INCOTERMS 2000. Incoterms – what are they and what can they do for you Incoterms is an abbreviation of International commercial terms It is a vital term.

INCOTERMS 2000INCOTERMS 2000

Incoterms – what are they and what can they do for you

• Incoterms is an abbreviation of International commercial terms

• It is a vital term of the contract of sale and not of the contract of carriage

• It guides seller and buyers with regard to:- carriage of goods from seller to buyer- export and import clearance

and also the division of costs and risk between the parties

Incoterms

• Use generally recognized key words

• Agree on the most common understanding of those key words

• Avoid misunderstandings in their use

Incoterms

• Problems still occur because:

- commercial practice is inconsistent

- variations of the key word may not be appropriate

- the Incoterm is not sufficiently precise

- the parties inadvertently choose the wrong term

Incoterms – what are they and what they cannot do for you

• Incoterms do not deal with:

- transfer of property rights in the goods

- relief from obligations and exemptions from liability in case of unexpected or unforeseen events

Incoterms – what are they and what they cannot do for you

• Incoterms also do not deal with:

- consequences of various breeches of contract, except those relating to the passing of risk and costs when the

buyer is in breach of his obligation to accept the goods or to nominate the carrier under an F-term

Incoterms –referencing in a contract of sale

• Parties are strongly advised to

- include in the contract of sale in conjunction with the trade term the words “Incoterms 2000” and …

• check that standard contract contains such a reference or superimpose

and now let’s discuss

Incoterms 2000

The seller’s minimum obligationonly to make goods available for the buyer at the seller’s premises

(EXW)

EXWEXW Group E: departureGroup E: departure

Ex Works (…named place)

AA Seller’s

primary duty

• Place the goods at the disposal of the buyer at the named place

Required document’s

• Commercial invoice

• Buyer’s receipt

Optional documents

• Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Take delivery of the goods when it has been paced at his disposal

Critical Points:• Carriage to be arranged by the buyer

• Risk and Cost transfer from the seller to the buyer when the goods are at the disposal of the buyer

The sellers’ extended obligation to hand over goods for carriage either to a carrier nominated by the buyer (FCA, FAS, FOB) or, (why?) to a carrier chosen and

paid for by the seller (CFR, CPT)

together with insurance against risks in transit (CIF, CIP)

CFR versus CIF?

FCAFCA Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree Carrier (…named place)

A Seller’s primary duty

• Deliver the goods at the named point and also load goods on buyer’s collecting vehicle

(changed from 1990)

Required document’s

• Commercial invoice

• Usual document evidencing delivery of goods to the carrier

• Export license if necessary

Optional documents

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Nominate carrier

• Contract for carriage, refer clause (A3a) – ICC Guide to Incoterms 2000

• Buyer has to unload the vehicle (changed from 1990)

FCAFCA Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree Carrier (…named place)

A Seller’s primary duty

• Provide evidence of delivery of goods to the carrier

• Arrange export clearance

FCAFCA Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree Carrier (…named place)

CONTINUED…

• Risk and Cost transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place

• Carriage to be arranged by the buyer or by the seller on the buyer’s behalf

Critical Points:

FASFAS Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree Alongside Ship (…named port of shipment)

A Seller’s primary duty

• Deliver the goods alongside the ship

• Provide an alongside receipt

• Arrange export clearance (changed from 1990)

Required document’s

• Commercial invoice

• Customary clean receipt

• Export license if necessary

Optional documents

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Nominate carrier

• Contract for carriage

FASFAS Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree Alongside Ship (…named port of shipment)

CONTINUED…

• Risk and Cost transfer from the seller to the buyer when the goods have been placed alongside the ship

• Carriage to be arranged by the buyer

Critical Points:

FOBFOB Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree on Board (…named port of shipment)

Only to be used when:

• when maritime transport will take place

• when goods are to be lifted across a ship’s rail

• tendered to the ship in hoses for liquid cargo

• filled form silos when the cargo is to be carried loose in bulk

• If not above, instead use FCA, thereby indicating the actual place where goods are handed over for carriage

FOBFOB Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree on Board (…named port of shipment)

