfilling his contractual obligation to deliver the goods for each of the 11

Prof. RUBEN C. PEDREZA, CB, EE, MCA

Page 1 of 7
 PEDREZA CUSTOMS & TARIFF WEBINARS
410 Burke Street, Brgy. 290, Binondo, Manila
Globe: 09063811016 / 09068172757 Landline: 82423398
Email: [email protected] FB: www.facebook.com/clap.stacruz/

incoterms. (e. g. pre-carriage/on-carriage, export documentation/clearance fees, forwarder’s fees,

THC/LCL charges, export/import duties & taxes, etc.) (Grp. “F”, “C” & “D”)

CARRIER
refers to airlines, shipping lines or their agents (NVOCC/IFF)

DELIVERY
refers to bringing of goods to a specific place or to a carrier/forwarder at country of origin or destination
and used as reference point when liability against risk for loss of or damage to the goods passes on from
seller to buyer

I. OTHER CHARGES (ORIGIN) II. OTHER CHARGES (DESTINATION)

- Origin Inland Freight / Pre-carriage - Destination Inland Freight/On-carriage
- Origin LCL/THC (DAP, DPU, DDP)
- Internal Insurance - Destination LCL/THC (DAP, DPU & DDP)
- Export Documentation/Clearance - Import Duties/Taxes (DDP only)
Expenses - Unloading expenses at buyer’s
- Export Duties/Taxes warehouse or designated place (DPU
only)
- Export Forwarder’s Fees
- Storage Charges (DDP only)
- Export Packaging/Handling
- Pre-shipments Inspection Fees
- Cert. of Origin, Phytosanitary Cert.,
MSDS, MIII Certificate, etc.

III. MAIN CARRIAGE

- ocean/air freight charges from port of origin to port of destination
a) Frt Pre-paid – main carriage paid be seller (included in invoice price) prior to departure at Port of
Origin.
(EXW, CPT, CIP, CFR, CIF, DAP, DPU, & DDP)
b) Frt. Collect – main carriage paid by buyer upon arrival at Port of Destination not included in
seller’s invoice price.
(EXW, FCA, FAS & FOB)

IV. PORT TO PORT INSURANCE

- Coverage against risk for loss/damage to the goods while in transit from port of Origin to Port of
Destinations (by sea – Marine Insurance) & applies only to CIF & CIP.
▪ Internal Insurance – coverage against risk for loss/damage to the goods while in transit from
seller’s warehouse to any point at Country of Origin (FCA, FAS, FOB, CPT, CFR, DAP, DPU &
DDP)

THE 4 CATEGORIES OF INCOTERMS 2020

I. CATEGORY E (DEPARTURE)
EXW (Ex Works)…named place of delivery

Note: FREIGHT PRE-PAID/COLLECT (BUYER’S OPTION)

MULTI-MODAL MODE OF TRANSPORT
II. CATEGORY F (SHIPMENT)
1) FCA (Free Carrier)…named place of delivery
2) FAS (Free Alongside Ship)…named port of shipment
3) FOB (Free on Board)…named port of shipment
COMMONALITY: MAIN CARRIAGE (FRT COLLECT) & PORT TO PORT INSURANCE NOT
INCLUDED IN SELLER’S INVOICE PRICE.

Prof. RUBEN C. PEDREZA, CB, EE, MCA

Page 2 of 7
 PEDREZA CUSTOMS & TARIFF WEBINARS
410 Burke Street, Brgy. 290, Binondo, Manila
Globe: 09063811016 / 09068172757 Landline: 82423398
Email: [email protected] FB: www.facebook.com/clap.stacruz/

