Ch1 Incoterms SV

8/6/2019 Ch1 Incoterms SV

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International Trade

Transactions(4 credits)

Tran Bich Ngoc

[email protected]

FOREIGN TRADE UNIVERSITY

Aug 2009

Aug-09 INTERNATIONAL COMMERCIAL TERMS 2


The Trade Dilemma

International trade must work around afundamental dilemma: Imagine an importer and an exporter who

would like to do business with one another Because of the distance between the two, it is

not possible to simultaneously hand overgoods and receive payments in person

How do participants in international trademitigate the risks associated with conductingbusiness with a stranger?


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Introduction

After the course, students should be

able to:

Find out partners

Draft the terms of contracts

Negotiate and sign the contract

Implement the contract


Vu Huu Tuu, Ky Thuat Nghiep Vu

Ngoai Thuong 2006

ICC, Incoterms 2000

UN Convention on Contract for the

International Sale of Goods (CISG)

Commercial Law of Vietnam

Sample contracts

Shipment

Textbook and references


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Overview

Chapter 1: INTERNATIONAL COMMERCIAL TERMS

Chapter 2: CONTRACTS FOR INTERNATIONAL SALEOF GOODS

Chapter 3: MODE OF INTERNATIONAL

TRANSACTIONS

Chapter 4: PREPARATION FOR INTERNATIONAL

TRANSACTIONS

Chapter 5: CONTRACTS IMPLEMENTATION


CHAPTER 1INTERNATIONAL COMMERCIAL TERMS

Definitions

ICC and Incoterms

Incoterms 2000

Most common terms


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Definition of Internationalcommercial terms

Short basic delivery terms used in foreign trade

practice in order to assign between the parties

+responsibility,

+Cost and expense

+and risk of damage

to the contractual commodities in the course of

transit from the seller to the buyer


Several Interpretation of

International Commercial terms International Law Association

Warsaw Rules 1928

Warsaw-Oxford Rules 1932

USA

The U.S. Export Quotations and Abbreviations- 1919

Revised American Foreign trade definition 1941

Uniform Commercial Code (UCC-1952)

International Chamber of Commerce (ICC)

International Commercial terms 1936

Revised Incoterms 1953, 1967, 1976, 1980, 1990, 2000


Incoterms

set of uniform rules for

interpretation of

INternational COmmercial TERMS


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13

Scope of Incoterms

Matters relating to

the right and obligationof the parties

to the contract with

respect to

the delivery of tangiblegoodssold

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Development of Incoterms

1953: 9 termsEXW /FOR/ FAS FOB DES DEQ /DDU/

/FOT/ CFR /DDP/

CIF

1980: 14 termsEXW /FOR/ FAS FOB DES DEQ /DDU/

/FOT/ FCA CFR /DDP/

FOA CPT CIFDAF CIP

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Development of Incoterms

1990, 2000: 13 termsEXW FAS FOB DES DEQ DDU

FCA CFR

CPT CIF DDP

CIP

DAF


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INCOTERMS 2000

13 terms are represented in order of increasing

responsibilities, costs and risks for the seller

Each term is written in 3 letters, followed by namedplace of delivery

Each term expresses respectively 10 obligations of the

two parties


13 terms in order of increasing

responsibilities, costs and risks forthe seller

SellerBuyer

EXW

FCA

FAS

FOB

CFR

CIF

CPT

CIP

DAF

DES

DEQ

DDU

DDP


Place at the Frontier

Port of Destination

Place of Destination

9 DAF Delivered at Frontier

10 DES Delivered Ex ship

11 DEQ Delivered Ex quay

12 DDU Delivered Duties Unpaid

13 DDP Delivered Duties Paid

D Group

Arrival

Port of Destination

Place of destination

5 CFR Costs and Freights

6 CIF Costs, Insurances & Freights

7 CPT Carriage Paid To8 CIP Carriage & Insurances Paid to

C Group

Main carriage

paid

Place of delivery

Port of Shipment

2 FCA Free Carrier

3 FAS Free Alongside Ship

4 FOB Free On Board

F Group

Main carriage

unpaid

The sellers premises1 EXW Ex worksE Group


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The seller and buyers obligation

