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INCOTERMS 2000 First published by the ICC in 1936 ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade terms. Purpose.

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Presentation on theme: "INCOTERMS 2000 First published by the ICC in 1936 ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade terms. Purpose."— Presentation transcript:

1 INCOTERMS 2000 First published by the ICC in 1936 ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade terms. Purpose is to provide a set of international rules for the interpretation of the most commonly used trade terms. These describing where risks lie between seller and buyer, responsibilities of each party and place of transfer of ownership. International Commercial Terms (INCOTERMS)

2 What are Incoterms ? International Commercial Terms (Incoterms) First formulated by the ICC in 1936 A set of standardized guidelines that parties in different countries (and different legal environments) use for structuring the logistical elements of selling and buying goods. the risks and costs between the seller and the buyer via determining a specific place and time for delivery of the goods. Revision , 2000, and now the 2010 revision, applied from 1 st Jan

3 What are Incoterms ? 3

4 Incoterms – Purpose and Scope Pricing terms, shipping terms, sales terms Define the rights and obligation of the parties to the contract of sale with respect to the delivery of goods sold. Provides a clear, universal set of standards for multi-lingual, multi-cultural, “multi-legal” usage -- very practical and based on business practices (not legal principles and abstract ideas) Specifies which party -- either the seller or the buyer -- has the obligation (to arrange and cover any costs) for (transport) carriage, (cargo) insurance, and (trade) compliance.

5 Incoterms are not Payment Terms (although payment timing is commonly tied to the event of delivery). Payment Terms + Incoterms = Terms of Sale 5

6 Four Groups of Incoterms Less Control More Control 1) “E” group 2) “F” group 3) “C” group 4) “D” group SellerBuyer More Control Less Control 6

7 Incoterms 2010 – What’s New? New Layout – Divided into two distinct sections –Any Mode Terms: DDP, DAP, DAT, CIP, CPT, FCA, EXW –Waterway/Maritime Terms: FOB, FAS, CFR, CIF –As opposed to 2000 version that began with EXW and progressed to DDP – Least to most risk 11 Terms (Down from 13) –DAF, DES, DDU, & DEQ have been removed and replaced by DAP & DAT respectively 7

8 Any Mode Terms EXW FCA CIP and CPT DAP, DAT and DDP 8

9 Sea and Inland Waterway Transport Terms FAS FOB CFR CIF 9

10 EXW EX WORKS (…named place) The “E”-term is the term in which the seller’s obligation is at its minimum. Seller delivers when goods placed at disposal of buyer

11 Incoterms 2010 The “F” –terms require the seller to deliver goods for carriage as instructed by the buyer. FCA FAS FOB Note: insurance and freight are responsibilities of buyer.

12 F Terms – General Considerations Main Carriage contracted by buyer Less work for seller, but less control over documents –For documentary payment terms –For US Exporters, EEI (Electronic Export Information) filings are typically done by forwarder –Compliance – Documentation required 12

13 FCA FREE CARRIER (named place) Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place. Term may be used irrespective of the mode of transport. Seller obligated to load goods on arriving vehicle if it arrives at the seller’s premises. Seller not obliged to unload goods from his vehicle.

14 FAS -FREE ALONGSIDE SHIP (…named port of shipment) Seller delivers when goods, cleared for export, are placed alongside the vessel Seller obliged to clear goods for export. The buyer bears all costs and risks of loss or damage to the goods from that moment. Terms can be used for sea or inland waterway transport only.

15 FOB – FREE ON BOARD (…named port of shipment) Seller delivers when goods, cleared for export, pass the ship’s rail at the named port of shipment. The buyer bears all costs and risks of loss or damage to the goods from that point. Term can be used for sea or inland waterway transport only. If intent is not to deliver goods across the ship’s rail, use FCA

16 Incoterms 2000 The “C” –terms require the seller to contract for carriage at his expense – to a specified point. CFR CIF CPT CIP Note: carriage/freight is responsibility of exporter.

