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IBMR
“INCOTERMS”PRESENTED BY
Mr. Swapnil Jain In the enlightening guidance of
Mrs. Megha Jain
Rules at the core of world trade
IN-CO-TERMSInternational commercial terms
WHAT ARE INCOTERMS ?
1. ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade terms.
2. First published by the ICC in 1936 Since then, ICC expert lawyers and trade practitioners have updated them six times to keep pace with the development of international trade.
3. ICC is currently revising Incoterms 2000. The new edition, Incoterms 2011, is expected to enter into force on 1 January 2011.
……WHAT ARE INCOTERMS ?
4. Incoterms are available from ICC Publishing and ICC national committees throughout the world.
5. Incoterms are developed, maintained and promoted by the ICC Commission on Commercial Law and Practice (CLP).
6. The English text is the original and official version of Incoterms 2000, authorized translations into 31 languages are available from ICC national committees.
Why Incoterms? Incoterms are international rules that are accepted by
governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade.
They either reduce or remove altogether uncertainties arising from differing interpretations of such terms in different countries.
Incoterms make international trade easier and help traders in different countries to understand one another. These standard trade definitions that are most commonly used in international contracts are protected by ICC copyright.
What do they cover?
• The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold, but excluding "intangibles" like computer software.
INCOTERMS 2000
Four Groups of Incoterms
LessControl
MoreControl1) “E” group
2) “F” group
3) “C” group
4) “D” group
Seller Buyer
MoreControl
LessControl
8
( INCOTERMS ) GROUP TERM Stands for
E EXW Ex Works
F
FCA Free Carrier
FAS Free Alongside Ship
FOB Free On Board
C
CFR Cost and Freight
CIF Cost, Insurance and Freight
CPT Carriage Paid To
CIP Carriage and Insurance Paid To
D DAF Delivered At Frontier
DES Delivered Ex Ship
DEQ Delivered Ex Quay
DDU Delivered Duty Unpaid
DDP Delivered Duty Paid
EXW EX WORKS (…named place)
"Ex works" means the seller's only responsibility is to make the goods available at the seller's premises, i.e. factory, mill or warehouse
The seller is not responsible for loading the goods on the vehicle provided by the buyer unless otherwise agreed.
The buyer bears the full costs and risk involved in collecting
the goods from there to the desired destination. Ex works represents the minimum obligation of the seller.
EXW Ex Works …(named place)
SELLER BUYER
Seller/ Exporter Premises
Export Documents Formalities
Delivered at named place of: Frontier/ Terminal/
Quay
Loading Port of
Shipment
Onboard Ship Rail
Plane Ship’s Ship’s Rail Rail
Discharging Port of Arrival
Delivery at named place of
destination: Frontier/
Terminal/Quay
Import Documents Formalities
Buyer/ Importer Premises
Seller’s Risks
Buyer’s Risks
Seller’s Cost
Buyer’s Cost
11
Obligations of the Salesperson.
• He surrenders of the merchandise and necessary documents
• Pack and packing
Obligations of the Buyer.
• Pay of the merchandise
• Freight internal (of factory to the export place)
• Customs (documents, permits, requirements, taxes)
• Export expenses (you maneuver, storage, agents)
• Freight international (of export place to the import place)
• Import expenses (you maneuver, storage, agents)
• Transport and sure (import place to plant)
Incoterms 2000
• The “F” –terms require the seller to deliver goods for carriage as instructed by the buyer.
• FCA• FAS• FOB
FCAFREE CARRIER (named place)
• Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place.
• The risk of loss or damage to the goods is transferred from seller to buyer at that time and not at the ship's rail.
• Seller obligated to load goods on arriving vehicle if it arrives at the seller’s premises.
• The term "carrier" means any person by whom or in whose name a contract of carriage by road, rail, air, sea, or a combination of modes has been made.
