INCOTERMS 2010 by the International Chamber of Commerce International Business Transactions SSL MSG IB 2015/2016 Monika Grottel PhD

INCOTERMS 2010 What the ICC is? INCOTERMS – what does it mean? The history of INCOTERMS How to use the INCOTERMS? Main features of INCOTERMS rules Rules for any mode(s) of transport Rules for sea and inland waterway transport

Is it law, regulation or optional convention? THE RULE Is it law, regulation or optional convention?

A RULE (by the English Language Dictionary} official instructions, often written down, which tell us what we are allowed to do and we are not in a particular place or situation; the course of action that you should take in order to do something properly or to achieve a particulat goal; a statement that describes the way that things usually happen in a system; the way of behaving or taking part in something that most people agree is right and acceptable.

THE RULE the course of action that you should take in order to do something – GUIDELINE the way of behaving or taking part in something – CONVENTION is right acceptable most people agree with it

One of the first initiatives of the International Chamber of Commerce (ICC) to facilitate international trade was to explore the understanding of trade terms in the 1920s and to publish the firts results of their study in 1923: 6 common trade terms, used by 13 different countries

What the ICC is? The International Chamber of Commerce (ICC) the largest, most representative business organization in the world a world network of national committees keeps the ICC International Secretariat in Paris

INCOTERMS what does it mean? International Commercial Terms a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) widely used in international commercial transactions

INCOTERMS what does it mean? a set of three-letters trade terms reflecting bussiness –to-bussines practice in contracts for the sale of goods the Incoterms rules describe mainly the tasks, costs and risks involved in the delivery of goods from sellers to buyers

The history of INCOTERMS 1921 – the Incoterms rules began development with the forming of the idea by the International Chamber of Commerce 1928 – second published study with interpretation of trade terms used in more than 30 countries 1936 – the first set of the Incoterms rules was published the first set remained in use for almost 20 years

The history of INCOTERMS 1953 – the second publication additional amendments and expansions followed in 1967, 1976, 1980, 1990 and 2000 January 1, 2011 – the eighth and current version of the Incoterms rules – Incoterms 2010 – was published

How to use the INCOTERMS? if we want the Incoterms 2010 to apply to our contract of sale, we have to make it clear in the contract, through such words: „CIF Hamburg, Incoterms 2010” the chosen Incoterms rule can work only, if the parties of contract name a place or port and specify this place or port as precisley as possible: „FCA 38 Cours Albert1er, Paris, France Incoterms 2010”

How to chose the appropriate INCOTERMS rule? The chosen Incoterms rule has to be appropriate: to the goods, to the means of their transport to whether the parties intend to put additional obligations, such as obligation to organize carriage or insurance, on the seller or on the buyer

How to use the INCOTERMS? Remember that Incoterms rules dont give you a complete contract of sale!

INCOTERMS rules do say! which party to the sales contract has the obligation to make carriage or insurance arrangements when the seller delivers the goods to the buyer which costs each party is responsible for

INCOTERMS rules say nothing about! the price to be paid and the method of the payment transfer of ownership of the goods consequences of a breach of contract

Main features of INCOTERMS rules the 11 Incoterms rules are presented in two classes: rules for any modes of transport rules for sea and inland waterway transport

Main features of INCOTERMS rules Incoterms rules have been used in international sale contracts, where goods pass across national borders in various areas of the world have made border formalities between different countries less significant

Main features of INCOTERMS rules Guidance Notes before each Incoterms rule you will find a Guidance Note Guidance Notes explain the fundamentals of each Incoterms rule: when it should be used, when risk passes, how costs are allocated between seller and buyer

Variants of INCOTERMS rules sometimes the parties want to alter an Incoterms rule Incoterms 2010 rules don’t prohibit such alteration there are dangers in so doing in order to avoid any unwelcome surprises, the parties of contract would need to make the indended effect of such alterations extremely clear in their contract

Terms used in the INCOTERMS 2010 the seller’s obligations and the buyer’s obligations can be carried out personally by the seller or by the buyer, or sometimes through intermediaries such as carriers, freight forwarders or other persons nominated by the seller or the buyer for a specific purpose

Terms used in the INCOTERMS 2010 CARRIER – the party with whom carriage is contracted CUSTOMS FORMALITIES – may include documentary, security, information or physical inspection obligations DELIVERY – this concept is used to indicate where the risk of loss of or damage to the goods passes from the seller to the buyer

Terms used in the INCOTERMS 2010 DELIVERY DOCUMENT – a document used to prove that the delivery has occured: a transport document or corresponding electronic record PACKAGING: the packaging of the goods to comply with any requirements under the contract of sale the packaging of the goods so that they are fit for transportation

