©This material is copyrighted to GMLS and may not be distributed without the express written permission of Management Welcome to this Training Course ICC

©This material is copyrighted to GMLS and may not be distributed without the express written permission of Management

Welcome to this Training Course

ICC Rules for the use of Trade Terms or Incoterms® 2010 Rules

Presented by: Mark GoodgerGhana: October 2012

Welcome to Incoterms® 2010 Rules Lecture


International Trade is the Lifeblood of our business world


ICC Accredited Training Programme of GMLS

This Incoterms® 2010 Rules Training Course is presented by Mark

Goodger, a Fully Accredited ICC

Accredited Trainer

ICC Website:-http://www.iccwbo.org/

http://www.iccwbo.org/


OBJECTIVES OF THIS COURSE

Upon completion of this Course you will be able to further understand and have insight of:-

The ICC Role and the development of Incoterms® 2010 RulesThe application of the Incoterms® 2010 RulesThe difference between 2000 and Incoterms® 2010 RulesCorrect use and choice of the most appropriate Incoterms® 2010 Rules for the specific transactionThe respective roles & responsibilities of the Buyer & the Seller, regarding:- a) Delivery b) Obligations, c) Risks, d) CostsMaking recommendations regarding the use of Incoterms® 2010 RulesThe legal use of Incoterms® 2010 RulesThe impact of a particular Incoterms® 2010 Rules on other 3rd Party Contracts, Transport Documents, Marine Insurance and Payment instruments and institutions

©This material is copyrighted to GMLS and may not be distributed without the express written permission of Management5

Banking Requirements

Customs Duties

Stock Control

Shipping Dept

Shipping Expertise

Marine Insurance

Central Control

Import Control

Costings

Forwarding

Exports

Procurement Department

Modes of Transport

IMPORT / EXPORT QUESTIONS

Other Govt. Departments

Freight Agents


RECOMMENDATIONS WHEN USING THE FOLLOWING “Incoterms® 2010 Rules” in Text

“Incoterms® 2010 Rules by the International Chamber of Commerce (ICC)”. This is for instance when it is shown on advertising material on websites, articles etc.;The 4 symbols (modes of transport 4 blocks) which should be a full colour, no less than 4.5 cm wide. A High Resolution graphic will be provided with permission;Encourage these whenever visual presentations of the “Incoterms® 2010 Rules are required;“Incoterms® 2010 Rules ” is trademark of the International Chamber of Commerce registered in several countries;Always utilise the registered Trademark symbol with the ® next to the trademark “Incoterms” i.e. “Incoterms® 2010 Rules ”Use Incoterms® 2010 Rules as an adjective and not a noun;Always utilise “Incoterms® 2010 Rules ” with the final “s” at the end;


Incoterms® 2010 Rules : INTRODUCTION

Incoterms, or international trade terms, are key elements of international contracts of sale, since they tell the parties what to do with respect to:-

The obligations of the parties relevant to Delivery, andCarriage of goods from seller to buyer, andExport and import clearance, andExplanation of the division of costs, risks and obligations of the respective parties.


The purpose and scope of Incoterms® 2010 Rules is to provide a set of Rules for the interpretation of the most commonly used trade terms in foreign trade.

The uncertainties can be avoided or at least reduced to a considerable degree.

They can be correctly incorporated into sales contracts.

Incoterms have always been primarily intended for use where goods are sold for delivery across national borders. Now also applicable to Domestic trade.