17 C Terms – General Considerations Most advantageous for seller Main Carriage contracted by seller –Most control over documents –More work for exporter than F Terms Under C Rules, buyers are responsible for the goods during the main carriage even though the seller has made the arrangements for main carriage 17

18 CFR – COST AND FREIGHT (…named port of destination) Seller delivers when goods, cleared for export, pass the ship’s rail at the named port of shipment. The seller pays the costs and freight necessary to bring goods to port of destination, but the buyer bears the risk of loss and additional costs occurring after delivery. Term can be used for sea or inland waterway transport. If intent is not to deliver goods across the ship’s rail, use CPT

19 CIF – COST, INSURANCE AND FREIGHT (…named port of destination) Seller delivers when goods, cleared for export, pass the ship’s rail at the named port of shipment. The seller pays the costs and freight necessary to bring goods to port of destination, but the buyer bears the risk of loss and additional costs occurring after delivery. The seller procures marine insurance, against buyer’s risk of loss. Seller is required to obtain insurance only on minimum cover. Term can be used for sea or inland waterway transport. If intent is not to deliver goods across the ship’s rail, use CIP.

20 CPT – CARRIAGE PAID TO (…named place of destination) Seller delivers the goods, cleared for export, to the carrier. The seller pays the costs of carriage necessary to bring goods to named destination, but the buyer bears the risk of loss and additional costs occurring after delivery. Term may be used irrespective of mode of transport.

21 CIP – CARRIAGE AND INSURANCE PAID TO (…named place of destination) Seller delivers the goods, cleared for export, the the carrier. The seller pays the costs of carriage to named destination, but the buyer bears the risk of loss and additional costs occurring after delivery. The seller procures insurance against buyer’s risk of loss. Seller is required to obtain insurance only on a minimum cover. Term may be used irrespective of mode of transport.

22 D Terms – General Considerations “Arrival” Terms Main Carriage contracted by seller Seller responsible for goods until delivered (“arrived”) to specified location on the buyer’s side –Not particularly advantageous if you’re looking for early revenue recognition 22

23 Incoterms 2000 The “D” –terms require the seller to take the goods all the way to destination at the border or within the country of import. DAF DESDAT DEQ DAP DDU DDP

24 What happened to DAF, DES and DDU? These three terms have been replaced by one term DAP (Delivered at Place) –DAF (Delivered at Frontier) – Rarely used and limited to ground transport –DES (Delivered Ex-Ship) – Limited to water shipments only –DDU (Delivered Duty Unpaid) – Not appropriate for domestic shipments since duty was implied DAP can be used with any mode of transport – domestic or international 24

25 What happened to DEQ? DEQ (Delivered Ex-Quay) replaced by DAT (Delivered at Terminal) –DEQ required the seller (shipper) to unload at the quay –DEQ was limited to water transport DAT –Requires the seller to unload at the quay, terminal, or warehouse –Can be used with any mode of transport 25

26 DAT (Delivered at Terminal) Any mode (arrival) term – replaces DEQ Seller obtains export clearance and handles export compliance documentation Seller packages goods for transport and pays for all transportation costs to a named destination terminal Seller pays for unloading at the named destination (dock, warehouse, etc.) terminal on buyer’s side 26

27 DAP (Delivered at Place) Any mode (arrival) term Seller obtains export clearance and handles export compliance documentation Seller packages goods for transport and pays for all transportation costs to a named destination place on the buyer’s side Buyer responsible for unloading goods at the named place – this is the main difference b/t DAP and DAT 27

28 DAP (Delivered at Place) Continued Buyer responsible for import clearance and on carriage (if any) No insurance specified Freight Prepaid – Seller pays – Need to incorporate freight charges into invoice to buyer Seller must provide appropriate documentation for release of goods on buyer side –This is important if on a L/C – flow of documents 28

29 DDP (Delivered Duty Paid) Continued Risky for exporter – dealing with foreign customs Buyer typically responsible for unloading at the point of delivery Insurance not specified Freight Prepaid – Seller pays – Need to incorporate freight and insurance charges into invoice to buyer An importer under DDP is not necessarily the importer of record since they are not clearing goods through Customs – this may affect Duty Drawback 29

30

31 Incoterms 2010 Chart Any Mode TermsControl of Costs Main Carriage Cost Risk of Costs Departure, Freight Collect EXW (Ex-Works) Buyer Main Carriage Freight Collect FCA (Free Carrier) Buyer Main Carriage Freight Prepaid CIP (Carriage & Insurance Paid To) Seller Buyer CPT (Carriage Paid To) Seller Buyer Arrival, Freight Prepaid DAT (Delivered at Terminal) Seller DAP (Delivered at Place) Seller DDP (Delivered Duty Paid) Seller 31

32 International Transport Documents

33 BILL OF LADING

34 Transport Documents

35 Terms of Payment in EXIM Advance Payment Export on Consignment Basis Open account Documentary Collection- Document against payment, Document against acceptance Letter of Credit


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