incoterms made easy
DESCRIPTION
COMPREHENSIVE EXPLANATION OF THE INCO TERMS, UNIVERSALLY ACCEPTED AND AS PER INTERNATIONAL CHAMBER OF COMMERECETRANSCRIPT
February 8, 2006
INCOTERMS 2000
• First published by the ICC in 1936• ICC (International Chamber of Commerce) Official Rules
for the Interpretation of Trade terms.• Purpose is to provide a set of international rules for the
interpretation of the most commonly used trade terms.• 10 categories describing where risks lie between seller
and buyer• International Commercial Terms (INCOTERMS)
February 8, 2006
Incoterms – Purpose and Scope
• Pricing terms, shipping terms, sales terms• Apply to international trade• Define the rights and obligation of the parties to
the contract of sale with respect to the delivery of goods sold.
February 8, 2006
Four Groups of Incoterms
LessControl
MoreControl1) “E” group
2) “F” group
3) “C” group
4) “D” group
Seller Buyer
MoreControl
LessControl
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February 8, 2006
EXW EX WORKS (…named place)
• The “E”-term is the term in which the seller’s obligation is at its minimum.
• Seller delivers when goods placed at disposal of buyer
February 8, 2006
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
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February 8, 2006
Incoterms 2000
• The “F” –terms require the seller to deliver goods for carriage as instructed by the buyer.
• FCA• FAS• FOB
February 8, 2006
FCAFREE CARRIER (named place)
• Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place.
• Term may be used irrespective of the mode of transport.
• Seller obligated to load goods on arriving vehicle if it arrives at the seller’s premises.
• Seller not obliged to unload goods from his vehicle.
February 8, 2006
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
destination: Frontier/
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
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February 8, 2006
FAS -FREE ALONGSIDE SHIP(…named port of shipment)
• Seller delivers when goods, cleared for export, are placed alongside the vessel
• Seller obliged to clear goods for export.• The buyer bears all costs and risks of loss or
damage to the goods from that moment.• Terms can be used for sea or inland waterway
transport only.
February 8, 2006
F A S F ree A longside… (nam ed p lace)
SE L LE R B U Y E R
Seller/ E xporter Prem ises
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 ischarging Port of A rrival
D elivery at nam ed p lace of
destination: Frontier/
T erm inal/Q uay
Im port D ocu m 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
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February 8, 2006
FOB – FREE ON BOARD(…named port of shipment)
• Seller delivers when goods, cleared for export, pass the ship’s rail at the named port of shipment.
• The buyer bears all costs and risks of loss or damage to the goods from that point.
• Term can be used for sea or inland waterway transport only.
• If intent is not to deliver goods across the ship’s rail, use FCA
February 8, 2006
FO B Free O n Board… (nam ed port of shipm ent)
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
destination: Frontier/
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
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February 8, 2006
Incoterms 2000
• The “C” –terms require the seller to contract for carriage at his expense – to a specified point.
• CFR
• CIF
• CPT
• CIP
February 8, 2006
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
February 8, 2006
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
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February 8, 2006
CIF – COST, INSURANCE 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.
• The seller procures marine insurance, against buyer’s risk of loss. Seller is required to obtain insurance only on minimum cover.
• Term can be used for sea or inland waterway transport.• If intent is not to deliver goods across the ship’s rail, use
CIP.
February 8, 2006
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
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February 8, 2006
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.
• Term may be used irrespective of mode of transport.
February 8, 2006
CPT Carriage Paid To …(named port of destination)
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 Costs
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February 8, 2006
CIP – CARRIAGE AND INSURANCE PAID TO (…named place of destination)
• Seller delivers the goods, cleared for export, the 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.
• Term may be used irrespective of mode of transport.
February 8, 2006
CIP Carriage and Insurance Paid To …(named port of destination)
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
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February 8, 2006
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
February 8, 2006
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.
February 8, 2006
D D U D elivered D uty U npaid… (nam ed place of destination)
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
destination: Frontier/
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
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February 8, 2006
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.
February 8, 2006
DDP Delivered Duty Paid…(named place of destination)
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
26
February 8, 2006
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.
• If delivery is to take place in the port of destination, DES or DEQ should be used.
February 8, 2006
DAF Delivered At Frontier…(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
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February 8, 2006
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.
February 8, 2006
DES Delivered exShip…(named port of destination)
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
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February 8, 2006
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.
February 8, 2006
DEQ Delivered Ex Quay…(named port of destination)
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
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February 8, 2006
Mode of Transport and Appropriate Incoterm - Any Mode of Transport
• EXW• FCA• CPT• CIP• DAF• DDU• DDP
February 8, 2006
Mode of Transport and Appropriate Incoterm – Maritime and Inland
Waterway Transport Only
• FAS• FOB• CFR• CIF• DES• DEQ
February 8, 2006
In Summary
• Buyer’s Objective: maximize control of supply chain, use FOB, FCA, or FAS
• Must name a place after the INCOTERM• INCOTERMS are negotiable!• INCOTERMS should appear on all commercial
documents• Establish a close relationship with a forwarder
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