Incoterms

Introduction

Universally recognised set of definitions of international trade terms

Recognised by courts and other authorities Define the trade contract responsibilities and

liabilities between buyer and seller Updated regularly to keep pace with

changes and developments in international trade

Introduction

Devised an published by the ICC

WBO ICC introduced Incoterms in 1936

Incoterms 2012 4 groups E, F, C and D

and in all 13 main terms

E: Departure

EXW- Ex Works

F: Main carriage unpaid

FCA- Free Carrier

FAS- Free Alongside Ship

FOB- Free On Board

C: Main carriage paid

CFR- Cost and Freight

CIF- Cost, Insurance and Freight

CPT- Carriage Paid To

CIP- Carriage and Insurance Paid To

D: Arrival

DAF- Delivered At Frontier

DES- Delivered Ex Ship

DEQ- Delivered Ex Quay

DDU- Delivered Duty Unpaid

DDP- Delivered Duty Paid

Introduction

Purpose of Incoterms

Designed for Parties to a Contract Provides a set of international rules for foreign trade Reduces uncertainties Avoids different interpretations in different countries Additional costs and time can be avoided

IntroductionTHE SELLER’S OBLIGATIONS

A1 Provision of goods in conformity with the contractA2 Licenses, authorizations and formalitiesA3 Contract of carriage and insuranceA4 DeliveryA5 Transfer of risksA6 Division of costsA7 Notice to the buyerA8 Proof of delivery, transport document or equivalent

electronic messageA9 Checking – packaging – markingA10 Other obligations

IntroductionTHE BUYER’S OBLIGATIONS

B1 Payment of the priceB2 Licenses, authorizations and formalitiesB3 Contract of carriageB4 Taking deliveryB5 Transfer of risksB6 Division of the costsB7 Notice to the sellerB8 Proof of delivery, transport document of equivalent

electronic messageB9 Inspection of goodsB10 Other obligations

IntroductionScope of Incoterms

Incoterms is limited:• To rights and obligations of the parties to contract of sale

with respect to the delivery of the goods sold.

• Do not deal with the consequences of breach of contract

• Primarily intended for use where goods are sold for delivery across national boundaries, hence international commercial terms

• Can be used in contracts for sale of goods directly.

IntroductionScope of Incoterms

Incoterms is limited:• To rights and obligations of the parties to contract of sale

with respect to the delivery of the goods sold.

• Do not deal with the consequences of breach of contract

• Primarily intended for use where goods are sold for delivery across national boundaries, hence international commercial terms

• Can be used in contracts for sale of goods directly.

IntroductionStructure

Group E DepartureEXW Ex Works (.....…........named place)

Group F Main carriage unpaidFCA Free Carrier (....….........named place)FAS Free Alongside Ship (........

….named port of shipment)FOB Free On Board

(............named port of shipment)

IntroductionStructure

Group C Main carriage paidCFR Cost and Freight (...........named port of destination)CIF Cost, Insurance & Freight (.....named port of destination)CPT Cost Paid To (...........named port of destination)CIP Carriage and Insurance paid to

(…… .named place of destination)

Group D Arrival DAF Delivered at Frontier (.....………………….....named place) DES Delivered Ex Ship (...........named port of destination) DEQ Delivered Ex Quay (....…....named port of destination) DDU Delivered Duty Unpaid (…...named place of destination) DDP Delivered Duty Paid (.........named place of destination)

IntroductionThe Terms

• The “E” Term is the term in which seller’s obligation is at its minimum

• The “F” Term require the seller to deliver as instructed by the buyer

• The “C” Term require the seller to contract for carriage at his expense

• The “D” Term signifies arrival contracts

IntroductionAny mode of transport

Group E EXW Ex Works (…...............named place)

Group F FCA Free Carrier (…................named place)

Group C

CPT Cost Paid To (............named port of destination)

CIP Carriage and Insurance paid to (..........named place of destination)

Group D

DAF Delivered at Frontier (............named place)

DDU Delivered Duty Unpaid (..........named place of destination)

DDP Delivered Duty Paid (..........named place of destination)

IntroductionMode of transport and the appropriate Incoterm

Maritime and inland waterway transport only• Group F

FAS Free Alongside Ship (..…..........named port of shipment)

FOB Free On Board (…............named port of shipment)

• Group C

CFR Cost and Freight (............named port of destination)

CIF Cost, Insurance & Freight (............named port of destination)

• Group D

DES Delivered Ex Ship (............named port of destination)

DEQ Delivered Ex Quay (............named port of destination)

EXW - Ex Works

Goods available only at seller’s premises.

Buyer: loads the goods on truck or container at the seller’s premises, and takes into account the subsequent costs and risks.

FCA - Free CarrierDelivery at the specified point of departure: the seller’s

premises or a named cargo terminal / railroad station

Buyer: main carriage/freight, cargo insurance and other costs and risks

FAS - Free Alongside Ship Seller: places the goods alongside the ship at the

named port, loaded at his expense.

Buyer: pays loading fee, main carriage/freight, cargo insurance and other costs risks.

FOB - Free On Board

Delivery of goods on board the vessel at the port of origin is at the seller’s expense.

Buyer is responsible for loading fee, main carriage/freight, cargo insurance and other costs risks.

CFR - Cost and Freight

Seller: pays the costs and freight to bring the goods to the port of destination.

Risk: transferred once the goods have crossed the ship’s rail.

CIF - Cost Insurance and Freight

Used exactly the same way as CFR except that

Seller: must in addition procure and pay for insurance for the cargo insurance and delivery of goods to the port of destination

Buyer: responsible for the import customs clearance & other costs and risks

CPT - Carriage Paid To Seller delivers the goods at the named place of

destination at his expense.

Buyer assumes the cargo insurance, import customs clearance, payment of customs duties and taxes, and other costs and risks.

Risk transferred at the delivery of goods

CIP - Carriage & Insurance Paid To

Seller delivers the goods on the ship. On board, the risk is transferred to the buyer.

Buyer is accountable for the import customs clearance, payment of customs duties and taxes, and other costs and risks until goods reach their final destination.

DAF - Delivered At Frontier

Delivery of goods is done at the specified point at the frontier at the seller's expense.

Buyer is responsible for the import customs clearance, payment of customs duties and taxes. The transfer of risk is made at the frontier

DES - Delivered Ex Ship Seller assumes expenses linked to the delivery of

goods. At the arrival of the ship, the risk is transferred to the buyer.

Buyer is accountable for the unloading fee, import customs clearance, payment of customs duties and taxes, cargo insurance, and other costs

DEQ - Delivered Ex Quay Delivery of goods is done to the quay of the port at the

seller's expense. He is also responsible for the import customs clearance and payment of customs duties and taxes at the buyer's end.

Buyer assumes the cargo insurance and other costs and risks

DDU - Delivered Duty Unpaid

Delivery of goods and the cargo insurance to the final destination, which is often the project site or buyer's premises, is done at the seller's expense.

Buyer is responsible for the import customs clearance and payment of customs duties and taxes

DDP - Delivered Duty Paid

Seller is responsible for most of the expenses, which include the cargo insurance, import customs clearance, and payment of customs duties and taxes at the buyer's end, and the delivery of goods to the final point at destination, which is often the project site or the buyer's premises.

It is a “door to door” delivery. Risk is transferred when the goods are delivered

Conclusion

Incoterms cannot be applied by themselves to a variety of situations, of medium of transports, technologies....

They must be supplemented by additional details adapted to these particular case.

Define the geographical points where the transfers of risks and expenses will take place.