Concept of Delivery Group Documents/NCCA/Incoterms 201… · Incoterms® 2010 - “ F” Rules FCA:...

©2015 Trade Technologies, Inc. All rights reserved. 1

and Concept of Delivery

Incoterms® 2010 Rules


3

THE IMPORTANCE OF ‘DELIVERY’ IN

CONTRACTS OF SALE


©2015 Trade Technologies, Inc. All rights reserved.


Sarbanes Oxley IAS 18.14

4

Place and date of delivery

Price Calculation

Start Production

Shipping instruction

Packaging Instruction

Revenue recognition

Taxable transaction

Delivery & payment

documents

Insurance

Applicable product

regulations

Checking & protesting conformity

---

Agency commission

Origin calculation Customs Value

Transport documents

Need for Insurance

Consumer packaging

Transport packaging

Invoicing obligation

VAT registration

Customs registration


5

R & D

…

Legal

Customer services

Logistics

Finance

Accounting

Production

Corporation Who writes the contract?

Sales Purchase

Insurance

Customs agent

Forwarder

Bank

…

But you told me to go and sell the stuff

What’s a B/L?

I fill in the order form but I never see the

invoice But there is no

VAT if we sell to a foreigner?

What is US-Chile

COO?

How much

does that risk cost?

You’re the tech

guys



6

THE POSSIBILITIES

AVAILABLE



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Incoterms® 2010 Rules – Delivery Possibilities


8

CHOOSING THE ‘RIGHT’

LOGISTICAL SOLUTIONS



A buyer doesn’t care about the selling price…. all he cares about is the ‘landed cost’

Indeed: regardless of the choice of the Incoterms ® rule, in the end the buyer/importer always pays: - a seller assuming costs/risks because of the chosen

solution will include these costs (plus a markup for administration and risk) in his final selling price.

- a buyer assuming costs/risks will include these costs in the ‘budget’ required to obtain the goods.

Thus it is in both parties’ interest to allocate costs and risks with the party that can manage them most efficiently (at the lowest cost), thus reducing the ‘total cost of purchase’.

9 ©2015 Trade Technologies, Inc. All rights reserved.

10

COST

RISK

Incoterms® 2010 Rules – Logistical Solutions

COST

RISK



Incoterms® 2010 Rules – Place of Delivery and Incoterms

EXW FCA Seller ‘s

premises FCA freight forwarders terminal

FOB seaport

DAT Antwerp

DAP Lyon DDP Lyon

FCA airport

FAS port

CFR CIF Antwerp

CPT CIP

What is the best rule to use for your transaction?

Understand the tools the Incoterms® 2010 Rules have provided Shipping perspective

Risk and insurance perspective

Cost perspective

Control perspective


Incoterms® 2010 - Who set the rules?

International Chamber of Commerce (ICC)

o Founded 1919 in Paris o International representatives from over 120 countries o Conforms with WTO, U.N., G20 o Publication ICC no 715 (Incoterms ® 2010) o Publication ICC no 720 (ICC Guide to Incoterms ® 2010) o http://www.iccwbo.org/products-and- services/trade- facilitation/incoterms-2010/


Using the Incoterms® Rules

Under all Incoterms® 2010 rules the respective obligations of the parties have been grouped under 10 articles (‘headings’) where each article on the seller’s

side “mirrors” the positions of the buyers with respect to the same subject matter.


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Incoterms® 2010 - obligations of Seller and Buyers


Structure of the Incoterms® 2010 Rules: 10 articles

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A. B.


Incoterms® 2010 What are they & what do they do?

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3 Letter Acronyms

Standardize

Define Responsibility

Outline costs included in each rule

Reveal Gaps

Determine Delivery Point


Incoterms® Common Misconceptions. . . . .

Incoterms® do not: Determine Financing (You want how many days to pay?)

Settle Breach of Contract

Determine Carriage Contracts

Provide for intangible goods or services


Incoterms® 2010 - Quiz

By the use of each specific Incoterm rule, it will define exactly where title or ownership of goods passes. a. True b. False


Incoterms® Common Misconceptions. . .

Incoterms do not: Transfer legal title or ownership of goods.

Transfer, title, or ownership process begins with exchange of documents

Exchange of money for documents

+ Delivery of goods per Incoterms® = Title Transfer


Incoterms® 2010 Divided into two (2) distinct Sections

The incoterms® are divided into 2 sets of rules Any mode of Transport or combination

Waterway / Maritime transport


Incoterms® 2010 – The Basics The Rules of the Game

The purpose of the Incoterms®

How will the goods be shipped?

Who will pay the costs of the transportation and insurance?

Have I included all of the necessary costs into my sales offer bottom line total?

What risks am I taking with rules I am using?

What is the exact location or point I want to provide the goods and risks to?


