Incoterms: Framework for Success January 27, 2011

Presenter: Steve Rubinson Licensed US Customs Broker

By PresenterMedia.com

Who is the International Chamber of Commerce

(ICC)?

http://www.iccwbo.org/

Goals for this session: 1.  ASK QUESTIONS! 2.  PARTICIPATE In The Discussion! 3.  Learn more about using Incoterms rules as a tool to

effectively perform international business 4.  Equip ourselves to become more effective

international business-people

Why are we here?

Critical Success Factors for International Business Transactions • Senior management commitment – doing business internationally is more demanding, and requires different resources, skills and experience than domestic transactions. • Effective and accurate information flows protect your ability to do business internationally. • Service providers can make or break your international sales. Choose them well. • Using clear Incoterms rules reduces uncertainty between the international buyer and seller.

Successful International

Business Transactions

Senior-Level Commitment

Information Flows

Service Providers

Incoterms Rules

Introduction

Where are Incoterms rules used?

INCOTERMS Rules

Who uses Incoterms rules?

What are Incoterms rules?

When are Incoterms rules used?

Why are Incoterms rules useful for international business?

Five Questions To Answer

Who?

What?

Where?

When?

Why?

• Business owners • Customer service • Finance • Senior executives • Sales • Logistics • Trade Compliance

Who?

Many people involved in your business can

benefit from understanding Incoterms rules

What?

Incoterms rules are a set of internationally recognized ways to describe business

transactions

Source: http://www.iccwbo.org/incoterms

Incoterms® – International Commercial Terms 

The Incoterms® rules are an internationally recognized standard and are used worldwide in international and domestic contracts for the sale of goods. First published in 1936, Incoterms® rules provide internationally

accepted definitions and rules of interpretation for most common commercial terms.

The rules have been developed and maintained by experts and practitioners brought together by ICC and have become the standard in

international business rules setting. They help traders avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the

delivery of goods from sellers to buyers. Incoterms® rules are recognized by UNCITRAL as the global standard for the interpretation of the most common

terms in foreign trade. Please note that all contracts made under INCOTERMS®  2000 remain valid

even after 2011.  Moreover, although we recommend using Incoterms® 2010 after 2011, parties to a contract for the sale of goods can agree to

choose any version of the Incoterms rules after 2011. It is important however to clearly specify the chosen version INCOTERMS® 2010, INCOTERMS® 2000

or any earlier version. 

Incoterms 2000 Rules Chart 1 TERM

SERVICE

EXW Ex-Works

FCA Free Carrier

FAS Free Alongside Ship

FOB Free On-Board Vessel

CFR Cost & Freight

CIF Cost Insurance & Freight

CPT Carriage Paid to

WhoPays WhoPays WhoPays WhoPays WhoPays WhoPays WhoPays

Warehouse storage at point of origin

Seller Seller Seller Seller Seller Seller Seller

Warehouse labor at point of origin

Seller Seller Seller Seller Seller Seller Seller

Export packing Seller Seller Seller Seller Seller Seller Seller

Loading at point of origin Buyer Seller Seller Seller Seller Seller Seller

Inland freight Buyer Buyer Seller Seller Seller Seller Seller

Port receiving charges Buyer Buyer Seller Seller Seller Seller Seller

Forwarders fee Buyer Buyer Seller Seller Seller Seller Seller

Loading on ocean carrier Buyer Buyer Buyer Seller Seller Seller Seller

Ocean/Air freight charges Buyer Buyer Buyer Buyer Seller Seller Seller

Charges at foreign Port/Airport

Buyer Buyer Buyer Buyer Buyer Buyer Seller

Customs, Duties & Taxes abroad

Buyer Buyer Buyer Buyer Buyer Buyer Buyer

Delivery charges to final destination

Buyer Buyer Buyer Buyer Buyer Buyer Buyer

Incoterms 2000 Rules Chart 2 TERM

SERVICE

CIP Carriage & Insurance Paid To

DAF Delivery At Frontier

DES Delivered Ex-Ship

DEQ Delivered Ex-Quay, Duty Unpaid

DDU Delivered Duty Unpaid

DDP Delivered Duty Paid

WhoPays WhoPays WhoPays WhoPays WhoPays WhoPays

Warehouse storage at point of origin

Seller Seller Seller Seller Seller Seller

Warehouse labor at point of origin

Seller Seller Seller Seller Seller Seller

Export packing Seller Seller Seller Seller Seller Seller

Loading at point of origin Seller Seller Seller Seller Seller Seller

Inland freight Seller Seller Seller Seller Seller Seller

Port receiving charges Seller Seller Seller Seller Seller Seller

Forwarders fee Seller Seller Seller Seller Seller Seller

Loading on ocean carrier Seller Seller Seller Seller Seller Seller

Ocean/Air freight charges Seller Seller Seller Seller Seller Seller

Charges at foreign Port/Airport

Seller Seller Buyer Seller Seller Seller

Customs, Duties & Taxes abroad

Buyer Buyer Buyer Buyer Buyer Seller

Delivery charges to final destination

Buyer Buyer Buyer Buyer Seller Seller

Incoterms 2010 Rules Part 1

RULES FOR ANY MODE OR MODES OF TRANSPORT

EXW EX WORKS FCA FREE CARRIER CPT CARRIAGE PAID TO CIP CARRIAGE AND INSURANCE PAID TO DAT DELIVERED AT TERMINAL DAP DELIVERED AT PLACE DDP DELIVERED DUTY PAID

Incoterms 2010 Rules Part 2

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

FAS FREE ALONGSIDE SHIP FOB FREE ON BOARD CFR COST AND FREIGHT CIF COST INSURANCE AND FREIGHT

INCOTERMS Rules Comparison

Incoterms 2010 rules

• For both domestic and international transactions • 11 rules in 2 categories • Eliminates “Ship’s Rail” term • Addition of guidance notes for each Incoterms rule

Incoterms 2000 rules

• Primarily for international transactions • 13 rules in 4 categories • “Ship’s Rail” terminology used

• The International Chamber of Commerce has the support of a global membership • Incoterms rules are recognized and used on agreement by ICC members and non-members alike • No membership fees or costs to use Incoterms rules

Where?

Anywhere you do business!

• There is no time like the present! • Consider adopting Incoterms rules as a matter of company policy • Global implementation is not required. Incoterms rules may be implemented regionally, locally or even in selected shipping lanes • Many companies use Incoterms rules only to ship internationally

When?

Use Incoterms rules when you buy or sell

anything – domestically or internationally

Benefits of using Incoterms rules:

1. Standardize how you do business 2. Strengthen internal controls 3. Avoid delays caused by problems with documentation 4. Prevent disputes over “who pays for what” 5. Protect your ability to do business internationally 6. Declare the correct value for imports and exports – the first time!

Why?

Incoterms rules can make the difference

between success and failure.

QUESTIONS?