Incoterms® 2010 Rules MEAN


Since 1936 ... to 2011

2011


Works Carrier Alongside Ship On Board Vessel Border Arrival Quay Destination Place Buyers Warehouse

Contract of SaleTHE GLOBAL SUPPLY CHAIN

The Global Supply Chain


It is important to ensure that where the parties intend to incorporate Incoterms® 2010 Rules into their contract of sale, an express reference is always made to the current version of Incoterms® 2010 Rules

Failure to refer to the current version may then result in disputes as to whether the parties intended to incorporate that version or an earlier version as a part of their contract

Merchants wishing to use Incoterms® 2010 Rules should therefore clearly specify that their contract is governed by “Incoterms® 2010 Rules”

INCORPORATION OF Incoterms® 2010 Rules INTO CONTRACTS OF SALE


Incoterms® 2010 Rules

Spell

DANGER


Incorporate correctly into Contract of SaleChoose the applicable & appropriate Incoterms® 2010 Rules, followed by the named place specified in detail.Specify Place/Port clearly / PointCheck Guidance NotesKnow the Difference between NAMED PLACE vs PLACE OF DELIVERYUnderstand Risks and Cost divisionVariants (BE CLEAR)

HOW TO USE Incoterms® 2010 Rules


Classification of the Incoterms® 2010 Rules

The 11 Incoterms® 2010 Rules are presented in two distinct classes:-

RULES FOR ANY MODE OR MODES OF TRANSPORT:-ExW - EX WORKSFCA - FREE CARRIERCPT - CARRIAGE PAID TOCIP - CARRIAGE AND INSURANCE PAID TODAT - DELIVERED AT TERMINAL (NEW)DAP - DELIVERED AT PLACE (NEW)DDP - DELIVERED DUTY PAID

RULES FOR SEA AND INLAND WATERWAY TRANSPORT:-FAS - FREE ALONGSIDE SHIPFOB - FREE ON BOARDCFR - COST AND FREIGHTCIF - COST INSURANCE AND FREIGHT


Main features of the New Incoterms® 2010 Rules

2 NEW Incoterms® 2010 Rules – DAT & DAP – these have replaced the Incoterms 2000 Rules DAF, DES, DEQ & DDU;Classification of the 11 Incoterms® 2010 RulesRules for domestic and international tradeGuidance NotesElectronic communicationInsurance coverSecurity-related clearances and information required for such clearances – Global Supply Chain SecurityTerminal handling chargesString salesVariants of Incoterms Rules


2 NEW Incoterms® 2010 Rules – DAT & DAP

The number of Incoterms Rules has been reduced from 13 to 11. This has been achieved by substituting two new Rules that may be used irrespective of the agreed mode of transport – DAT, Delivered at Terminal, and DAP, Delivered at Place – for the Incoterms 2000 Rules DAF,DES, DEQ and DDU.

Under both new Rules, delivery occurs at a named destination: in DAT, at the buyer’s disposal unloaded from the arriving vehicle (as under the former DEQ rule); in DAP, likewise at the buyer’s disposal, but ready for unloading (as under the former DAF, DES and DDU Rules).

The named terminal in DAT may well be in a port, and DAT can therefore safely be used in cases where the Incoterms 2000 rule DEQ once was. Likewise, the arriving “vehicle” under DAP may well be a ship and the named place of destination may well be a port: consequently, DAP can safely be used in cases where the Incoterms 2000 rule DES once was. These new Rules, like their predecessors, are “delivered”, with the seller bearing all the costs (other than those related to import clearance, where applicable) and risks involved in bringing the goods to the named place of destination.


Specify Party obliged to make insurance and carriage arrangementsSay nothing about price and methodDon’t deal with Transfer of OwnershipBe aware of Mandatory Local LawDon’t deal with Breach of Contract

WHAT DO THEY DO AND WHAT DON’T THEY DO IN THE CONTRACT OF SALE


There is a relation between Incoterms® 2010 Rules and

Contractsof Carriage

Contractsof Insurance

Contractsof Payment

Contract of Sale incorporating Incoterms


19

EXPORT CLEARANCE

IMPORT CLEARANCE

COUNTRY OF EXPORT COUNTRY OF IMPORT

ON-CARRIAGEPRE-CLEARANCE MAIN CARRIAGEBUYERSELLER

RISK COSTAny Mode

FCA

ExW

CPT

CIP+ INSURANCE

THE SELLER COST/RISK IS MAXIMISED BECAUSE HE MUST MAKE THE GOODS AVAILABLE UPON ARRIVAL AT THE AGREED DESTINATION


Incoterms® 2010 Rules OVERVIEW AT A GLANCE RULES FOR ANY MODE OF TRANSPORT

•Ex Works - represents Min obligation for Seller

•Named place must be included i.e. (ExW, ABC Stores, 34 Pongola Road, Durban)