Rules for any mode(s) of transport EXW FCA CPT CIP DAT DAP DDP

EXW Ex Works (named place of delivery) the seller delivers, when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (works, factory, warehouse..) represents the minimum obligation for the seller

EXW the seller’s obligations to provide the goods and the commercial invoice in confirmity with the contract of sale to deliver the goods by placing them at the disposal of the buyer at the agreed point, at the named place of delivery, not loaded on any collecting vehicle, on the agreed date no obligation to make a contract of carriage and a contract of insurance

EXW the seller’s obligations to bear the risks of loss of or damage to the goods until they have been delivered to the agreed point to pay all costs relating to the goods until they have been delivered at its own expense, to package the goods to provide the buyer , at the buyer’s request, risk and expense, assistance in obtaining any export licence, other official authorization necessary for the export of the goods

EXW the buyer’s obligations to pay the price of the goods as provided in the contract of sale to take the delivery of the goods if it has been complied with the contract of sale to pay all costs relating to the goods from the time they have been delivered

EXW the buyer’s obligations to obtain any export and import licences and other official authorization and carry out all customs formalities for the export of the goods to pay all duties, taxes and other charges, costs of carrying out customs formalities payable upon export to bear all risks of loss of or damage to the goods from the time they have been delivered

FCA Free Carrier (named place of delivery) the seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the named place the seller pays for carriage to the named point of delivery risk passes when the goods are handed over to the first carrier

FCA the seller’s obligations to delivere the goods to the carrier or another person nominated by the buyer at the agreed point and at the agreed date to obtain, at its own risk and costs, any export licence and other official authorization and carry out all customs formalities necessary for the export of goods

FCA the seller’s obligations no obligation to make contract of carriage no obligation to make a contract of insurance to bear all risks of loss of or damage to the goods until they have been delivered to the first carrier nominated by the buyer to pay all costs relating to the goods until they have been delivered

FCA the buyer’s obligations to pay the price of the goods to obtain, at its own risk and costs, any import licence and other official authorization and carry out all customs formalities necessary for the import of goods and for their transport through any country

FCA the buyer’s obligations to contract at its own expense for the carriage of the goods from the named place of delivery to bear all risks of loss of or damage to the goods from the time they have been delivered to pay all costs relating to the goods from the time they have been delivered

CPT Carriage Paid To (named place of destination) the seller pays for carriage risk transfers to buyer upon handing goods over to the first carrier and NOT when the goods reach the place of destination

CPT the seller’s obligations to contract, on its expense, for the carriage of the goods from the agreed point of delivery to the named place of destination no obligation to make a contract of insurance to deliver the goods by handing them over to the contracted carrier

CPT the seller’s obligations to bear all risks of loss of or damage to the goods until they have been delivered to the first carrier to pay all costs relating to the goods until they have been delivered to pay the freight, including costs of loading the goods and any charges for unloading at the place of destination, costs of customs formalities necessary for export

CPT the buyer’s obligations to pay the price of the goods to bear all risks of loss of or damage to the goods from the time they have been delivered to the first carrier

CIP Carriage and Insurance Paid To (named place of destination) seller pays for carriage and insurance to the named destination point seller contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage

CIP seller is required to obtain insurance only on minimum cover risk passes when the goods are handed over to the first carrier

CIP the seller’s obligations to deliver the goods by handing them over to the first carrier to contract for the carriage of the goods to the named place of destination to bear all risks of loss of or damage to the goods until they have been delivered to the first carrier

CIP the seller’s obligations must obtain at its own expense cargo insurance must provide the buyer with the insurance policy or any other evidence of insurance cover

CIP the buyer’s obligations to pay the price of the goods to bear all risks of loss of or damage to the goods from the time they have been delivered to the first carrier

DAT Delivered at Terminal (named terminal at port or place of destination) seller delivers when the goods are unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal of destination

DAT seller pays for carriage to the terminal, except for costs related to import clearance seller assumes all risks up to the point that the goods are unloaded at the terminal

DAT the seller’s obligations to contract at its own expense for the carriage of the goods to the named terminal at the agreed port or place of destination must unload the goods from the arriving means of transport and then deliver them by placing them at the disposal of the buyer at the named terminal on the agreed date

DAT the seller’s obligations to bear all risks of loss of or damage to the goods until they have been delivered to the agreed terminal to pay costs of customs formalities in export, all duties, taxes, charges payable upon export and the costs for their transport through any country

DAT the buyer’s obligations to pay the price of the goods to bear all risks of loss of or damage to the goods from the time they have been delivered to the agreed terminal to pay costs of customs formalities in import, all duties, taxes, charges payable upon import and the costs for their transport through the country to the own store