Other obligationsB10Other obligationsA10

Inspection of goodsB9Checking, packing and markingA9

Proof of delivery, transport

document or equivalent electronicmessage

B8Proof of delivery, transport

document or equivalent electronicmessage

A8

Notice to the sellerB7Notice to the buyerA7

Division of costB6Division of costA6

Transfer of risksB5Transfer of risksA5

Taking deliveryB4DeliveryA4

Contracts of carriage and insuranceB3Contracts of carriage and insuranceA3

Licences, authorization andformalities

B2Licences, authorization andformalities

A2

Payment of the priceB1Provision of goods in conformity

with the contract

A1

THE BUYERS OBLIGATIONsTHE SELLERS OBLIGATIONs


Incoterms diagram


Incoterms diagram 2


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Suitable Mode of transportation

Any mode of transportDelivered at FrontierDAF

Any mode of transportCarriage & Insurances Paid toCIP

Any mode of transportCarriage Paid ToCPT

Maritime and inland waterway onlyCosts, Insurances & FrieghtsCIFMaritime and inland waterway onlyCosts and FreightsCFR

Any mode of transportDelivered Duties PaidDDP

Any mode of transportDelivered Duties UnpaidDDU

Maritime and inland waterway onlyDelivered Ex quayDEQ

Maritime and inland waterway onlyDelivered Ex shipDES

Maritime and inland waterway onlyFree On BoardFOB

Maritime and inland waterway onlyFree Alongside ShipFAS

Any mode of transportFree CarrierFCA

Any mode of transportEx worksEXW

MODE OF TRANSPORTTERMS


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INCOTERMS 2000 in details

Student should master the following details for

each term

Division of obligations between parties

Division of costs and expenses between parties Transfer of risk of or damage to the goods

Implications for uses of term


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1) EXW: EX WORKS (named place)

The Seller delivers when he places the goods at

the disposal of the buyer at the place of delivery

The Buyer bears all cost and risk involved in

taking the goods

SELLERS COST BUYERS COST

BUYERS RISKSELLERS RISK

EXW

PLACE OF DELIVERY


EXW(...named place),Incoterms 2000

Place of delivery: At the sellers premise(Factory, warehouse, plantation, mine,...)

The Seller must:

Provide the goods in conformity with thesale contract

Provide Packing and marking

Document: commercial invoice only

No obligation: loading, export clearance,

other documentations


WAREHOUSE


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The Buyer must:

Take delivery, Bear all cost, risk with respectto Pre-mature delivery

Load the goods on to the vehicle

Export clearance

Arrange transportation

Import clearance



Implications for use of EXW:

All mode of transportation

Apply only if

The Buyer is able to fulfill export clearance

The Buyer is experience in booking carriage,

insurance

The seller dominates the market power



Question 1:

Whether the Seller as per EXW terms bears

the loading charge? In which case?


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Question 2:

Whether the Buyer as per EXW terms canchoose the place of delivery outside the

sellers premise?



Question 3:

The Buyer as per EXW terms fails to inform

the seller the time and place of delivery.

The seller must keep the goods in storage

but can not prevent the quality of goods

from decreasing. Who will bear this loss

and damage?



Question 4:

After signing the sale contract as EXW

terms. The government suspends the

goods from export. Whether the Buyer isexempted from the contract obligations?


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Question 5:

Sanitary Inspections by Government's body

is required for export of foodstuff inVietnam. As per EXW terms, who will pay

the cost and risk of this inspection?

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2) FCA:FREE CARRIER (named place)

The Seller must arrange the export clearance

The Buyer nominated the carrier

And the Seller delivers the goods to the carrier

nominated by the buyer



FCA

PLACE OF DELIVERY


FCA (...Named place),Incoterms 2000

Place of delivery At the Sellers premise

Outside the sellers premiseRoadway: Roadway terminal

Airway: AirportInland waterway: ferry station

Railway: Railway station, freight stations

Seaway: Sea port

Postal service: Post office

Forwarder:

Less than Container load (LCL): Container FreightStation (CFS)

Full Container load (FCL): Container Yard


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Container at port


FCA (...Named place), Incoterms2000

FCA

Free Carrier The seller delivers the

goods, cleared for export, to the carrier

nominated by the buyer at the named place.

Sellers premises: the seller is responsible

for loading.

Any other place: the seller is not responsible

for unloading.

