INCOTERMS 2000 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. 10 categories describing where risks lie between seller and buyer International Commercial Terms (INCOTERMS) Must say, “as per ICC 2000” or “Incoterms 2000” for it to be enforceable.

Incoterms – Purpose and Scope Pricing terms, shipping terms, sales terms Apply to international trade Define the rights and obligation of the parties to the contract of sale with respect to the delivery of goods sold.

Incoterms – Purpose and Scope Does not include “intangibles.” Do not provide for all the duties which parties may include in a sales contract. Does not include breach of contract. Not software Do not apply to the contract of carriage – only to contract of sale

Incoterms – Who needs to know? Importers Exporters Insurers Bankers

Incoterms 2000 The “E”-term is the term in which the seller’s obligation is at its minimum. Usually at seller’s place of business 1990 - EDI messages were allowed as opposed to just paper. 2000 – clarification of terminology.

EXW EX WORKS (…named place) Seller delivers when goods placed at disposal of buyer Minimum obligation for the seller. Not obligated to put goods on truck, but usually does help anyway.

Incoterms 2000 The “F” –terms require the seller to deliver goods for carriage as instructed by the buyer. FCA FAS FOB

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.

FAS -FREE ALONGSIDE SHIP (…named port of shipment) Seller delivers when goods, cleared for export, are placed alongside the vessel 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. Seller obliged to clear goods for export. 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.

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 If 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.

Incoterms 2000 The “C” –terms require the seller to contract for carriage at his expense – to a specified point. CFR CIF CPT CIP

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 Mostly on commodities. Seller bears costs until delivery, but buyer bears the risks at that time.

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.

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.

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.

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 DES DEQ DDU DDP C-terms – shipment D-terms – destination, buyer clears goods for import.

DAF – DELIVERED AT FRONTIER (…named place) Seller delivers goods, cleared for export, at disposal of buyer on arriving means of transport. Not unloaded, not cleared for import at point at frontier before customs border of adjoining country. Term may be used irrespective of the mode of transport when goods are delivered at a land frontier. If delivery is to take place in the port of destination, DES or DEQ should be used. Typically for railway traffic. Not used much.

DES – DELIVERED EX SHIP (…named port of destination) Seller delivers goods at disposal of buyer on board the ship. Not cleared for import at the named port of destination. Seller bears all costs and risks to bring goods to the named port before discharging. Term used only for delivery by sea. If the seller is to bear the costs of discharging the goods, DEQ should be used. Buyer takes out of ship.

DEQ – DELIVERED EX QUAY (…named port of destination) Seller delivers goods, not cleared for import, at disposal of buyer on the quay at the named port of destination. Seller bears all costs and risks to bring goods to the named port of destination and discharging the goods on the quay. Term used only for delivery by sea. Already loaded off ship and onto quay or wharf.

DDU – DELIVERED DUTY UNPAID (…named place of destination) Seller delivers goods to the buyer, not cleared for import, and not unloaded, at the named place of destination. Seller bears all costs and risks (except duty) to bring goods to the named place of destination. Term may be used irrespective of mode of transport. If delivery is to take place at the port, quay or on board a vessel, DES or DEQ should be used. Before or at customs station or at interior of country. Be careful with this one. Customs regulations (e.g., EU – no customs in each country.)

DDP – DELIVERED DUTY PAID (…named place of destination) Seller delivers goods to the buyer, cleared for import, and not unloaded, at the named place of destination. Seller bears all costs and risks, including import duty, to bring goods to the named place of destination. Term may be used irrespective of mode of transport. If delivery is to take place at the port, quay or on board a vessel, DES or DEQ should be used. Maximum obligation of the seller. Shouldn’t be used if seller can’t acquire import license. Be careful – can tax be deductible on your tax forms?

Mode of Transport and Appropriate Incoterm - Any Mode of Transport EXW FCA CPT CIP DAF DDU DDP

Mode of Transport and Appropriate Incoterm – Maritime and Inland Waterway Transport Only FAS FOB CFR CIF DES DEQ

Bill of Lading and Electronic Commerce Bill of Lading – Three important functions Proof of delivery of the goods on board the vessel Evidence of the contract of carriage; and A means of transferring rights to the goods Traditionally only the on board documents were worth anything (paper).

Non-negotiable Transport Documents Instead of Bills of Lading Bills of lading replaced by non-negotiable documents Sea waybills Liner waybills Freight receipts