ExW

•Free Carrier means the Seller delivers the goods to the carrier or another person nominated by the Buyer

•Named place must be included i.e. (FCA, Globewide Forwarders, 106 Point road, Durban)

FCA

•Carriage paid to - means that the Seller delivers the goods to the carrier or another person nominated by the Seller at an agreed place

•Named place must be included i.e. (CPT 1 Amherst Street, E40-281, Cambridge, MA 02142)

CPT

•Named place must be included i.e. (CIP 1 Amherst Street, E40-281, Cambridge, MA 02142)

•Carriage & Insurance Paid to – means that the Seller delivers the goods to the carrier or another person nominated by the Seller at an agreed place and that the Seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

CIP

•Replaces the old DAF, DES, DEQ & DDU Terms

•Named place must be included i.e. (DAT, Duxburry Container Terminal, Felixstowe)

•Delivered at Terminal means that the Seller delivers when the goods, once loaded from the arriving means of transport, are placed at the disposal of the Buyer at the named terminal at the named port or place of destination.

DAT

•Replaces the old DAF, DES, DEQ & DDU Terms

•Named place must be included i.e. (DAP. , 1 Amherst Street, E40-281, Cambridge, MA 02142)

•Delivered at Place means that the Seller delivers when the goods are placed at the disposal of the Buyer on the arriving means of transport ready for unloading at the named place of destination.

DAP

•Named place must be included i.e. (DDP, , 1 Amherst Street, E40-281, Cambridge, MA 02142)

•Delivered Duty Paid means that the Seller delivers the goods when the goods are placed at the disposal of the Buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.

DDP

BUYERSELLER

Delivery

Delivery

Delivery

Delivery

Delivery

Delivery

Delivery


Incoterms® 2010 Rules OVERVIEW AT A GLANCE RULES FOR SEA & INLAND WATERWAY TRANSPORT

•Free Alongside Ship means that the Seller delivers when the goods are placed alongside the vessel nominated by the Buyer at the named port of shipment

•Named place must be included i.e. (FAS, Berth 106, Durban Harbour)

FAS•Free on Board means that the Seller delivers the goods on board the vessel nominated by the Buyer at the named port of shipment or procures the goods already so delivered.

•Named place must be included i.e. (FOB, “Maeve”, Durban Port)

FOB

•Cost and Freight means that the Seller delivers the goods on board the vessel or procures the goods already so delivered

•Named place must be included i.e. (CFR, Hamburg Port)

CFR

•Cost, Insurance and Freight means that the Seller delivers the goods on board the vessel or procures the goods already so delivered.

•Named place must be included i.e. (CIF, Hamburg Port)

CIF

BUYERSELLER

Delivery

Delivery

Delivery

Delivery


It is particularly important to note that the term “delivery” is used in two different senses in Incoterms® 2010 Rules :-

Firstly, to determine when the seller has fulfilled his delivery obligation

Secondly, the term “delivery” is also used in the context of the buyer’s obligation to take or accept delivery of the goods

“Delivery” means first that the buyer “accepts” the nature of the terms

This obligation is important so as to avoid unnecessary charges for storage of the goods until they have been incurred by the buyer

Delivery has multiple meanings in trade law & practice, but in Incoterms® 2010 Rules, it is used to indicate where the risk of loss of or damage to the goods passes from the seller to the buyer

Default point

DELIVERY


Guidance Notes

Before each Incoterms® 2010 Rules term you will find a Guidance Note (View the attached file by clicking on the Light Bulb icon below in the E-Learning CD)Guidance Notes explain the fundamentals of each Incoterms ® 2010 Rules TermThe Guidance Notes are not part of the actual Incoterms® 2010 Rules They are intended to help the user accurately and efficiently steer towards the appropriate Incoterms rule for a particular transaction.