DAP Delivered at Place (named place of destination) seller delivers when the goods are on the arriving means of transport, ready for unloading at a named place of destination seller pays for carriage to the named place, except for costs related to import clearance, seller assumes all risks prior to the point that the goods are ready for unloading by the buyer

DAP the seller’s obligations must deliver the goods by placing them at the disposal of the buyer on the arriving means of transport ready for unloading at the agreed point, at the named place of destination on the agreed time must contract at its own expense for the carriage of the goods to the named place of destination

DAP the seller’s obligations to bear all risks of loss ofor damage to the goods until they have been delivered to the named place to pay costs of customs formalities in export, all duties, taxes, charges payable upon export and the costs for their transport through any country

DAP the buyer’s obligations to pay the price of the goods to bear all risks of loss of or damage to the goods from the time they have been delivered to the place to pay all costs of unloading necessary to take delivery of the goods from the arriving means of transport at the named place of destination

DAP the buyer’s obligations to pay costs of customs formalities in import, all duties, taxes, charges payable upon import of the goods

DDP Delivered Duty Paid (named place of destination) seller is responsible for delivering the goods to the named place in the country of the buyer seller pays all costs in bringing the goods to the destination including import duties and taxes DDP places maximum obligations on the seller and minimum obligations on the buyer

DDP the seller’s obligations must deliver the goods by placing them at the disposal of the buyer on the arriving means of transport ready for unloading at the agreed point, at the named place of destination on the agreed time

DDP the seller’s obligations to pay costs of customs formalities in export and import, all duties, taxes, charges payable upon export and import of the goods, and the costs for their transport through any country

DDP the buyer’s obligations to pay the price of the goods to bear all risks of loss of or damage to the goods from the time they have been delivered to the place to pay all costs of unloading necessary to take delivery of the goods from the arriving means of transport at the named place of destination

Rules for sea and inland waterway transport FAS FOB CFR CIF

FAS Free Alongside Ship (named port of shipment) seller must place the goods alongside the ship at the named port and clear the goods for export suitable only for maritime transport but NOT for multimodal sea transport in containers is typically used for heavy-lift or bulk cargo

FAS the seller’s obligations to deliver the goods by placing them alongside the ship nominated by the buyer at the loading point to bear all risks of loss of or damage to the goods until they have been placed alonside the ship to pay costs of customs formalities in export, all duties, taxes, charges payable upon export

FAS the buyer’s obligations to pay the price of the goods must contract at its own expense for the carriage of the goods from the named port of shipment to pay costs of customs formalities in import, all duties, taxes, charges payable upon import of the goods

FAS the buyer’s obligations to bear all risks of loss of or damage to the goods from the time they have been placed alongside the ship nominated by the buyer at the loading point

FOB Free on Board (named port of shipment) seller must load the goods on board the vessel nominated by the buyer cost and risk are passes when the goods are actually on board of the vessel (this rule is new!) and the buyer bears all costs from that moment the seller must clear the goods for export

FOB the seller’s obligations to deliver the goods by placing them on board the vessel nominated by the buyer at the loading point, at the named port of shipment to bear all risks of loss of or damage to the goods until they have been placed on board to pay costs of customs formalities in export, all duties, taxes, charges payable upon export

FOB the buyer’s obligations to pay the price of the goods must contract at its own expense for the carriage of the goods from the named port of shipment to bear all risks of loss of or damage to the goods from the time they have been placed on the board

FOB the buyer’s obligations to pay costs of customs formalities in import, all duties, taxes, charges payable upon import of the goods

CFR Coast and Freight (named port of destination) seller must pay the costs and freight to bring the goods to the port of destination risk is transferred to the buyer once the goods are loaded on the vessel!! maritime transport only and insurance for the goods is NOT included.

CFR the seller’s obligations must deliver the goods by placing them on board the vessel must contract for the carriage of the goods to the named port of destination to bear all risks of loss of or damage to the goods until they have been placed on board

CFR the seller’s obligations to pay costs of customs formalities in export, all duties, taxes, charges payable upon export

CFR the buyer’s obligations to pay the price of the goods to bear all risks of loss of or damage to the goods from the time they have been placed on the board to pay costs of customs formalities in import, all duties, taxes, charges payable upon import of the goods

CIF Cost Insurance and Freight (named port of destination) the same as CFR except that the seller must in addition procure and pay for the insurance maritime transport only

How to use the INCOTERMS? EXW, FCA, DAT, DAP, DDP, FAS, FOB – the named place is the place where delivery takes place and where risk passes from the seller to the buyer CPT, CIP, CFR, CIF – the named place differs from the place of delivery. The named place is the place of destination to which carriage is paid

How to use the INCOTERMS? is a registered trademark of the ICC, registered in several countries

INCOTERMS 2010