February 8, 2006 INCOTERMS 2000 First published by the ICC in 1936 ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade

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

3

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

5

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


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

8

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


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


10

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




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


12

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)


• 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

15

February 8, 2006

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


• 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

17

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




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks Buyer’s Risks

Seller’s Cost Buyer’s Costs

19

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




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks Buyer’s Risks

Seller’s Cost Buyer’s Cost

21

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




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


24

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




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


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




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


28

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




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


30

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




Quay

Loading Port of

Shipment

Onboard Ship Rail





Terminal/Quay



Seller’s Risks

Buyer’s Risks


32

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

35