Terminal Terminal


FCA (...Named place), Incoterms2000


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The Seller must:

Provide the goods, packing and marking.Inspections, Export clearance

Deliver the goods: If place of delivery is the sellers premise, when the

goods have been loaded on the buyers means oftransport

If place of delivery is not the sellers premise, whenthe goods are handled over the nominated carrier onthe sellers mean of transport not unloaded

Provide usual proof of delivery



The Buyer must:

Take delivery and pay the price

Arrange the carrier, Inform the seller of the

time & Place of delivery, nominated carrier

Bear all risks and costs related to the goods

since the goods are delivered



Implication for uses:

All mode of transportation, especially

container transportation

Pay attention to the Divisions of loading/

unloading charge

Use FCA instead of FOB if the seller cannot

handle the goods over the ships rails


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Question 1

Distinguish the FCA terms with EXW+export clearance terms



Question 2

After delivery as per FCA terms, the seller

only get the Cargo receipt. Whether the

seller fulfills his obligations?



Question 3

How the division of loading/unloading

charges are stipulated as per FCA

Incoterms 2000


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3) FAS : FREE ALONGSIDE SHIP

(named port of shipment)

The Seller must arrange the export clearance

The Seller delivers when the goods are placed

alongside the vessel at the named port of shipment.

The Buyer bear all cost and risk of lost of or damage

to the goods since the goods are delivered



FAS

PLACE OF DELIVERY


FAS (...Named Port of Shipment),Incoterms 2000

Implication for uses:

Marine transportation only,

The seller finds difficult in collect evident

document of delivery

FAS is not popular in Vietnam

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4) FOB : FREE ON BOARD


The Seller delivers when the goods pass the

ships rail at the named port of shipment

The Buyer bear all cost and risk of loss of or

damage to the goods from that point



FOB

PLACE OF DELIVERY


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Fob, pass the ships rail

FOB

Free on board Seller delivers when the goods,

cleared for export, pass the ships rail at the named

port of shipment.

If parties do not intend to deliver the goods across the ships rail,

the FCA-term should be used.

TerminalTerminal


4) FOB, Cont.

What happen if the

goods fall out, hit

against the ships

rail, break into 2

parts:

+ one falls on board

of the ship

+ another falls into

the sea


Container at port

-


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FOB (...Named port of shipment),

Incoterms 2000

Implication for uses

One of the most popular terms in VietnamApply to maritime and inland waterway

transportations

Clearly mention to FOB as per Incoterms

2000, because there are many other

interpretations for FOB terms


FOB (...Named port of shipment),Incoterms 2000

The Seller must:

Provide the goods in conformity with the salecontract

Export clearance

Pay loading charge

Deliver the goods and provide deliver evidence: Ships/ docks tally sheet

Mates receipt

Bill of Lading

Notice the buyer of shipment


FOB (...Named port of shipment),Incoterms 2000

The Buyer must:

Book a vessel to carriage the goods and

notice the seller of nominated vessel

Take delivery of goods, bear the cost and

risk of goods

Pay the price,

Import clearance


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FOB (...Named port of shipment),

Incoterms 2000

Question 1

Which term of FCA and FOB will give theSeller the best advantage


The seller arrange the vessel and the

Buyer bear the cost and risk of goods in

transit

FOB Shipment todestination

The seller load the goods into the vessel

cabin and trim the bulk cargo

FOB Trimmed-FOB.T.

The seller deliver the goods into the

vessel cabin & bear the loading charges

FOB Stowed-FOB.S.

the seller only put the goods to the

range within reach of vessels tackle,

and later loading charges are born by

the buyer

FOB under tackle (FOB

freight includes the cost of loading and

discharging from the vessel

FOB Liner terms (FOB

berth terms)

FOB variants


Fob Liner termsLoading, discharging containers

Liner termsfrom ships tackle till ships tackle

FOB


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FOB Stowed


STOWAGE OF GENERAL

CARGO IN PALET, Stow the goods in to the ship hold

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5) CFR : COST AND FREIGHT

(named port of destination)

The Seller charters a vessel or books shipping space

The Seller delivers when the goods pass the ships railat the named port of shipment

After the goods are on board, the seller pay the freight

All other charges and risk to the goods will be born bythe buyer.