Incoterms® 2010 - Here are the Rules

Rules For Any Mode of Transport o Ex Works (EXW) o Free Carrier (FCA) o Carriage Paid To (CPT) o Carriage and Insurance Paid To (CIP) o Delivered at Terminal (DAT) o Delivered at Place (DAP) o Delivered Duty Paid (DDP)

Maritime (Waterways) Rules

o Free Alongside Ship (FAS) o Free On Board (FOB) o Cost and Freight (CFR) o Cost Insurance and Freight (CIF)



The Ex-Works (EXW) rule indicates that the seller has no responsibilities for loading the goods at his facility. a. True b. False


Rules for Any Mode of Transport EXW ( Ex-Works)

o Seller places goods at loading dock for ‘pick up’ by the buyer o Seller supplies all needed documentation for export of goods

to the buyer o Best used only for domestic transactions

• Can only be applied to the sellers factory • Domestic or International application • Designed for domestic use only • Insurance coverage not required


Rules for Any Mode of Transport EXW ( Ex-Works)

• Seller:

– Informs the Buyer when and where the goods will be available – Provides Commercial Invoice, Packing List & Certificate of

Origin

• Buyer: – Obtains the Export License – Arranges all carriers – Loads goods onto the carrier at the point of departure – Obtains Import Licenses and arranges import formalities

• Risk of loss or damage passes to the buyer from the seller's door


Incoterms® 2010 - “F” Rules

FCA: Free Carrier FOB: Free on Board FAS: Free Alongside

o Main carriage is contracted by the buyer which will generally include the contracting of the forwarder

o Although less work for the seller, it also offers less

control over documentation, bank presentations and ultimately payment. The forwarder will be hired to represent the buyer.

• FOB, FAS for waterway only, • FCA for any mode of transport • Insurance coverage not specified


FCA – Free Carrier (named place)

Any Mode of Transport Seller must deliver the goods to the carrier provided by the buyer at a named point on the seller’s side

Seller is responsible for:

• All costs to place the goods with the carrier • Export clearance, Compliance, and documentation.

Buyer is responsible for all other functions and costs beyond arrival at carrier. Buyer is responsible for payment of main carriage (freight collect).

Insurance coverage is not specified.


Incoterms® 2010 - FCA - Free Carrier


Waterways only Seller:

• Obtains the Export License and documentaton • Arranges delivery of goods to & loads the buyer’s carrier • Places goods on board the ocean vessel at the port of export

designated by the Buyer Buyer:

• Gives sufficient notice to the Seller of the carrier & delivery point • Arranges the main carriage and the on-carriage • Obtains import licenses and arranges import formalities

Risk & responsibility passes to the buyer when the goods are loaded on board the vessel. Insurance coverage not necessarily specified.

FOB – Free on Board


Incoterms® 2010 - FOB, Free on board


FAS - Free Along side Waterways Designed for loading on quay, barge or charter party vessel (not conference line containerized shipments) Seller delivers the goods, commodity, or product, packaged

or prepared for export alongside a vessel designated by the buyer at a named place/port on the seller’s side • Seller responsible for export clearance, compliance & documentation.

Buyer bears all costs and risks of loss or damage to the goods once the goods are placed alongside the vessel.

Insurance coverage is not necessarily specified.


Incoterms® 2010 FAS - Free alongside


Waterway Term– Not for Containers???? Use “FCA” Instead Conflict: - Mixed costs and liability - Multimodal transportation required Risk: - Stowage and manipulation of container - Vessel delays - Fire, theft, acts of God coverage - Insufficient or lack of insurance coverage and the party responsible - Accounts receivable time extended

FAS, FOB – Not Suitable for Containers?


Incoterms® 2010 – Ship’s Rail Takenaway for Containers Why use FCA instead of FOB for containers?

Passing over “ship’s rail” divides the cost and risk $$ Carrier insurance grossly insufficient $$ Basic Insurance may not cover some losses Transfer from container drop off point to vessel staging

point Terminal handling fees Special equipment Loading Charges (Cranes, bracing,

protecting) Vessel Loading delays Damages Pilferage Acts of God Fire Breach of security


X

Incoterms® 2010 – Maritime Rules not suitable for Containers


“On Board” Vessel

Container Packing Depot

Container Terminal/Dock

LCL Shipment FCL Shipment

Incoterms® 2010 - Container shipment terms

• FCA – Free Carrier FAS – Free Alongside Ship

• FCA – Free Carrier FOB – Free On Board

• CPT – Carriage Paid To CFR – Cost and Freight

• CIP – Carriage and Insurance Paid To

CIF – Cost, Insurance, and Freight


For container shipments:

