Incoterms 2010 E

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Incoterms® 2010

Presentation by

Assoc. Prof. Nguyen Hoang AnhEmail: [email protected]

1

Nguyen Hoang Anh FTU

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Who publishes and copyrights

Incoterms®?

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1. The World Trade Organization

2. The Interstate Commerce Commission

3. The International Chamber of Commerce


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Who publishes and copyrights

Incoterms®?

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1 2 3

14%

86%

0%

1. The World Trade Organization

2. The Interstate Commerce Commission

3. The International Chamber of Commerce


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Incoterms® address the legal transfer

of title for goods.

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1 2

43%

57%1. True

2. False


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Incoterms can be used for the transfer

of both goods and services?

5

30%

70%

1. True.2. False.


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Roles of Incoterms in ITC


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Roles of Incoterms in ITC


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News about Incoterms 2010

1 . Two new Incoterms rules – DAT and DAP –

have replaced the Incoterms 2000 rules DAF,

DES, DEQ and DDU

• The number of Incoterms® rules has been

reduced from 13 to 11.

• Substitution two new rules: DAT, Delivered at

Terminal, and DAP, Delivered at Place – for the

Incoterms® 2000 rules DAF, DES, DEQ and

DDU.


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2 Classification of the 11 Incoterms® 2010

rules

•

The 11 Incoterms® 2010 rules are presented intwo distinct classes:

- RULES FOR ANY MODE OR MODES OF

TRANSPORT

- RULES FOR SEA AND INLAND WATERWAY

TRANSPORTNguyen Hoang Anh FTU

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3.Rules for domestic and international trade

• Incoterms® rules have traditionally been used

in international sale contracts where goodspass across national borders.

• The subtitle of the Incoterms® 2010 rules

formally recognizes that they are available for

application to both international and domestic

sale contracts.Nguyen Hoang Anh FTU

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4. Guidance Notes

• Before each Incoterms® 2010 rule you will find

a Guidance Note. The Guidance Notes explainthe fundamentals of each Incoterms® rule.

• The Guidance Notes are not part of the actual

Incoterms® 2010 rules, but are intended to

help the user accurately and efficiently steer

towards the appropriate Incoterms® rule for a

particular transaction.


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5. Electronic communication

• Previous versions of Incoterms® rules have

specified those documents that could bereplaced by EDI messages.

• But articles A1/B1 of the Incoterms® 2010

rules, give electronic means of communication

the same effect as paper communication, as

long as the parties so agree or where

customary.


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6. Insurance cover

• The Incoterms® 2010 rules are the first version

of the Incoterms® rules since the revision of the Institute Cargo Clauses and take account

of alterations made to those clauses.

• The Incoterms® 2010 rules place information

duties relating to insurance in articles A3/B3,

which deal with contracts of carriage and

insurance.


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7. Security-related clearances and information

required for such clearances

•

The Incoterms® 2010 rules have allocatedobligations between the buyer and seller to

obtain or to render assistance in obtaining

security-related clearances, such as chain-of-

custody information, in articles A2/B2 andA10/B10 of various Incoterms® rules.Nguyen Hoang Anh FTU

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8.Terminal handling charges

• Under Incoterms® rules C & D group the seller

must make arrangements for the carriage of the goods to the agreed destination.

• The Incoterms® 2010 rules seek to avoid

paying for the same service twice by clearly

allocating such costs in articles A6/B6 of the

relevant Incoterms rules.Nguyen Hoang Anh FTU

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9. String sales

• In the sale of commodities, cargo is frequently

sold several times during transit “down astring”.

• For clarification purposes, Incoterms® 2010

rules include the obligation to “procure goods

shipped” as an alternative to the obligation to

ship goods in the relevant Incoterms rules.Nguyen Hoang Anh FTU

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Incotemrs 2010

• Includes 11 rules, stepladder of increasing

responsibility from Seller’s premise to Buyer’s

premise.

• From minimum responsibility of Seller to his

maximum responsibility.

• Their rules could be valid only when they are

incorporated in contract and being referred to

Incoterms 2010Nguyen Hoang Anh FTU

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E - Group: EXW (Ex-Works)

• Any mode term

• Least work for exporters/sellers

–

Popular among new exporters• Seller makes goods available for pickup

(including agreed packaging)

– Is the packaging suitable for international

shipments?

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EXW (Ex-Works) Continued

• Buyer responsible for loading goods at EXW

place – How often does this actually happen?

– If the seller is loading, who takes responsibility if damage occurs?

– What document evidences of delivery? (No standard)

• Buyer responsible for export and compliance

documentation – Seller must provide company info to buyer’s forwarder and how does

seller feel about that

• All of this makes EXW less desirable

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FCA (Free Carrier)

• Recommended as substitute for EXW

• Can be used with 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

– If no point is named the seller can choose a point best suited forthem - the named point can be the seller’s facility

• Seller is responsible for: – Packaging, Loading, Pre-carriage (if any – none if at seller’s dock),

Export Clearance, and Compliance Documentation24


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FCA (Free Carrier) Continued

• Seller not responsible for unloading on buyer’s

side

•

Buyer responsible for everything else afterloading

• Insurance not specified

• Freight Collect – Buyer pays

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CPT (Carriage Paid To)


• Well suited for multimodal transport

•Seller must clear goods for export includingexport compliance documentation

• Seller delivers goods, packaged for shipment,

to carrier for transport to a named destination

place on the buyer’s side

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CPT (Carriage Paid To) Continued