A Seller’s primary duty

• Deliver the goods on board

• Provide a clean on board receipt

• Pay loading costs not included in the freight

•Arrange export clearance

Required document’s

• Commercial invoice

• Customary clean receipt

• Export license if necessary

Optional documents

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Nominate carrier

• Contract for carriage

• Pay unloading costs

FOBFOB Group F: main carriage not paid by sellerGroup F: main carriage not paid by seller

FFree on Board (…named port of shipment)

CONTINUED…

• Risk and Cost transfer from the seller to the buyer when the goods pass the ship’s rail

•Carriage to be arranged by the buyer

Critical Points:

CFRCFR Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCost and Freight (…named port of destination)

A Seller’s primary duty

• Contract for carriage

•Deliver the goods on board

• Provide a clean transport document (Bill of Lading / Sea Waybill)

•Arrange export clearance

• Pay unloading costs if for his account under the contract of carriage

Required document’s

• Commercial invoice

• Transport document

• Export license if necessary

Optional documents

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Accept delivery of the goods upon shipment

• Receive the goods from the carrier

• Pay such costs as are not for the seller’s account under the contract of carriage

CFRCFR Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCost and Freight (…named port of destination)

• Carriage to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods pass the ship’s rail

• Cost transfer at port of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

Critical Points:

CIFCIF Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCost, Insurance and Freight (…named port of destination)

A Seller’s primary duty• Contract for carriage and insurance

•Deliver the goods on board

• Provide a clean transport document (Bill of Lading / Sea Waybill) and a cargo insurance policy or certificate

Required document’s

• Commercial invoice

• Transport document

• Export license if necessary

• Insurance policy (Certificate)

Optional documents

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Accept delivery of the goods upon shipment

• Receive the goods from the carrier

• Pay such costs as are not for the seller’s account under the contract of carriage

CIFCIF Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCost, insurance and freight (…named port of destination)

A Seller’s primary duty• Arrange export clearance

• Pay loading costs

• Pay unloading costs if for his account under the contract of carriage

CONTINUED…

CIFCIF Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCost Insurance and Freight (…named port of destination)

• Carriage and Insurance to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods pass the ship’s rail

• Cost transfer at port of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

Critical Points:

CPTCPT Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCarriage paid to (…named place of destination)

A Seller’s primary duty

• Contract for carriage

•Deliver the goods to the (first) carrier

• Provide a clean transport document (Bill of Lading / Sea Waybill)

Required document’s

• Commercial invoice

• Transport document

• Export license if necessary

Optional documents

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Accept delivery of the goods when they have been delivered to the carrier

• Receive the goods from the carrier

• Pay such costs as are not for the seller’s account under the contract of carriage

CPTCPT Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCarriage paid to (…named place of destination)

A Seller’s primary duty

• Pay unloading costs if for his account under the contract of carriage

• Pay loading costs

•Arrange export clearance

CONTINUED…

CPTCPT Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCarriage paid to (…named place of destination)

• Carriage to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods have been delivered to the carrier

•Cost transfer at port of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

Critical Points:

CIPCIP Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCarriage and Insurance paid to (…named place of destination)

A Seller’s primary duty

• Contract for the carriage and Insurance

•Deliver the goods to the (first) carrier

• Provide a clean transport document (Bill of Lading / Sea Waybill)

Required document’s

• Commercial invoice

• Transport document

• Export license if necessary

• Insurance Policy (Certificate)

Optional documents

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Accept delivery of the goods when they have been delivered to the carrier

• Receive the goods from the carrier

• Pay such costs as are not for the seller’s account under the contract of carriage

CIPCIP Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCarriage and Insurance paid to (…named place of destination)

A Seller’s primary duty

• Pay unloading costs if for his account under the contract of carriage

• Pay loading costs

•Arrange export clearance

CONTINUED…

CIPCIP Group C: main carriage paid by sellerGroup C: main carriage paid by sellerCarriage and Insurance paid to (…named place of destination)

• Carriage and Insurance to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods have been delivered to the carrier

• Cost transfer at place of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

Critical Points:

The seller’s maximum obligation to deliver the goods at destination

(DAF, DES, DEQ, DDU or DDP)