Don’t use these rules Use these rules

Incoterms® 2010 “C” Rules


CFR: Cost of goods and main freight CIF: Cost of goods, main freight and insurance CPT: Carriage paid to named point CIP: Cost of goods, carriage and insurance paid to named

point Main carriage contracted and controlled by the seller and paid by the seller. These terms provide the best method of control of the entire carriage of the goods by the seller. CFR, CIF for WATERWAY ONLY CPT, CIP ANY MODE OF TRANSPORT

CFR, CIF

• Waterway rule only to named destination


CFR – Cost & Freight (named port)

Waterway Seller delivers goods, packaged for shipment, to carrier for

transportation to a named destination port on the buyer’s side • Risk passes to buyer when goods delivered to carrier due to the absence of insurance specifications. The Incoterm® terminates the goods at the destination port. Claims may be complicated to determine cause and point of occurrence. • Chooses vessel • Pays costs for main carriage • Handles export clearance, compliance, and document requirements

Buyer responsible for: Vessel unloading Import clearance On-carriage

Freight Prepaid and Insurance not specified


CIF – Cost, Insurance & Freight (named port)

Waterway

Seller delivers goods, packaged for shipment, to carrier for transportation to a named destination port on the buyer’s side • Chooses vessel • Pays costs for main carriage • Handles export clearance ,compliance & documentation

requirements

Buyer responsible for: • Vessel unloading • Import clearance • On-carriage

Freight Prepaid and Goods are insured


Incoterms® Quiz

A company wants to be in charge of contracting with their freight company for the main carriage but they want responsibility to transfer at their dock for earlier revenue recognition. What Incoterm rule should they use? a. FCA Factory b. Ex-Works c. CPT foreign airport d. Can’t be done – no rule fits


CPT, CIP

• Any mode of transport to named point


CPT – Carriage Paid to (named port)

Any Mode of Transport Seller delivers the goods, cleared for export, to the

carrier and provide all documentation • pays the costs of carriage necessary to bring

goods to named destination, including main carriage.

Buyer is responsible for all costs and risks after named point at destination.

Freight Prepaid Insurance not specified


CIP- Carriage and Insurance to (named port)

Any Mode of Transport Seller must prepare the goods for export and issue all

documentation • Pay for all costs to get the cargo loaded on vessel or

aircraft • Pay for main carriage transportation costs up to destination • Secure insurance Buyer will take all responsibility once the goods are

delivered to the named point

Freight Prepaid to named point


Incoterms® 2010 - “D” Rules

DAT: Delivered at terminal DAP: Delivered at named place DDP: Delivered at named place, duty paid o Multimodal Rule o The “D” rules define delivery of goods by the seller o The revisions of the “D” rules pinpoint the delivery place and the transfer of risk/damage • Insurance coverage not specified


Incoterms® 2010 - DAT


DAT - Delivered at Terminal (…named terminal at port or place of destination)

Terminal

Sellers unloads from arriving means of transport and places goods at the disposal of buyer

Buyer takes delivery from place where Seller delivers to.

Incoterms® 2010 - DAP


DAP - Delivered at Place

Place

Sellers places goods at disposal of Buyer ready for unloading

Buyer unloads from arriving means of transport.

Incoterms® 2010 – DDP


DDP – Delivered Duty Paid

Place

Sellers pays costs of customs formalities,

duties, taxes, and other import charges

Buyer unloads from arriving means of transport.


The DDP (Delivered Duty Paid) rule is a good Incoterm rule for importers to use because the seller will be responsible for all costs and risks. a. True b. False



Incoterms® 2010 Rules – Place of Delivery and Transport Documents

EXW FCA Seller ‘s

premises FCA freight forwarders terminal

FOB seaport

DAT Antwerp

DAP Lyon DDP Lyon

FCA airport

- Ready for Collection

- CMR – FCR … freight prepaid

- CMR – FCR …freight collect

AWB

B/L… freight collect

Multimodal BL… freight prepaid Goods Receipt

- D/O - Release

notice

FAS port

- Inland BL - Truck BL

CFR CIF Antwerp

CPT CIP

Ocean port to port B/L full set freight prepaid

B/L – AWB – CMR - … freight prepaid

Incoterms 2010 - Quiz

A plane carrying goods under CPT Beijing Incoterms has a fire and loses all of the cargo in the ocean. Who is responsible for the lost freight under this Incoterms? a. The Seller b. The Buyer c. The Freight Company d. The Insurance Company


CFR – CPT Adequate insurance from buyer?


CFR - CPT Adequate insurance from buyer How old is the vessel carrying your cargo?


Questions/ Contact Information


Nadir Tayyab, CICP Director of Operations [email protected] +281.890.9194

and, YOUR OWN PROFESSIONAL STAFF AND OFFICE

Concept of Delivery Group Documents/NCCA/Incoterms 201… · Incoterms® 2010 - “ F” Rules FCA:...

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