EXW

FOB

DDPCI

PDAT


The Mirror Concept in Incoterms® 2010 Rules

As in the Incoterms® 2010 Rules , the Seller’s and Buyer’s obligations are presented in mirror fashion, reflecting under column A the Seller’s obligations and under column B the Buyer’s obligations. These obligations can be carried out personally by the Seller or the Buyer or sometimes, subject to terms in the contract or the applicable law, through intermediaries such as Carriers, Freight Forwarders or other persons nominated by the Seller or the Buyer for a specific purpose.

The text of the Incoterms® 2010 Rules is meant to be self-explanatory. However, in order to assist users, the text sets out guidance as to the sense in which selected terms are used throughout the document.


A1

•General obligations of Seller

A2

•Licenses, authorisations security clearances and other formalities

A3

•Contracts of carriage and insurance

A4

•Delivery

A5

•Transfer of Risk

A6

•Allocation of costs

A7

•Notices to the Buyer

A8

•Delivery document

A9

•Checking-packaging-marking

A10

•Assistance with information and related costs

THE BUYER MUST…THE SELLER MUST…

B1

•General obligations of Buyer

B2

•Licenses, authorisations security clearances and other formalities

B3

•Contracts of carriage and insurance

B4

•Taking delivery

B5

•Transfer of Risk

B6

•Allocation of costs

B7

•Notices to the Seller

B8

•Proof of delivery

B9

•Checking-packaging-marking

B10

•Assistance with information and related costs

SELLER & BUYER OBLIGATIONS


26

DDP

A THE SELLER'S OBLIGATIONS B THE BUYER'S OBLIGATIONS

A1General obligations of the seller

The seller must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of

conformity that may be required by the contract.

Any document referred to in A1-A10 may be an equivalent electronic record or procedure if agreed between the parties or customary.

B1General obligations of the buyer

The buyer must pay the price of the goods as provided in the contract of sale.

Any document referred to in B1-B10 may be an equivalent electronic record or procedure if agreed between the parties or customary.

A2Licences, authorizations, security clearances and other formalities

Where applicable, the seller must obtain, at its own risk and expense, any export and import

licence and other official authorization and carry out all customs formalities necessary for the

export of the goods, for their transport through any country and for their import.

B2Licences, authorizations, security clearances and other formalities

Where applicable, the buyer must provide assistance to the seller, at the seller’s request,

risk and expense, in obtaining any import licence or other official authorization for the import of the

goods.


Risks

Transit Risk:-

- Theft- Damage- Other losses due to fire, water, etc

Passing of Risk:-

- At Origin- At Destination


Responsibilities

Origin Costs:-

- Manufacture & Supply- Packing

- Compliance / Documentation

- Transportation- Port Handling- Insurance

Main Carriage Costs:-

- Freight- Loading / Discharging

Destination Costs:-

- Port Handling- Clearing- Unpacking & Transport- Insurance- Payment


CONCLUSION (acknowledgement)

The ICC has been writing and publishing the Incoterms Rules for more than 70 years, providing importers, exporters, lawyers, transporters and insurers and students in the International Trade arena with the Rules and guidance reflecting the latest developments in the trading environment.The ICC (International Chamber of Commerce), the World Business Organisation based in Paris, is the global leader in the development of standards, Rules and reference guides for International Trade.

The ICC are – Merchants of Trade and Peace !!


For further information on this and other Training Courses offered by GMLS, please contact us on:-

Website: www.gmls.co.za Email: [email protected]

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Tel: +27 44 695 2251 or 695 2187

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