FC A Free C arrier… (nam ed place)
SELLE R B U Y ER
Seller/ E xporter Prem ises
E xport D ocum ents Form alities
D elivered at nam ed place of: Frontier/ T erm inal/
Q uay
L oading Port of
Shipm ent
O nboard Ship R ail
Plane Ship’s Ship’s R ail R ail
D ischarging Port of A rrival
D elivery at nam ed place of
destination: Frontier/
T erm inal/Q uay
Im port D ocum ents Form alities
B uyer/ Im porter Prem ises
Seller’s R isks
B uyer’s R isks
Seller’s C ost B uyer’s C ost
15
FAS -FREE ALONGSIDE SHIP(…named port of shipment)
FAS or "free alongside ship" requires the seller to deliver the goods alongside the ship on the quay.
From that point on, the buyer bears all costs and risks of loss and damage to the goods.
Unlike F.O.B., F.A.S. requires the buyer to clear the goods for export and pay the cost of loading the goods.
F A S F ree A longside… (nam ed p lace)
SE L LE R B U Y E R
Seller/ E xporter Prem ises
E xport D ocu m ents Form alities
D elivered at nam ed p lace of: Frontier/ T erm inal/
Q uay
L oading Port of
Sh ipm ent
O nboard Sh ip R ail
P lane Sh ip ’s Sh ip ’s R ail R ail
D ischarging Port of A rrival
D elivery at nam ed p lace of
destination: Frontier/
T erm inal/Q uay
Im port D ocu m ents Form alities
B uyer/ Im porter Prem ises
Seller’s R isks B uyer’s R isks
Seller’s C ost B uyer’s C ost
17
FOB FREE ON BOARD (... named port of shipment)
• Under FOB the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement.
• The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ship's rail (i.e., off the dock and placed on the ship).
• The seller pays the cost of loading the goods.• If intent is not to deliver goods across the ship’s rail, use
FCA
FO B Free O n Board… (nam ed port of shipm ent)
SELLE R B U Y ER
Seller/ E xporter Prem ises
E xport D ocum ents Form alities
D elivered at nam ed place of: Frontier/ T erm inal/
Q uay
L oading Port of
Shipm ent
O nboard Ship R ail
Plane Ship’s Ship’s R ail R ail
D ischarging Port of A rrival
D elivery at nam ed place of
destination: Frontier/
T erm inal/Q uay
Im port D ocum ents Form alities
B uyer/ Im porter Prem ises
Seller’s R isks
B uyer’s R isks
Seller’s C ost B uyer’s C ost
19
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
C F R C o st a n d F re ig h t … (n a m ed p o r t o f d estin a tio n )
S E L L E R B U Y E R
S e ller / E x p o rter P r e m ises
E x p o rt D o cu m en ts F o r m a litie s
D e liv ered a t n a m ed p la ce o f: F ro n tier /
T er m in a l/ Q u a y
L o a d in g P o r t o f
S h ip m en t
O n b o a rd S h ip R a il
P la n e S h ip ’s S h ip ’s R a il R a il
D isch a rg in g P o r t o f A rr iv a l
D e liv ery a t n a m ed p la ce o f
d estin a tio n : F ro n tier /
T er m in a l/Q u a y
Im p o r t D o cu m en ts F o r m a litie s
B u y er / Im p o r ter P r e m ises
S e ller ’s R isk s B u y er ’s R isk s
S e ller ’s C o st B u y er ’s C o st
22
CIF – COST, INSURANCE AND FREIGHT (…named port of destination)
• CIF is CFR with the additional requirement that the seller procure transport insurance against the risk of loss or damage to goods.
• 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.
C IF C o st, In su ra n ce a n d F re ig h t … (n a m ed p o r t o f d estin a tio n )
S E L L E R B U Y E R
S e ller / E x p o rter P r e m ises
E x p o rt D o cu m en ts F o r m a litie s
D e liv ered a t n a m ed p la ce o f: F ro n tier /
T er m in a l/ Q u a y
L o a d in g P o r t o f
S h ip m en t
O n b o a rd S h ip R a il
P la n e S h ip ’s S h ip ’s R a il R a il
D isch a rg in g P o r t o f A rr iv a l
D e liv ery a t n a m ed p la ce o f
d estin a tio n : F ro n tier /
T er m in a l/Q u a y
Im p o r t D o cu m en ts F o r m a litie s
B u y er / Im p o r ter P r e m ises
S e ller ’s R isk s
B u y er ’s R isk s
S e ller ’s C o sts
B u y er ’s C o st
24
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.
