INCOTERMS 2000

Incoterms – what are they and what can they do for you Incoterms is an abbreviation of International commercial terms It is a vital term of the contract of sale and not of the contract of carriage It guides seller and buyers with regard to: - carriage of goods from seller to buyer - export and import clearance and also the division of costs and risk between the parties

Incoterms Use generally recognized key words Agree on the most common understanding of those key words Avoid misunderstandings in their use

Incoterms Problems still occur because: -commercial practice is inconsistent -variations of the key word may not be appropriate -the Incoterm is not sufficiently precise -the parties inadvertently choose the wrong term

Incoterms – what are they and what they cannot do for you Incoterms do not deal with: -transfer of property rights in the goods -relief from obligations and exemptions from liability in case of unexpected or unforeseen events

Incoterms – what are they and what they cannot do for you Incoterms also do not deal with: -consequences of various breeches of contract, except those relating to the passing of risk and costs when the buyer is in breach of his obligation to accept the goods or to nominate the carrier under an F-term

Incoterms –referencing in a contract of sale Parties are strongly advised to -include in the contract of sale in conjunction with the trade term the words Incoterms 2000 and … check that standard contract contains such a reference or superimpose

and now lets discuss Incoterms 2000

The sellers minimum obligation only to make goods available for the buyer at the sellers premises (EXW)

EXW Group E: departure EXW Group E: departure Ex Works (…named place) A A Sellers primary duty Place the goods at the disposal of the buyer at the named place Required documents Commercial invoice Buyers receipt Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Take delivery of the goods when it has been paced at his disposal Critical Points: Carriage to be arranged by the buyer Risk and Cost transfer from the seller to the buyer when the goods are at the disposal of the buyer

The sellers extended obligation to hand over goods for carriage either to a carrier nominated by the buyer (FCA, FAS, FOB) or, (why?) to a carrier chosen and paid for by the seller (CFR, CPT)

together with insurance against risks in transit (CIF, CIP) CFR versus CIF?

FCA Group F: main carriage not paid by seller F FCA Group F: main carriage not paid by seller F ree Carrier (…named place) A Sellers primary duty Deliver the goods at the named point and also load goods on buyers collecting vehicle (changed from 1990) Required documents Commercial invoice Usual document evidencing delivery of goods to the carrier Export license if necessary Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Nominate carrier Contract for carriage, refer clause (A3a) – ICC Guide to Incoterms 2000 Buyer has to unload the vehicle (changed from 1990)

FCA Group F: main carriage not paid by seller F FCA Group F: main carriage not paid by seller F ree Carrier (…named place) A Sellers primary duty Provide evidence of delivery of goods to the carrier Arrange export clearance

FCA Group F: main carriage not paid by seller F FCA Group F: main carriage not paid by seller F ree Carrier (…named place) CONTINUED… Risk and Cost transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place Carriage to be arranged by the buyer or by the seller on the buyers behalf Critical Points:

FAS Group F: main carriage not paid by seller F FAS Group F: main carriage not paid by seller F ree Alongside Ship (…named port of shipment) A Sellers primary duty Deliver the goods alongside the ship Provide an alongside receipt Arrange export clearance (changed from 1990) Required documents Commercial invoice Customary clean receipt Export license if necessary Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Nominate carrier Contract for carriage

FAS Group F: main carriage not paid by seller F FAS Group F: main carriage not paid by seller F ree Alongside Ship (…named port of shipment) CONTINUED… Risk and Cost transfer from the seller to the buyer when the goods have been placed alongside the ship Carriage to be arranged by the buyer Critical Points:

FOB Group F: main carriage not paid by seller F FOB Group F: main carriage not paid by seller F ree on Board (…named port of shipment) Only to be used when: when maritime transport will take place when goods are to be lifted across a ships rail tendered to the ship in hoses for liquid cargo filled form silos when the cargo is to be carried loose in bulk If not above, instead use FCA, thereby indicating the actual place where goods are handed over for carriage

FOB Group F: main carriage not paid by seller F FOB Group F: main carriage not paid by seller F ree on Board (…named port of shipment) A Sellers primary duty Deliver the goods on board Provide a clean on board receipt Pay loading costs not included in the freight Arrange export clearance Required documents Commercial invoice Customary clean receipt Export license if necessary Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Nominate carrier Contract for carriage Pay unloading costs