III. CATEGORY C (SHIPMENT)

1) CFR (Cost & Freight)…named port of destination
2) CIF (Cost, Insurance & Freight)…named port of destination
3) CPT (Carriage Paid to)…named destination
4) CIP (Carriage & Insurance Paid to)…named destination
COMMONALITY: MAIN CARRIAGE (FRT PRE – PAID) PAID BY SELLER PRIOR TO DEPARTURE
AT ORIGIN AND INCLUDED IN INVOICE PRICE.
IV. CATEGORY D (ARRIVAL)
1) DPU (Delivered at Place Unloaded)…named place of destination
2) DAP (Delivered at Place)…named place of destination
3) DDP (Delivered Duty Paid)…named place of destination
COMMONALITY: ARRIVAL, MAIN CARRIAGE (FRT PRE – PAID) PAID BY SELLER PRIOR TO
DEPARTURE AT ORIGIN AND INCLUDED IN INVOICE PRICE EXCEPT PORT-TO-
PORT INSURANCE.

TRANSPOSITION : INCOTERMS FORMULAS TRANSPOSITION : INCOTERMS FORMULAS

ILLUSTRATION No.1 ILLUSTRATION No.2
GIVEN: FOB = EXW + O/C GIVEN: CIF = FOB + INS + FRT

FIND: a) EXW b) O/C FIND: a) FOB b) INS c) FRT

SOLUTION:
SOLUTION:
a) FOB = CIF - (INS + FRT)
a) EXW = FOB - O/C
b) INS = CIF - (FOB + FRT)
b) O/C = FOB - EXW c) FRT = CIF - (FOB + INS)
11 12

TRANSPOSITION : ADDITION / SUBTRACTION TRANSPOSITION : ADDITION / SUBTRACTION

ILLUSTRATION No.3 SOLUTION : ILLUSTRATION No.3

GIVEN: EQ. : CFR = FOB + FRT

Substitute given values
CFR / INV - $ 5,500.00 $ 5,500.00 = FOB + $ 500.00
FRT / BL - $ 500.00 Solving for FOB by TRANSPOSITION

FIND: FOB = $ 5,500.00 - $ 500.00

TOTAL FOB VALUE TOTAL FOB = $ 5,000.00

13 14

Solution :
SUBSTITUTION – Mathematical tool used to CFR = FOB + FRT
substitute a given value for a term in an equation By Substitution :
to reduce 2 unknowns to only 1 unknown. $ 10,500.00 = FOB + 0.05 FOB
Example: $ 10,500.00 = 1.05 FOB

Given : By Transposition, solve for “FOB” :

CFR – $ 10,500.00 $ 10,500.00
FOB =
FRT – 5% of FOB 1.05
Find : FOB = $ 10,000.00
FOB & FRT using the formula : x 0.05
CFR = FOB + FRT FRT - $ 500.00
23

Prof. RUBEN C. PEDREZA, CB, EE, MCA

Page 3 of 7
 PEDREZA CUSTOMS & TARIFF WEBINARS
410 Burke Street, Brgy. 290, Binondo, Manila
Globe: 09063811016 / 09068172757 Landline: 82423398
Email: [email protected] FB: www.facebook.com/clap.stacruz/

ILLUSTRATION No. 4 ILLUSTRATION No. 5

GIVEN: FOB FIND: EXW GIVEN:
O/C – 3% of EXW Using the formula: Total CIF - $9,520.00
FOB = EXW + O/C
SOLUTION: Total FRT - 10% of FOB
3% of EXW
by substitution:
Total INS - 2% of FOB
FOB = EXW + 0.03 EXW
= 1.03 EXW FIND:
by transposition: Total Customs Value based on the Formula
FOB
EXW = CIF = FOB + INS + FRT
1.03 21 28

Solution: ILLUSTRATION No. 5 Solution: ILLUSTRATION No. 5

1st Solution :
Formula : CIF = FOB + INS + FRT $ 9,520.00 = FOB + 0.02FOB + 0.10FOB
1) based on the given data, equate “INS” & “FRT” in terms of “FOB”
$ 9,520.00 = 1.12 FOB
a) INS = 0.02FOB (Gen. cargo ins. rate)
b) FRT = 0.10FOB (given) By TRANSPOSITION, solve for “FOB”

