INCOTERMS Ppt

IBMR

“INCOTERMS”PRESENTED BY

Mr. Swapnil Jain In the enlightening guidance of

Mrs. Megha Jain

Rules at the core of world trade

IN-CO-TERMSInternational commercial terms

WHAT ARE INCOTERMS ?

1. ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade terms.

2. First published by the ICC in 1936 Since then, ICC expert lawyers and trade practitioners have updated them six times to keep pace with the development of international trade.

3. ICC is currently revising Incoterms 2000. The new edition, Incoterms 2011, is expected to enter into force on 1 January 2011.

……WHAT ARE INCOTERMS ?

4. Incoterms are available from ICC Publishing and ICC national committees throughout the world.

5. Incoterms are developed, maintained and promoted by the ICC Commission on Commercial Law and Practice (CLP).

6. The English text is the original and official version of Incoterms 2000, authorized translations into 31 languages are available from ICC national committees.

Why Incoterms? Incoterms are international rules that are accepted by

governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade.

They either reduce or remove altogether uncertainties arising from differing interpretations of such terms in different countries.

Incoterms make international trade easier and help traders in different countries to understand one another. These standard trade definitions that are most commonly used in international contracts are protected by ICC copyright.

What do they cover?

• The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold, but excluding "intangibles" like computer software.

INCOTERMS 2000

Four Groups of Incoterms

LessControl

MoreControl1) “E” group

2) “F” group

3) “C” group

4) “D” group

Seller Buyer

MoreControl

LessControl

8

( INCOTERMS ) GROUP TERM Stands for

E EXW Ex Works

F

FCA Free Carrier

FAS Free Alongside Ship

FOB Free On Board

C

CFR Cost and Freight

CIF Cost, Insurance and Freight

CPT Carriage Paid To

CIP Carriage and Insurance Paid To

D DAF Delivered At Frontier

DES Delivered Ex Ship

DEQ Delivered Ex Quay

DDU Delivered Duty Unpaid

DDP Delivered Duty Paid

EXW EX WORKS (…named place)

"Ex works" means the seller's only responsibility is to make the goods available at the seller's premises, i.e. factory, mill or warehouse

The seller is not responsible for loading the goods on the vehicle provided by the buyer unless otherwise agreed.

The buyer bears the full costs and risk involved in collecting

the goods from there to the desired destination. Ex works represents the minimum obligation of the seller.

EXW Ex Works …(named place)

SELLER BUYER

Seller/ Exporter Premises

Export Documents Formalities

Delivered at named place of: Frontier/ Terminal/

Quay

Loading Port of

Shipment

Onboard Ship Rail

Plane Ship’s Ship’s Rail Rail

Discharging Port of Arrival

Delivery at named place of

destination: Frontier/

Terminal/Quay

Import Documents Formalities

Buyer/ Importer Premises

Seller’s Risks

Buyer’s Risks

Seller’s Cost

Buyer’s Cost

11

Obligations of the Salesperson.

• He surrenders of the merchandise and necessary documents

• Pack and packing

Obligations of the Buyer.

• Pay of the merchandise

• Freight internal (of factory to the export place)

• Customs (documents, permits, requirements, taxes)

• Export expenses (you maneuver, storage, agents)

• Freight international (of export place to the import place)

• Import expenses (you maneuver, storage, agents)

• Transport and sure (import place to plant)

Incoterms 2000

• The “F” –terms require the seller to deliver goods for carriage as instructed by the buyer.

• FCA• FAS• FOB

FCAFREE CARRIER (named place)

• Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place.

• The risk of loss or damage to the goods is transferred from seller to buyer at that time and not at the ship's rail.

• Seller obligated to load goods on arriving vehicle if it arrives at the seller’s premises.

• The term "carrier" means any person by whom or in whose name a contract of carriage by road, rail, air, sea, or a combination of modes has been made.

FC A Free C arrier… (nam ed place)

SELLE R B U Y ER

Seller/ E xporter Prem ises

E xport D ocum ents Form alities

D elivered at nam ed place of: Frontier/ T erm inal/

Q uay

L oading Port of

Shipm ent

O nboard Ship R ail

Plane Ship’s Ship’s R ail R ail

D ischarging Port of A rrival

D elivery at nam ed place of


T erm inal/Q uay

Im port D ocum ents Form alities

B uyer/ Im porter Prem ises

Seller’s R isks

B uyer’s R isks

Seller’s C ost B uyer’s C ost

15

FAS -FREE ALONGSIDE SHIP(…named port of shipment)

FAS or "free alongside ship" requires the seller to deliver the goods alongside the ship on the quay.

From that point on, the buyer bears all costs and risks of loss and damage to the goods.

Unlike F.O.B., F.A.S. requires the buyer to clear the goods for export and pay the cost of loading the goods.

F A S F ree A longside… (nam ed p lace)

SE L LE R B U Y E R


E xport D ocu m ents Form alities

D elivered at nam ed p lace of: Frontier/ T erm inal/

Q uay

L oading Port of

Sh ipm ent

O nboard Sh ip R ail

P lane Sh ip ’s Sh ip ’s R ail R ail


D elivery at nam ed p lace of


T erm inal/Q uay

Im port D ocu m ents Form alities


Seller’s R isks B uyer’s R isks


17

FOB FREE ON BOARD (... named port of shipment)

• Under FOB the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement.

