Incoterms lectures

8/7/2019 Incoterms lectures

1/18

Law of ContractEssential elements of a validcontract Valid Offer & unconditional

Acceptance Consideration quid pro quo Capacity to contract Consensus AD-IDEM

Legality of Object Capable of Performance & Intention to create legal relationship


2/18

CONTRACTUAL OBLIGATIONS

Seller Deliver goods as per contract,in time & inform buyer

Bear all costs, taxes, tilldeliveredProvide packagingArrange Inspection, if

requiredProvide Document of title &other documents

Buyer Take delivery of goodsArrange paymentIf required, arrange freight,insurance


3/18

CONTRACTThe Contracts for the International Sale of Goods (CISG) will app ly in a ny sa les co ntr ac t

for goods be twee n e ntities in cou ntries tha t have s igned th is U nited Na tions-spo nso r edtr ea ty, unless the bu ye r or se lle r takesspec if ic s teps to exc lude it. CISG wasdeve loped b y United Na tions Co nve ntion on Inte rna tiona l Tr ade La w (UNCITRAL) .www. c isg .la w. pace .edu


4/18

INCOTERMS

Define obligations/responsibility of Seller andBuyer in respect of

Carriage of GoodsRisksCosts

INCOTERMS quantify the costs borne by Seller and Buyer


5/18

INCOTERM - 1

When Buyer arranges to pick up the cargo fromRanipet, they will pay the cost of goods to BarakatLeather Co and bear all other costs.

Here, the terms of sale are Ex Works Ranipet orEXW.

Barakat Leather Co, Ranipet


6/18

F ree Carrier ( F CA) Chennai

Barakat Leather Co delivers the cargo, custom cleared at Chennaiairport, for airfreight. Thereafter Buyer will arrange to loadthe cargo and pay cost of airfreight and insurance.


7/18

FAS Free A longsid e Sh ip (Che nnai)

FOB Free on Boa r d (Che nnai)


8/18

W h a rf o r Qu ay


9/18

FAS & FOB .

F AS (Chennai) : Barakat Leather Co will pay allcosts till the goods are custom cleared and brought

inside Chennai port for loading. Thereafter, Buyer will bear all costs of loading, ocean freight,insurance etc.F OB (Chennai) : Barakat Leather Co arrangesloading the cargo into the ship but the freight andinsurance charges are paid by Buyer.


10/18

D e stination


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CFR Cost and Freight(Named Port of Destination)

CIF Cost Insurance and Freight(Named Port of Destination)

CF R Marseille: Barakat Leather Co also pay theOcean freight cost from Chennai to Marseille over the F OB costs, but their risk is only upto Chennai.CIF : Barakat Leather Co pay the ocean freight costand insurance premium but their risk is onlyupto Chennai.


12/18

By land, P lac e o f D e stination

CPT carriage paid to (named place of destination)CIP carriage and insurance paid to

(Named place of destination)Example: F rom Marseille to CPT or CIP Hamburg


13/18

D Term s

DAF Delivered at F rontier (named place)DES Delivered ex Ship (named port of destination)DEQ Delivered ex quay (named port of destination)DDU Delivered Duty Unpaid (named place)DDP Delivered Duty Paid ( named place)Costs and risk upto named port/place toBarakat Leather Cos account


14/18

INCOTERMS1 exclusively territorial Incoterm (DAF)

6 exclusively maritime Incoterms(FAS, FOB, CFR, CIF, DES, DEQ)

6 Incoterms valid for any means of transport

(EXW, FCA, CPT, CIP, DDU, DDP)


15/18

INCOTERMS Cost ImplicationEXW Gurgaon cost of Maruti Swift: Rs 200,000 Cost of transport to C F S Delhi, export documentation,

and customs clearance 500F CA N.Delhi 200,500 THC, Stuffing, transportation

to Nhava Sheva & port charges 1,000F AS Nhava Sheva port 201,500 Loading (stevedoring) charges 500

F OB Nhava Sheva 202,000 Ocean freight to Hamburg 2,000CF R Hamburg 204,000 Marine Insurance 500CIF Hamburg 204,500

= $ 4, 650 Shipping Agency charges at Hamburg 20


16/18

INCOTERMS - Example

DES Hamburg 4,670

Unloading costs 20DEQ Hamburg 4,690

Local transport charges to customer 40DDU Customers warehouse 4,730

Clearing charges and customs duty 100DDP Customers warehouse 4,830


17/18

Incoterms Exportcustoms

Local

tpt

Loading

chgs

freight insur

ance

Unload

ing chgs

tpt Import

customs

EXWF CAFASF

OBCF R

CIF

CPT

CIP

DESDEQ

DDU

DDP

DAF


18/18

Making a contractBuyer and Seller Product: description, specificationsQuantity

Packing, MarkingPrice, ValueTerms of DeliveryLoadport, Discharge port/destinationShipment schedule InsurancePayment DocumentsInspectionArbitration F orce Majeure

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