FOB Group F: main carriage not paid by seller F FOB Group F: main carriage not paid by seller F ree on Board (…named port of shipment) CONTINUED… Risk and Cost transfer from the seller to the buyer when the goods pass the ships rail Carriage to be arranged by the buyer Critical Points:

CFR Group C: main carriage paid by seller CFR Group C: main carriage paid by seller Cost and Freight (…named port of destination) A Sellers primary duty Contract for carriage Deliver the goods on board Provide a clean transport document (Bill of Lading / Sea Waybill) Arrange export clearance Pay unloading costs if for his account under the contract of carriage Required documents Commercial invoice Transport document Export license if necessary Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Accept delivery of the goods upon shipment Receive the goods from the carrier Pay such costs as are not for the sellers account under the contract of carriage

CFR Group C: main carriage paid by seller CFR Group C: main carriage paid by seller Cost and Freight (…named port of destination) Carriage to be arranged by the Seller Risk transfer from the seller to the buyer when the goods pass the ships rail Cost transfer at port of destination, buyer paying such costs as are not for the sellers account under the contract of carriage Critical Points:

CIF Group C: main carriage paid by seller CIF Group C: main carriage paid by seller Cost, Insurance and Freight (…named port of destination) A Sellers primary duty Contract for carriage and insurance Deliver the goods on board Provide a clean transport document (Bill of Lading / Sea Waybill) and a cargo insurance policy or certificate Required documents Commercial invoice Transport document Export license if necessary Insurance policy (Certificate) Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Accept delivery of the goods upon shipment Receive the goods from the carrier Pay such costs as are not for the sellers account under the contract of carriage

CIF Group C: main carriage paid by seller CIF Group C: main carriage paid by seller Cost, insurance and freight (…named port of destination) A Sellers primary duty Arrange export clearance Pay loading costs Pay unloading costs if for his account under the contract of carriage CONTINUED…

CIF Group C: main carriage paid by seller CIF Group C: main carriage paid by seller Cost Insurance and Freight (…named port of destination) Carriage and Insurance to be arranged by the Seller Risk transfer from the seller to the buyer when the goods pass the ships rail Cost transfer at port of destination, buyer paying such costs as are not for the sellers account under the contract of carriage Critical Points:

CPT Group C: main carriage paid by seller CPT Group C: main carriage paid by seller Carriage paid to (…named place of destination) A Sellers primary duty Contract for carriage Deliver the goods to the (first) carrier Provide a clean transport document (Bill of Lading / Sea Waybill) Required documents Commercial invoice Transport document Export license if necessary Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Accept delivery of the goods when they have been delivered to the carrier Receive the goods from the carrier Pay such costs as are not for the sellers account under the contract of carriage

CPT Group C: main carriage paid by seller CPT Group C: main carriage paid by seller Carriage paid to (…named place of destination) A Sellers primary duty Pay unloading costs if for his account under the contract of carriage Pay loading costs Arrange export clearance CONTINUED…

CPT Group C: main carriage paid by seller CPT Group C: main carriage paid by seller Carriage paid to (…named place of destination) Carriage to be arranged by the Seller Risk transfer from the seller to the buyer when the goods have been delivered to the carrier Cost transfer at port of destination, buyer paying such costs as are not for the sellers account under the contract of carriage Critical Points:

CIP Group C: main carriage paid by seller CIP Group C: main carriage paid by seller Carriage and Insurance paid to (…named place of destination) A Sellers primary duty Contract for the carriage and Insurance Deliver the goods to the (first) carrier Provide a clean transport document (Bill of Lading / Sea Waybill) Required documents Commercial invoice Transport document Export license if necessary Insurance Policy (Certificate) Optional documents Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Accept delivery of the goods when they have been delivered to the carrier Receive the goods from the carrier Pay such costs as are not for the sellers account under the contract of carriage

CIP Group C: main carriage paid by seller CIP Group C: main carriage paid by seller Carriage and Insurance paid to (…named place of destination) A Sellers primary duty Pay unloading costs if for his account under the contract of carriage Pay loading costs Arrange export clearance CONTINUED…

CIP Group C: main carriage paid by seller CIP Group C: main carriage paid by seller Carriage and Insurance paid to (…named place of destination) Carriage and Insurance to be arranged by the Seller Risk transfer from the seller to the buyer when the goods have been delivered to the carrier Cost transfer at place of destination, buyer paying such costs as are not for the sellers account under the contract of carriage Critical Points:

The sellers maximum obligation to deliver the goods at destination (DAF, DES, DEQ, DDU or DDP)

DAF Group D: arrival DAF Group D: arrival Delivered at Frontier (…named place) A Sellers primary duty Deliver the goods at the named frontier Provide a document to enable the buyer to take delivery at the frontier or assist him to obtain a through transport document Arrange export clearance Required documents Commercial invoice Transport document or warehouse warrant Optional documents Through transport document Other documents needed for export or transit of the goods through any country or for import clearance B B Buyers primary duty Take delivery of the goods at the named frontier or assume responsibility for on- carriage Arrange import clearance

DAF Group D: arrival DAF Group D: arrival Delivered at Frontier (…named place) Carriage to be arranged by the Seller Risk transfer from the seller to the buyer when the goods have been delivered at the frontier Cost transfer from the seller to the buyer when the goods have been delivered at the frontier Critical Points:

DES Group D: arrival DES Group D: arrival Delivered ex ship (…named port of destination) A Sellers primary duty Deliver the goods on board the ship at the Port of destination Provide a document to enable the buyer to take delivery from the ship (Bill of Lading or delivery order) Arrange export clearance Required documents Commercial invoice Bill of Lading or delivery order Optional documents Other documents needed for transit of the goods through any country or for import clearance B B Buyers primary duty Take delivery of the goods from the ship at the Port of destination Arrange import clearance

DES Group D: arrival DES Group D: arrival Delivered ex ship (…named port of destination) Carriage to be arranged by the Seller Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship Critical Points:

DEQ Group D: arrival DEQ Group D: arrival Delivered ex Quay (…named port of destination) A Sellers primary duty Deliver the goods on the quay at the Port of destination Provide a document to enable the buyer to take delivery from the quay (Bill of Lading or delivery order) Arrange export clearance Required documents Commercial invoice Bill of Lading or delivery order Optional documents Other documents needed for transit of the goods through any country or for import clearance B B Buyers primary duty Take delivery of the goods from the ship at the Port of destination Arrange import clearance (changed from 1990)

DEQ Group D: arrival DEQ Group D: arrival Delivered ex Quay (…named port of destination) Carriage to be arranged by the Seller Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship Critical Points:

DDU Group D: arrival DDU Group D: arrival Delivered duty unpaid (…named place of destination) A Sellers primary duty Deliver the goods at the named place of destination Provide a document to enable the buyer to take delivery Arrange export clearance Required documents Commercial invoice Document needed to take delivery Optional documents Other documents needed for transit of the goods through any country or for import clearance B B Buyers primary duty Take delivery of the goods from the named place of destination Arrange import clearance

DDU Group D: arrival DDU Group D: arrival Delivered duty unpaid (…named place of destination) Carriage to be arranged by the Seller Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer Critical Points:

DDP Group D: arrival DDP Group D: arrival Delivered duty paid (…named place of destination) A Sellers primary duty Deliver the goods at the named place of destination Provide a document to enable the buyer to take delivery Arrange export clearance Required documents Commercial invoice Document needed to take delivery Import license, if necessary B B Buyers primary duty Take delivery of the goods from the named place of destination

DDP Group D: arrival DDP Group D: arrival Delivered duty paid (…named place of destination) Carriage to be arranged by the Seller Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer Critical Points:

Now which one is appropriate? Commercial practice and the type of goods will dictate whether -the seller should refrain from undertaking additional obligations -the seller is prepared to do more than make the goods availableto the buyer at the sellers premises -the buyers bargaining position allows him to require the seller to undertake additional obligations - the seller is able to undertake additional obligations, and in particular, to quote a more competitive price by extending his obligations

Now which one is appropriate? Commercial practice and the type of goods will also dictate whether -it is necessary to use the maritime terms FAS, FOB, CFR or CIF when the goods are intended to be resold before they reach their destination -But …. in the case of manufactured goods (containerized), it is more appropriate to use FCA, CPT or CIF and not FAS, FOB, CFR or CIF -Manufactured goods will rarely be picked out of the ship by the buyer/quay(DES, DEQ) but rather delivered in cargo terminal, therefore DDU, DDP will be more appropriate

Thank you