• The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ship's rail (i.e., off the dock and placed on the ship).

• The seller pays the cost of loading the goods.• If intent is not to deliver goods across the ship’s rail, use

FCA

FO B Free O n Board… (nam ed port of shipm ent)

SELLE R B U Y ER




Q uay

L oading Port of

Shipm ent

O nboard Ship R ail





T erm inal/Q uay



Seller’s R isks

B uyer’s R isks


19

Incoterms 2000

• The “C” –terms require the seller to contract for carriage at his expense – to a specified point.

• CFR

• CIF

• CPT

• CIP

CFR – COST AND FREIGHT(…named port of destination)

• Seller delivers when goods, cleared for export, pass the ship’s rail at the named port of shipment.

• The seller pays the costs and freight necessary to bring goods to port of destination, but the buyer bears the risk of loss and additional costs occurring after delivery.

• Term can be used for sea or inland waterway transport.

• If intent is not to deliver goods across the ship’s rail, use CPT

C F R C o st a n d F re ig h t … (n a m ed p o r t o f d estin a tio n )

S E L L E R B U Y E R

S e ller / E x p o rter P r e m ises

E x p o rt D o cu m en ts F o r m a litie s

D e liv ered a t n a m ed p la ce o f: F ro n tier /

T er m in a l/ Q u a y

L o a d in g P o r t o f

S h ip m en t

O n b o a rd S h ip R a il

P la n e S h ip ’s S h ip ’s R a il R a il

D isch a rg in g P o r t o f A rr iv a l

D e liv ery a t n a m ed p la ce o f

d estin a tio n : F ro n tier /

T er m in a l/Q u a y

Im p o r t D o cu m en ts F o r m a litie s

B u y er / Im p o r ter P r e m ises

S e ller ’s R isk s B u y er ’s R isk s

S e ller ’s C o st B u y er ’s C o st

22

CIF – COST, INSURANCE AND FREIGHT (…named port of destination)

• CIF is CFR with the additional requirement that the seller procure transport insurance against the risk of loss or damage to goods.

• The seller pays the costs and freight necessary to bring goods to port of destination, but the buyer bears the risk of loss and additional costs occurring after delivery.

• The seller procures marine insurance, against buyer’s risk of loss. Seller is required to obtain insurance only on minimum cover.

C IF C o st, In su ra n ce a n d F re ig h t … (n a m ed p o r t o f d estin a tio n )

S E L L E R B U Y E R

S e ller / E x p o rter P r e m ises

E x p o rt D o cu m en ts F o r m a litie s

D e liv ered a t n a m ed p la ce o f: F ro n tier /

T er m in a l/ Q u a y

L o a d in g P o r t o f

S h ip m en t

O n b o a rd S h ip R a il

P la n e S h ip ’s S h ip ’s R a il R a il

D isch a rg in g P o r t o f A rr iv a l

D e liv ery a t n a m ed p la ce o f

d estin a tio n : F ro n tier /

T er m in a l/Q u a y

Im p o r t D o cu m en ts F o r m a litie s

B u y er / Im p o r ter P r e m ises

S e ller ’s R isk s

B u y er ’s R isk s

S e ller ’s C o sts

B u y er ’s C o st

24

CPT – CARRIAGE PAID TO (…named place of destination)

• Seller delivers the goods, cleared for export, to the carrier.

• The seller pays the costs of carriage necessary to bring goods to named destination, but the buyer bears the risk of loss and additional costs occurring after delivery.

• Accordingly, "freight/carriage paid to" can be used for all modes of transportation, including container or roll-on roll-off traffic by trailers and ferries.

CPT Carriage Paid To …(named port of destination)

SELLER BUYER




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks Buyer’s Risks

Seller’s Cost Buyer’s Costs

26

CIP – CARRIAGE AND INSURANCE PAID TO (…named place of destination)

• Seller delivers the goods, cleared for export, to the carrier.

• The seller pays the costs of carriage to named destination, but the buyer bears the risk of loss and additional costs occurring after delivery.

• The seller procures insurance against buyer’s risk of loss.• Seller is required to obtain insurance only on a minimum cover.

• This term is the same as "freight/carriage paid to (CPT)" but with the additional requirement that the seller has to procure transport insurance against the risk of loss or damage to the goods during the carriage.

CIP Carriage and Insurance Paid To …(named port of destination)

SELLER BUYER




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks Buyer’s Risks

Seller’s Cost Buyer’s Cost

28

Incoterms 2000

• The “D” –terms require the seller to take the goods all the way to destination at the border or within the country of import.

• DAF• DES• DEQ• DDU• DDP

DDU – DELIVERED DUTY UNPAID (…named place of destination)

• Seller delivers goods to the buyer, not cleared for import, and not unloaded, at the named place of destination.

• Seller bears all costs and risks (except duty) to bring goods to the named place of destination.

