Presentation on theme: "INCOTERMS 2000 First published by the ICC in 1936"— 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)Must say, “as per ICC 2000” or “Incoterms 2000” for it to be enforceable.
2 International Commercial Terms (Incoterms) What are Incoterms ?International Commercial Terms (Incoterms)First formulated by the ICC in 1936A 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 1st Jan 2011.22
4 Incoterms – Purpose and Scope Pricing terms, shipping terms, sales termsDefine 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 Payment Terms + Incoterms = Terms of Sale Incoterms are not Payment Terms (although payment timing is commonly tied to the event of delivery).Payment Terms + Incoterms = Terms of Sale55
6 Four Groups of Incoterms LessControlMoreControl1) “E” group2) “F” group3) “C” group4) “D” groupSellerBuyerMoreControlLessControl6
7 Incoterms 2010 – What’s New?New Layout – Divided into two distinct sectionsAny Mode Terms: DDP, DAP, DAT, CIP, CPT, FCA, EXWWaterway/Maritime Terms: FOB, FAS, CFR, CIFAs opposed to 2000 version that began with EXW and progressed to DDP – Least to most risk11 Terms (Down from 13)DAF, DES, DDU, & DEQ have been removed and replaced by DAP & DAT respectively77
8 Any Mode TermsEXWFCACIP and CPTDAP, DAT and DDP88
9 Sea and Inland Waterway Transport Terms FASFOBCFRCIF99
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 buyerNot obligated to put goods on truck, but usually does help anyway.
11 Incoterms 2010The “F” –terms require the seller to deliver goods for carriage as instructed by the buyer.FCAFASFOBNote: insurance and freight are responsibilities of buyer.
12 F Terms – General Considerations Main Carriage contracted by buyerLess work for seller, but less control over documentsFor documentary payment termsFor US Exporters, EEI (Electronic Export Information) filings are typically done by forwarderCompliance – Documentation required1212
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.Seller responsible for loading truck if at premises, but if delivered any other place they do not have to load it.Buyer at risk at this point.
14 FAS -FREE ALONGSIDE SHIP (…named port of shipment) Seller delivers when goods, cleared for export, are placed alongside the vesselSeller 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.Used to be the buyer who was responsible to clear the goods for export.Logic – it’s easier for those in home country to clear.
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 FCAIf not using sea, FCA should be used.Do not use FOB unless something unusual happens at the loading of ship.This is the oldest term and it is overused.
16 Incoterms 2000The “C” –terms require the seller to contract for carriage at his expense – to a specified point.CFRCIFCPTCIPNote: carriage/freight is responsibility of exporter.
17 C Terms – General Considerations Most advantageous for sellerMain Carriage contracted by sellerMost control over documentsMore work for exporter than F TermsUnder C Rules, buyers are responsible for the goods during the main carriage even though the seller has made the arrangements for main carriage1717
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 CPTMostly on commodities.Seller bears costs until delivery, but buyer bears the risks at that time.
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.Buyer may want to supplement with own insurance.Same as CFR except insurance.Must have bill of lading.
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.Can be used for every means of transport, therefore not bill of lading.
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” TermsMain Carriage contracted by sellerSeller responsible for goods until delivered (“arrived”) to specified location on the buyer’s sideNot particularly advantageous if you’re looking for early revenue recognition2222
23 Incoterms 2000The “D” –terms require the seller to take the goods all the way to destination at the border or within the country of import.DAFDES DATDEQ DAPDDUDDPC-terms – shipmentD-terms – destination, buyer clears goods for import.
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 transportDES (Delivered Ex-Ship) – Limited to water shipments onlyDDU (Delivered Duty Unpaid) – Not appropriate for domestic shipments since duty was impliedDAP can be used with any mode of transport – domestic or international2424
25 What happened to DEQ?DEQ (Delivered Ex-Quay) replaced by DAT (Delivered at Terminal)DEQ required the seller (shipper) to unload at the quayDEQ was limited to water transportDATRequires the seller to unload at the quay, terminal, or warehouseCan be used with any mode of transport2525
26 DAT (Delivered at Terminal) Any mode (arrival) term – replaces DEQSeller obtains export clearance and handles export compliance documentationSeller packages goods for transport and pays for all transportation costs to a named destination terminalSeller pays for unloading at the named destination (dock, warehouse, etc.) terminal on buyer’s side2626
27 DAP (Delivered at Place) Any mode (arrival) termSeller obtains export clearance and handles export compliance documentationSeller packages goods for transport and pays for all transportation costs to a named destination place on the buyer’s sideBuyer responsible for unloading goods at the named place – this is the main difference b/t DAP and DAT2727
28 DAP (Delivered at Place) Continued Buyer responsible for import clearance and on carriage (if any)No insurance specifiedFreight Prepaid – Seller pays – Need to incorporate freight charges into invoice to buyerSeller must provide appropriate documentation for release of goods on buyer sideThis is important if on a L/C – flow of documents2828
29 DDP (Delivered Duty Paid) Continued Risky for exporter – dealing with foreign customsBuyer typically responsible for unloading at the point of deliveryInsurance not specifiedFreight Prepaid – Seller pays – Need to incorporate freight and insurance charges into invoice to buyerAn importer under DDP is not necessarily the importer of record since they are not clearing goods through Customs – this may affect Duty Drawback2929
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