DAFDAF Group D: arrivalGroup D: arrivalDelivered at Frontier (…named place)

A Seller’s primary duty•Deliver the goods at the named frontier

• Provide a document to enable the buyer to take delivery at the frontier or assist him to obtain a through transport document

•Arrange export clearance

Required document’s

• Commercial invoice

• Transport document or warehouse warrant

Optional documents

• Through transport document

•Other documents needed for export or transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Take delivery of the goods at the named frontier or assume responsibility for on-carriage

• Arrange import clearance

DAFDAF Group D: arrivalGroup D: arrivalDelivered at Frontier (…named place)

• Carriage to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods have been delivered at the frontier

• Cost transfer from the seller to the buyer when the goods have been delivered at the frontier

Critical Points:

DESDES Group D: arrivalGroup D: arrivalDelivered ex ship (…named port of destination)

A Seller’s primary duty•Deliver the goods on board the ship at the Port of destination

• Provide a document to enable the buyer to take delivery from the ship (Bill of Lading or delivery order)

•Arrange export clearance

Required document’s

• Commercial invoice

• Bill of Lading or delivery order

Optional documents

•Other documents needed for transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Take delivery of the goods from the ship at the Port of destination

•Arrange import clearance

DESDES Group D: arrivalGroup D: arrivalDelivered ex ship (…named port of destination)

• Carriage to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship

• Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship

Critical Points:

DEQDEQ Group D: arrivalGroup D: arrivalDelivered ex Quay (…named port of destination)

A Seller’s primary duty

•Deliver the goods on the quay at the Port of destination

• Provide a document to enable the buyer to take delivery from the quay (Bill of Lading or delivery order)

•Arrange export clearance

Required document’s

• Commercial invoice

• Bill of Lading or delivery order

Optional documents

•Other documents needed for transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Take delivery of the goods from the ship at the Port of destination

•Arrange import clearance (changed from 1990)

DEQDEQ Group D: arrivalGroup D: arrivalDelivered ex Quay (…named port of destination)

• Carriage to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship

• Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship

Critical Points:

DDUDDU Group D: arrivalGroup D: arrivalDelivered duty unpaid (…named place of destination)

A Seller’s primary duty

•Deliver the goods at the named place of destination

• Provide a document to enable the buyer to take delivery

•Arrange export clearance

Required document’s

• Commercial invoice

•Document needed to take delivery

Optional documents

•Other documents needed for transit of the goods through any country or for import clearance

BB Buyer’s primary duty

• Take delivery of the goods from the named place of destination

•Arrange import clearance

DDUDDU Group D: arrivalGroup D: arrivalDelivered duty unpaid (…named place of destination)

• Carriage to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer

•Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer

Critical Points:

DDPDDP Group D: arrivalGroup D: arrivalDelivered duty paid (…named place of destination)

A Seller’s primary duty

•Deliver the goods at the named place of destination

• Provide a document to enable the buyer to take delivery

•Arrange export clearance

Required document’s

• Commercial invoice

•Document needed to take delivery

• Import license, if necessary

BB Buyer’s primary duty

• Take delivery of the goods from the named place of destination

DDPDDP Group D: arrivalGroup D: arrivalDelivered duty paid (…named place of destination)

• Carriage to be arranged by the Seller

• Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer

•Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer

Critical Points:

Now which one is appropriate?• Commercial practice and the type of goods will dictate

whether- the seller should refrain from undertaking additional obligations- the seller is prepared to do more than make the goods available to the buyer at the seller’s premises- the buyer’s bargaining position allows him to require the seller to undertake additional obligations- the seller is able to undertake additional obligations , and in particular, to quote a more competitive price by extending his obligations

Now which one is appropriate?• Commercial practice and the type of goods will also dictate

whether- it is necessary to use the maritime terms FAS, FOB, CFR or CIF when the goods are intended to be resold before they reach their destination - But …. in the case of manufactured goods (containerized), it is more appropriate to use FCA, CPT or CIF and not FAS, FOB, CFR or CIF- Manufactured goods will rarely be picked out of the ship by the buyer/quay(DES, DEQ) but rather delivered in cargo terminal, therefore DDU, DDP will be more appropriate

Thank you