• Accordingly, "freight/carriage paid to" can be used for all modes of transportation, including container or roll-on roll-off traffic by trailers and ferries.
CPT Carriage Paid To …(named port of destination)
SELLER BUYER
Seller/ Exporter Premises
Export Documents Formalities
Delivered at named place of: Frontier/ Terminal/
Quay
Loading Port of
Shipment
Onboard Ship Rail
Plane Ship’s Ship’s Rail Rail
Discharging Port of Arrival
Delivery at named place of
destination: Frontier/
Terminal/Quay
Import Documents Formalities
Buyer/ Importer Premises
Seller’s Risks Buyer’s Risks
Seller’s Cost Buyer’s Costs
26
CIP – CARRIAGE AND INSURANCE PAID TO (…named place of destination)
• Seller delivers the goods, cleared for export, to 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.
• This term is the same as "freight/carriage paid to (CPT)" but with the additional requirement that the seller has to procure transport insurance against the risk of loss or damage to the goods during the carriage.
CIP Carriage and Insurance Paid To …(named port of destination)
SELLER BUYER
Seller/ Exporter Premises
Export Documents Formalities
Delivered at named place of: Frontier/ Terminal/
Quay
Loading Port of
Shipment
Onboard Ship Rail
Plane Ship’s Ship’s Rail Rail
Discharging Port of Arrival
Delivery at named place of
destination: Frontier/
Terminal/Quay
Import Documents Formalities
Buyer/ Importer Premises
Seller’s Risks Buyer’s Risks
Seller’s Cost Buyer’s Cost
28
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
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.
D D U D elivered D uty U npaid… (nam ed place of destination)
SELLE R B U Y ER
Seller/ E xporter Prem ises
E xport D ocum ents Form alities
D elivered at nam ed place of: Frontier/ T erm inal/
Q uay
L oading Port of
Shipm ent
O nboard Ship R ail
Plane Ship’s Ship’s R ail R ail
D ischarging Port of A rrival
D elivery at nam ed place of
destination: Frontier/
T erm inal/Q uay
Im port D ocum ents Form alities
B uyer/ Im porter Prem ises
Seller’s R isks
B uyer’s R isks
Seller’s C ost B uyer’s C ost
31
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.
DDP Delivered Duty Paid…(named place of destination)
SELLER BUYER
Seller/ Exporter Premises
Export Documents Formalities
Delivered at named place of: Frontier/ Terminal/
Quay
Loading Port of
Shipment
Onboard Ship Rail
Plane Ship’s Ship’s Rail Rail
Discharging Port of Arrival
Delivery at named place of
destination: Frontier/
Terminal/Quay
Import Documents Formalities
Buyer/ Importer Premises
Seller’s Risks
Buyer’s Risks
Seller’s Cost Buyer’s Cost
33
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.
DAF Delivered At Frontier…(named place)
SELLER BUYER
Seller/ Exporter Premises
Export Documents Formalities
Delivered at named place of: Frontier/ Terminal/
Quay
Loading Port of
Shipment
Onboard Ship Rail
Plane Ship’s Ship’s Rail Rail
Discharging Port of Arrival
Delivery at named place of
destination: Frontier/
Terminal/Quay
Import Documents Formalities
Buyer/ Importer Premises
Seller’s Risks
Buyer’s Risks
Seller’s Cost Buyer’s Cost
35
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.