2) Substitute value of “INS” & “FRT” in terms of FOB in $ 9,520.00

the CIF formula FOB =
1.12
$ 9,520.00 = FOB + 0.02FOB + 0.10FOB Total FOB = $ 8,500.00
29 30
CIF INS FRT

Alternative Solution: ILLUS. No. 5 INCOTERMS 2020

CIF - FRT EXWORKS (EXW)
2nd Solution : FOB = (Gen. Cargo)
1.02 COUNTRY OF ORIGIN Carrying Aircraft

Substitute value of “FRT” in terms of “FOB” Carrying Vessel

FRT EXW Sea Frt
Air Freight
(Pre-paid/collect)
(Prepaid or collect)
CIF - 0.10 FOB CUSTOMS
FOB =
1.02
1.02 FOB = CIF - 0.10 FOB
Seller’s warehouse,
1.02 FOB + 0.10 FOB = CIF Port of Shipment at origin
Factory, plant or EXW = COST OF GOODS (Seaport/Airport)
premises
1.12 FOB = $ 9,520.00
DELIVERY : Seller delivers goods at his warehouse, factory, plant and may or may
By transposition, solve for “FOB” not be his premises (not loaded to collecting vehicle provided by buyers)
$ 9,520.00
FOB = N O T E : Importer pays for ocean/air freight charges prior to departure at origin or
1.12 upon arrival of goods at destination. Port to port insurance not included
FOB = $ 8,500.00 31 in seller’s invoice price. 32
(CV)

INCOTERMS 2020 INCOTERMS 2020

FREE CARRIER (FCA)
COUNTRY OF ORIGIN CARRIAGE PAID TO (CPT)
1 2
Customs COUNTRY OF ORIGIN
FCA FCA 1 2
OR
Customs
CPT CPT
OR

Seller’s warehouse, Carrier Port of Shipment

Factory or plant (airlines/shipping lines/NVOCC) at origin (Seaport/Airport
- Frt collect) Port of Shipment
FCA = EXW + OC Seller’s warehouse, Carrier
at origin (Seaport/Airport
Factory or plant (airlines/shipping lines/NVOCC)
- Frt pre-paid)
DELIVERY : Seller delivers the goods at any of 2 places at origin:
a) seller’s premises loaded to the collecting vehicle provided by the buyer,
CPT = FCA + O/C
or DELIVERY : Seller delivers the goods by handing them over to the custody of the
b) Another named place where goods were handed over to the carrier or carrier or his agent (seller fulfills his obligation to deliver when goods
another person (forwarder) nominated by the buyer ready for unloading are handed over to the carrier and not when the goods reaches the port
from vehicle provided by the seller of destination)
N O T E : Importer pays for ocean/air freight charges upon arrival of goods at destination.
Port to port insurance not included in seller’s invoice price. 34
N O T E : Seller pays for ocean/air charges prior to departure at origin. Port to port
insurance not included in seller’s invoice price. 36

Prof. RUBEN C. PEDREZA, CB, EE, MCA

Page 4 of 7
 PEDREZA CUSTOMS & TARIFF WEBINARS
410 Burke Street, Brgy. 290, Binondo, Manila
Globe: 09063811016 / 09068172757 Landline: 82423398
Email: [email protected] FB: www.facebook.com/clap.stacruz/

INCOTERMS 2020 INCOTER S 2 2

CARRIAGE & INSURANCE PAID TO (CIP)
COUNTRY OF ORIGIN
Seller Export anufacturer,
COUNTRY OF ORI IN
1 Consignor a) FAS b) FAS
2 Customs
Customs
CIP CIP
OR