• Seller pays all transportation costs to

specified delivery destination – main

carriage – Risk passes to buyer when goods are delivered to carrier

• Buyer typically responsible for unloading at

place of destination


• Freight Prepaid – Seller pays – Need toincorporate freight charges into invoice to buyer

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CIP

(Carriage & Insurance Paid to)

• Same as CPT except Insurance


• Well suited for multimodal transport

• Seller must clear goods for export including

export compliance documentation

• Seller delivers goods, packaged for

shipment, to carrier for transport to a

named destination place on the buyer’s

side30


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CIP (Carriage & Insurance Paid to)

Continued

• Seller pays all transportation costs to specified

delivery destination – main carriage – Risk passes to buyer when goods are delivered to carrier

• Buyer typically responsible for unloading at place of destination

• Insurance is seller’s obligation (minimum coverage)

• Freight Prepaid – Seller pays – Need to incorporatefreight and insurance charges into invoice to buyer

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DAT (Delivered at Terminal)

• Any mode (arrival) term – replaces DEQ

• Seller obtains export clearance and handles


• Seller packages goods for transport and

pays for all transportation costs to a named

destination terminal• Seller pays for unloading at the named

destination (dock, warehouse, etc.)

terminal on buyer’s side 33


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DAP (Delivered at Place)

• Any mode (arrival) term

• Seller obtains export clearance and handles


• Seller packages goods for transport and

pays for all transportation costs to a named

destination place on the buyer’s side

• Buyer responsible for unloading goods atthe named place – this is the main

difference b/t DAP and DAT35


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DAP (Delivered at Place) Continued

• Buyer responsible for import clearance and

on carriage (if any)

•

No insurance specified• Freight Prepaid – Seller pays – Need to

incorporate freight charges into invoice to buyer

• Seller must provide appropriate

documentation for release of goods on

buyer side

– This is important if on a L/C – flow of documents

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DDP (Delivered Duty Paid)

• Any Mode (arrival) term

• Not suitable for domestic shipments

• Seller arranges to pay for: – Transportation, Foreign duties, Export and Import Licenses, Export

Compliance Documentation

• Seller clears goods through Customs in

foreign country for delivery to a namedplace on the buyer’s side – May be foreign exchange risk

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DDP (Delivered Duty Paid)

Continued• Risky for exporter – dealing with foreign customs

• Buyer typically responsible for unloading at the

point of delivery


• Freight Prepaid – Seller pays – Need to incorporatefreight and insurance charges into invoice to buyer

•

An importer under DDP is not necessarily theimporter of record since they are not clearing

goods through Customs – this may affect DutyDrawback

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Sea and Inland Waterway

Transport Terms• FAS

• FOB

•

CFR• CIF

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FAS (Free Alongside Ship)

• Sea and Waterway Term

• Usually used for charter party transactions

(not liner 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 and

export compliance requirements

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FAS (Free Alongside Ship)

Continued• Buyer responsible for:

– Loading the vessel, Main carriage, Clearance

through Customs, On-carriage


• Freight Collect – Buyer pays

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FOB (Free on Board)

• Sea and Waterway Term (not to be confused with

UCC term FOB)

– Incoterms 2010 will be used for both domestic and

international transactions• Seller delivers the goods packaged and prepared

for export, loaded on-board a vessel chosen by

the buyer, at a port on the seller’s side

• Seller is responsible for: – Export compliance requirements, Export Clearance,

and Pre-Carriage

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FOB (Free on Board) Continued

• “Over the ship’s rail” is no longer used as a point to define

transfer of risk from seller to buyer

– Buyer and seller should agree on what constitutes loaded on

board

– Different products loaded differently

– Seller responsible for performance of carrier loading the ship even

though carrier is chosen by the buyer

• Buyer responsible for:

–

Main carriage, Import clearance, and On-Carriage• Freight Collect – Buyer Pays


• Common Incoterm for L/C transactions

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CFR (Cost and Freight)

• Sea and Waterway Term


to carrier for transportation to a named

destination port on the buyer’s side

– Risk passes to buyer when goods delivered to carrier

• Seller:

– Chooses vessel, Pays costs for main carriage, and handlesexport clearance and compliance requirements

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CFR (Cost and Freight) Continued

• “Over the ship’s rail” is no longer used as a point to define

transfer of risk from seller to buyer

– Buyer and seller should agree on what constitutes loaded on board

• Buyer responsible for:

– Vessel unloading, Import clearance, and On-Carriage

• Freight Prepaid – Seller pays – Need to incorporate freight charges intoinvoice to buyer


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CIF

(Cost Insurance and Freight)• Sea and Waterway Term


to carrier for transportation to a named

destination port on the buyer’s side

– Risk passes to buyer when goods delivered to carrier

• Seller:

– Chooses vessel, Pays costs for main carriage, and handlesexport clearance and compliance requirements

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Football Team of Incoterms 2010


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Which of the following are

Any Mode Terms?

541 2 3 4 5

0% 0%

86%

0%

14%

1. EXW

2. FCA

3. CIP

4. DDP

5. All of the AboveNguyen Hoang Anh FTU

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Which of the following are only

Sea and Inland Waterway Terms?

551 2 3 4

0%

89%

0%

11%

1. FAS

2. FOB

3. CIF

4. All of the Above


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Incoterms are considered as Law and are

also used as Payment Terms.

571 2

78%

22%

1. Very True.

2. Very False.


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Enjoy your business


Incoterms 2010 E

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