DES Delivered exShip…(named port of destination)
SELLER BUYER
Seller/ Exporter Premises
Export Documents Formalities
Delivered at named place of: Frontier/ Terminal/
Quay
Loading Port of
Shipment
Onboard Ship Rail
Plane Ship’s Ship’s Rail Rail
Discharging Port of Arrival
Delivery at named place of
destination: Frontier/
Terminal/Quay
Import Documents Formalities
Buyer/ Importer Premises
Seller’s Risks
Buyer’s Risks
Seller’s Cost Buyer’s Cost
3730 November, 2009
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.
DEQ Delivered Ex Quay…(named port of destination)
SELLER BUYER
Seller/ Exporter Premises
Export Documents Formalities
Delivered at named place of: Frontier/ Terminal/
Quay
Loading Port of
Shipment
Onboard Ship Rail
Plane Ship’s Ship’s Rail Rail
Discharging Port of Arrival
Delivery at named place of
destination: Frontier/
Terminal/Quay
Import Documents Formalities
Buyer/ Importer Premises
Seller’s Risks
Buyer’s Risks
Seller’s Cost Buyer’s Cost
3930 November, 2009
Summary of terms
For a given term, "Yes" indicates that the seller has the responsibility to provide the service included in the price. "No" indicates it is the buyer's responsibility. If insurance is not included in the term (for example, CFR) then insurance for transport is the responsibility of the buyer or the seller depending on who owns the cargo at time of transport. In the case of CFR terms, it would be the buyer while in the case of DDU or DDP terms, it would be the seller.
30 November, 2009
February 8, 2006
DES Yes Yes Yes Yes Yes Yes No No No Yes No No
DEQ Yes Yes Yes Yes Yes Yes Yes No No Yes No No
DDU Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No
DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Load to truck
Export- duty payment
Transport to exporter's port
Unload from truck at the origin's port
Landing charges at origin's port
Transport to import's port
Landing charges at importer's port
Unload onto trucks from the importers' port
Transport to destination
InsuranceEntry - Customs clearance
Entry - Duties and Taxes
EXW No No No No No No No No No No No No
FCA Yes Yes Yes No No No No No No No No No
FAS Yes Yes Yes Yes No No No No No No No No
FOB Yes Yes Yes Yes Yes No No No No No No No
CFR Yes Yes Yes Yes Yes Yes No No No No No No
CIF Yes Yes Yes Yes Yes Yes No No No Yes No No
CPT Yes Yes Yes Yes Yes Yes No No No No No No
CIP Yes Yes Yes Yes Yes Yes No No No Yes No No
DAF Yes Yes Yes Yes Yes Yes No No No No No No
Mode of Transport and Appropriate Incoterm - Any Mode of Transport
• EXW• FCA• CPT• CIP• DAF• DDU• DDP
30 November, 2009
Mode of Transport and Appropriate Incoterm – Maritime and Inland
Waterway Transport Only
• FAS• FOB• CFR• CIF• DES• DEQ
30 November, 2009
Guidelines to Using Incoterms
• Always specify which terms are applicable.• When completing documents ensure that you are
using the correct format of a term e.g.• The term CFR is persistently misused/replaced with
C&F or C+F. • C+F has never existed.• C&F did exists but was replaced with CFR in 1980. • If C&F is used by mistake a court of law will use the
pre 1980 meaning of the term which is very different from the current meaning of CFR as in Incoterms 1990 and Incoterms 2000.
…..Guidelines to Using Incoterms
• Draw up a check list of your duties and rights under the selected term and check that every intended or completed transaction conforms to this list, and that nothing is omitted.
• Request your trading partner to do the same, and exchange this information with them.
• Inform your bank and insurance company which Incoterm(s) have been selected for your business, so that they can determine exactly what your duties and rights are with regard to a transaction in which they may have a role to play.
In Summary
• Must name a place after the INCOTERM
• INCOTERMS are negotiable!
• INCOTERMS should appear on all commercial documents
• Establish a close relationship with a forwarder
4630 November, 2009
Reference
• Short overview of international commerce vocabulary
• International Chamber of Commerce (ICC) incoterm list
• INCOTERMS 2000
• Wikipedia.
Questions !
Swapi
my breakfast
Swapi
my breakfast
you know “feedback”
is the……Swapi