Port of Shipment
Seller’s warehouse, Carrier Seller s warehouse, Factory,
at origin (Seaport/Airport Pier / UA
Factory or plant (airlines/shipping lines/NVOCC) plant or premises
- Frt pre-paid) FAS EXW O/C (Frt Collect)
CIP = CPT + INS
DELIVERY : Seller delivers the goods by handing them over to the custody of the DELIVER Seller delivers goods at any of 2 points at seaport of shipment
carrier or his agent (seller fulfills his obligation to deliver when a. at the port side of carrying vessel on board arriving delivery vehicle, not
goods are handed over to the carrier and not when the goods unloaded
reaches the port of destination) b. at the starboard side of carrying vessel or on board a barge/lighter, ready for
loading on board the vessel
N O T E : Seller pays for ocean/air freight charges prior to departure at origin. Port N O T E Importer pays for ocean freight charges upon arrival of goods at destination. Port
to port insurance included in seller’s invoice price. 38 to port insurance not included in seller s invoice price.

INCOTER S 2 2 INCOTERMS 2020

COST & FREIGHT (CFR)
COUNTRY OF ORI IN COUNTRY OF ORIGIN
FOB CFR
(Frt. Pre-Paid)
(Frt. Collect)
CUSTO S CUSTOMS

Seller s warehouse, Seller’s warehouse, Seaport at origin

Port of Shipment at origin Seaport at origin Factory, plant or premises
Port of Shipment at origin
Factory, plant or premises
CFR = FOB + FRT
FOB EXW O/C DELIVERY : Seller delivers goods on board carrying vessel at port of shipment
(seller fulfills his obligation to deliver when goods are loaded on
DELIVER Seller delivers goods on board carrying vessel at seaport of shipment
board the vessel and not when the goods reaches the port of
destination)
N O T E Importer pays for ocean freight charges upon arrival of goods at
destination. Port to port insurance not included in seller s invoice price. N O T E : Seller pays for ocean freight charges prior to departure at origin. Port to port
53
insurance not included in seller’s invoice price.

INCOTERMS 2020
INCOTERMS 2020
COST, INSURANCE & FREIGHT (CIF) DELIVERED AT PLACE (DAP)
Co unt ry o f De st inat io n
Arriving aircraft
COUNTRY OF ORIGIN CIF
(Frt. Pre-Paid) Customs
CUSTOMS DAP

Buyer’s warehouse
Seller’s warehouse, Arriving vessel Port of Destination1 / Designated place
Port of Shipment at origin Seaport at origin
Factory, plant or premises DAP = FOB/FCA + FRT + Dest. O/C
CIF = FOB + INS + FRT
DELIVERY : Delivers goods at buyer’s warehouse or designated place ready for unloading from arriving
DELIVERY : Seller delivers goods on board carrying vessel at port of shipment vehicle provided by him
(seller fulfills his obligation to deliver when goods are loaded on board N O T E : Seller pays for ocean/air freight charges prior to departure at origin. Port to port insurance
the vessel and not when the goods reaches the port of destination) not included in seller’s invoice price.
Seller pays destination inland freight charges up to buyer’s warehouse.
N O T E : Seller pays for ocean freight charges prior to departure at origin. Port to Buyer pays import duties/taxes, import clearing expenses including expenses for
44
port insurance included in seller’s invoice price. 55 unloading of goods from arriving delivery vehicle.

INCOTERMS 2020 INCOTERMS 2020

DELIVERED AT PLACE UNLOADED (DPU) DELIVERED DUTY PAID (DDP)
Country of Destination Country of Destination
Arriving aircraft (Frt. Pre-paid)
Arriving aircraft DPU Customs
(Frt. Pre-paid) Customs DDP