• Term may be used irrespective of mode of transport.

• If delivery is to take place at the port, quay or on board a vessel, DES or DEQ should be used.

D D U D elivered D uty U npaid… (nam ed place of destination)

SELLE R B U Y ER




Q uay

L oading Port of

Shipm ent

O nboard Ship R ail





T erm inal/Q uay



Seller’s R isks

B uyer’s R isks


31

DDP – DELIVERED DUTY PAID (…named place of destination)

• Seller delivers goods to the buyer, cleared for import, and not unloaded, at the named place of destination.

• Seller bears all costs and risks, including import duty, to bring goods to the named place of destination.

• Term may be used irrespective of mode of transport. • If delivery is to take place at the port, quay or on board

a vessel, DES or DEQ should be used.

DDP Delivered Duty Paid…(named place of destination)

SELLER BUYER




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


33

DAF – DELIVERED AT FRONTIER (…named place)

• Seller delivers goods, cleared for export, at disposal of buyer on arriving means of transport.

• Not unloaded, not cleared for import at point at frontier before customs border of adjoining country.

• Term may be used irrespective of the mode of transport when goods are delivered at a land frontier.

DAF Delivered At Frontier…(named place)

SELLER BUYER




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


35

DES – DELIVERED EX SHIP (…named port of destination)

• Seller delivers goods at disposal of buyer on board the ship.

• Not cleared for import at the named port of destination.

• Seller bears all costs and risks to bring goods to the named port before discharging.

• Term used only for delivery by sea.

• If the seller is to bear the costs of discharging the goods, DEQ should be used.

DES Delivered exShip…(named port of destination)

SELLER BUYER




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


3730 November, 2009

DEQ – DELIVERED EX QUAY (…named port of destination)

• Seller delivers goods, not cleared for import, at disposal of buyer on the quay at the named port of destination.

• Seller bears all costs and risks to bring goods to the named port of destination and discharging the goods on the quay.

• Term used only for delivery by sea.

DEQ Delivered Ex Quay…(named port of destination)

SELLER BUYER




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


3930 November, 2009

Summary of terms

For a given term, "Yes" indicates that the seller has the responsibility to provide the service included in the price. "No" indicates it is the buyer's responsibility. If insurance is not included in the term (for example, CFR) then insurance for transport is the responsibility of the buyer or the seller depending on who owns the cargo at time of transport. In the case of CFR terms, it would be the buyer while in the case of DDU or DDP terms, it would be the seller.

30 November, 2009

February 8, 2006

DES Yes Yes Yes Yes Yes Yes No No No Yes No No

DEQ Yes Yes Yes Yes Yes Yes Yes No No Yes No No

DDU Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No

DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Load to truck

Export- duty payment

Transport to exporter's port

Unload from truck at the origin's port

Landing charges at origin's port

Transport to import's port

Landing charges at importer's port

Unload onto trucks from the importers' port

Transport to destination

InsuranceEntry - Customs clearance

Entry - Duties and Taxes

EXW No No No No No No No No No No No No

FCA Yes Yes Yes No No No No No No No No No

FAS Yes Yes Yes Yes No No No No No No No No

FOB Yes Yes Yes Yes Yes No No No No No No No

CFR Yes Yes Yes Yes Yes Yes No No No No No No

CIF Yes Yes Yes Yes Yes Yes No No No Yes No No

CPT Yes Yes Yes Yes Yes Yes No No No No No No

CIP Yes Yes Yes Yes Yes Yes No No No Yes No No

DAF Yes Yes Yes Yes Yes Yes No No No No No No

Mode of Transport and Appropriate Incoterm - Any Mode of Transport

• EXW• FCA• CPT• CIP• DAF• DDU• DDP

30 November, 2009

Mode of Transport and Appropriate Incoterm – Maritime and Inland

Waterway Transport Only

• FAS• FOB• CFR• CIF• DES• DEQ

30 November, 2009

Guidelines to Using Incoterms

• Always specify which terms are applicable.• When completing documents ensure that you are

using the correct format of a term e.g.• The term CFR is persistently misused/replaced with

C&F or C+F. • C+F has never existed.• C&F did exists but was replaced with CFR in 1980. • If C&F is used by mistake a court of law will use the

pre 1980 meaning of the term which is very different from the current meaning of CFR as in Incoterms 1990 and Incoterms 2000.

…..Guidelines to Using Incoterms

• Draw up a check list of your duties and rights under the selected term and check that every intended or completed transaction conforms to this list, and that nothing is omitted.

• Request your trading partner to do the same, and exchange this information with them.

• Inform your bank and insurance company which Incoterm(s) have been selected for your business, so that they can determine exactly what your duties and rights are with regard to a transaction in which they may have a role to play.

In Summary

• Must name a place after the INCOTERM

• INCOTERMS are negotiable!

• INCOTERMS should appear on all commercial documents

• Establish a close relationship with a forwarder

4630 November, 2009

Reference

• Short overview of international commerce vocabulary

• International Chamber of Commerce (ICC) incoterm list

• INCOTERMS 2000

• Wikipedia.

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