SELLERS COST BUYERS COSTBUYERS RISKSELLERS RISK

CFR

PLACE OF DELIVERY


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CFR price formations

CFR= FOB+ F

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) CIF : COST,INSURANCE AND FREIGHT


Similar to CFR, But the Seller must insure the

goods at minimum cover of the Institute Cargo

Clauses



CIF

PLACE OF DELIVERY


CIF price formations

CIF= FOB+ F+I

= CFR+I


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CIF

CIF

Cost, Insurance and Freight Seller delivers

when the goods pass the ships rail in the port

of shipment.

Seller must clear the goods for export and pay

the costs and freight necessary to bring the

goods in the named port of destination.

TerminalTerminal

Seller is obliged to insure

If parties do not intend

to deliver the goods

across the ships rail, the

CIP-term should be

used.


Interest rate included in the quoted priceCIF and i (CIF.i), (i= interest)

Exchange fee included in the quotedprice.CIF and e (CIF.e), (e= exchange)

CIF.c and i

Commission to the sellers intermideateincluded in the quoted price

CIF and c (CIF.c), (c=

commission)

The seller bear the cost of unloading the

goods into the quayCFR Quay (CFR d hng ln cucng)

The seller deliver the goods when goodslanded in port of destination. The seller

bear the cost and risk of lighter hire and

other charge at the port of destination

CFR Landed (CFR d hng ln

b)

freight includes the cost of loading anddischarging from the vessel

CFR Liner terms

2) CFR & CIF variants



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The goods delivered when the goods is

in reach of tackle at port of destinationCIF under ships tackle

Goods are on board when the contract is

signedCIF afloat

The seller deliver the goods when goodslanded in port of destination. The seller

bear the cost and risk of lighter hire andother charge at the port of destination

and import clearance

CIF landed Duty Paid

Particular average premium included inthe quoted price

CIF and WA (CIF with

Particular Average)

War risk premium included in the quoted

priceCIF and w (CIF and war risk

insurance)

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7) CPT:CARRIAGE PAID TO

(named place of destination)

The Seller arranges carriage and clear the goods forexport.

The Seller delivers when you pass the goods to thefirst carrier

The seller pay the cost of carriage to nameddestination



CPT

PLACE OF DELIVERY

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8) CIP : CARRIAGE AND INSURANCE

PAID TO (named place of destination)

Similar to CPT, But the Seller must insure the

goods at minimum cover of the Institute Cargo

Clauses

a im chuyn giaoSELLERS COST BUYERS COST


CIP

PLACE OF DELIVERY


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9) DAF : DELIVERED AT FRONTIER

(named place)

The seller must contract for carriage to the name point

at frontier

The seller deliver the goods when goods are placed at

the disposal of the Buyer on the arriving means of

transport, cleared for export but not cleared for import



PLACE OF DELIVERY

DAF

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10) DES: DELIVERED EX SHIP


The seller delivers the goods when the goods

are placed at disposal of the Buyer, on board

the ship not cleared for import at port of

destination



PLACE OF DELIVERY

DES

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11) DEQ : DELIVERED EX QUAY


The seller delivers the goods when goods are

placed at the disposal of the buyer on the quay

not cleared for import at port of destination

SELLERS COST BUYERS COSTBUYERS RISKSELLERS RISK

PLACE OF DELIVERY

DEQ


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12) DDU: DELIVERED DUTY UNPAID


The seller delivers the goods to the buyer not

cleared for import not unloaded from arriving

means of transport at place of destination



PLACE OF DELIVERY

DDU

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13) DDP : DELIVERED DUTY PAID


The seller delivers the goods to the buyer cleared

for import and not unloaded from arriving

means of transport at place of destination



PLACE OF DELIVERY

DDP

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ecommen e uses o

Incoterms 2000

+ Incoterms only relate to the contract for sales of tangiblegoods

+ If parties agree on one of these 13 terms, the contractshould be clearly refer to the term

+ Incoterms only deal with number of obligations butThey do not fully cover the contract.

+ The parties could increase or lift some obligations butthese amendment shoud not change the basic meaning ofthe terms

+ The parties should not coporate the transportation termsin to the incoterms

+ Where goods is delivered by container, lighter, thearties should use the FCA, CPT, CIP

Ch1 Incoterms SV

Documents

Transcript of Ch1 Incoterms SV