Buyer’s warehouse /
Buyer’s warehouse / Arriving Vessel (Frt. Pre-paid) Port of Destination Designated place
Arriving Vessel (Frt. Pre-paid) Port of Destination Designated place
DDP = FOB/FCA + FRT + Dest. O/C
DPU = FOB/FCA + FRT + Dest. O/C DELIVERY : Seller delivers goods at buyer’s warehouse or designated place ready for unloading from
DELIVERY : Seller delivers goods at buyer’s warehouse or designated place. vehicle provided by him.
N O T E : Seller pays for ocean/air freight charges prior to departure at origin. Port to port insurance
N O T E : Seller pays for ocean/air freight charges prior to departure at origin. Port to port insurance not included in seller’s invoice price.
not included in seller’s invoice price.
Seller pays destination inland freight charges up to buyer’s warehouse excluding
Seller pays destination inland freight charges up to buyer’s warehouse including expenses for unloading of goods from arriving delivery vehicle.
expenses for unloading of goods from arriving delivery vehicle. Seller pays import duties/taxes and import clearing expenses.
48

Buyer pays import duties/taxes and import clearing expenses. 46

Prof. RUBEN C. PEDREZA, CB, EE, MCA

Page 5 of 7
 PEDREZA CUSTOMS & TARIFF WEBINARS
410 Burke Street, Brgy. 290, Binondo, Manila
Globe: 09063811016 / 09068172757 Landline: 82423398
Email: [email protected] FB: www.facebook.com/clap.stacruz/

SUMMARY OF INCOTERMS FORMULAS INCOTERMS FORMULAS

(Originally conceptualized &derived by Engr. R. Pedreza) 8) FCA = EXW + O/C
1) EXW = FOB/FCA - O/C 9) FCA = CPT - FRT
2) EXW = CFR/CPT - (O/C + FRT) 10) FCA = CIP - (INS + FRT)
3) EXW = CIF/CIP - (O/C + INS + FRT)

4) FAS = EXW + O/C 11) CFR = FOB + FRT

5) FOB = EXW + O/C 12) CFR = EXW + O/C + FRT
6) FOB = CFR - FRT
13) CFR = CIF - INS
7) FOB = CIF - (INS + FRT)

INCOTERMS FORMULAS INCOTERMS FORMULAS

14) CPT = FCA + FRT
15) CPT = EXW + O/C + FRT
20) CIP = FCA + INS + FRT
16) CPT = CIP - INS
21) CIP = EXW + O/C + INS + FRT

17) CIF = FOB + INS + FRT

22) CIP = CPT + INS
18) CIF = EXW + O/C + INS + FRT

19) CIF = CFR + INS

INCOTERMS FORMULAS Determination of Customs Value

24) DAP/DPU/DDP = EXW + Origin O/C + FRT + Dest. O/C

23) DAP/DPU/DDP = FOB/FCA + FRT + Dest. O/C

To determine the CUSTOMS VALUE
of imported goods for assessment
25) DAP/DPU/DDP = CFR/CPT + Dest. O/C
purposes it is equal to the FOB
Note: value or Cost of Goods as
1) Shipments by AIR/SEA – use EXW, FCA and CPT contemplated in CMO 20-2004.
2) Shipments by SEA ONLY – use EXW, FOB and CFR

DETERMINATION OF OTHER CHARGES (O/C)

Under the provisions of CMO 43-93, whenever the

other dutiable charges are not indicated as a separate
value in the invoice, the said charges are already
deemed included in the FOB value. (FOB = EXW + O/C)

On the other hand, whenever the other charges are

indicated in the invoice price as a separate value, the
Exw value is adopted as the customs value while the
other charges shall be indicated as a separate
component of the dutiable value.
(DV = EXW + O/C + FRT + INS) 38

Prof. RUBEN C. PEDREZA, CB, EE, MCA

Page 6 of 7
 PEDREZA CUSTOMS & TARIFF WEBINARS
410 Burke Street, Brgy. 290, Binondo, Manila
Globe: 09063811016 / 09068172757 Landline: 82423398
Email: [email protected] FB: www.facebook.com/clap.stacruz/

Prof. RUBEN C. PEDREZA, CB, EE, MCA

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