Anda di halaman 1dari 57

INTERNATIONAL

COMMERCIAL TERMS
2010

Areej Aftab Siddiqui

International Commercial Terms


History

Initially created in 1936 by the International Chamber of Commerce (ICC)


and have been periodically revised (Incoterms 2010 is the 8 th revision)

Incoterms are generally good for approximately 10 years ~ not a magic


number, but historically about accurate

Incoterms reflect world-wide trade practices, as practices change,


Incoterms are revised

Incoterms 2010 were written by the ICC, represented by 8 individuals


from various countries/areas of the world
Met 11 times in person
Received over 2000 suggestions in first request
Refined suggestions over 4 proposals
Controlling source document is written in British English and will be
translated into 35+ languages over the next year.

What are Incoterms 2010?

Eleven (11) Incoterms 2010 (used to be 13 terms)


Four (4) terms were deleted and two (2) new terms were
created
Incoterms 2010 will begin January 1, 2011
Available worldwide through 100 International Chamber of
Commerce National Committees
The terms arent law
Country neutral they dont favor one country over
another
Self-contained all information that determines
responsibility and risk are in one place

Who Uses Them?


Buyers

and Sellers, directly

And

indirectly
Banks
Insurers
Carriers/Forwarding Agents

Use by Banks
Most

credits will state an Incoterm

This

enable banks to check, to an extent, that:


The documents called for in the credit are
consistent with the term used
The documents presented are consistent with the
term used
Only few credits state that the term used is actually
an Incoterm.
To avoid ambiguity and avail the benefit of this
revision, it is recommended to state the Incoterms
specifically stating Incoterms 2010

Use by Insurers
If

there is loss or damage to a cargo,


insurers will be at pains to establish
exactly where it has occurred and
therefore whether the buyers or sellers
were responsible
Incoterms determine whether it is the
buyer or seller that is at risk

Use by Carriers/Forwarding
agents
To determine

which party (buyer/seller)


will be responsible for payment of frieght
charges
To determine which party (buyer/seller)
will be responsible for the various
activities in transportation

Definitions..

Key Definitions

What is Delivery?

As defined in Incoterms 2010, it is used to indicate


where the risk of loss of or damage to the goods passes
from the seller to the buyer.

It is not always:
When the goods arrive in your customers hands or
When the goods leave your dock
Defined the same in all countries

You must know your contract and your Incoterm


Note: A Purchase Order and a matching Acknowledgement will
constitute a contract if there isnt a separate stand-alone
contract related to the transaction.

Transportation Definitions

Pre-carriage: inland transportation on the sellers side


Domestic: from the place where the shipment starts to any
subsequent transportation carriage
International: from the place where the shipment starts to the
departure point on the sellers side

Main Carriage:
Domestic: subsequent transportation beyond pre-carriage
International: transportation from the point of departure on the
sellers side to the arrival pint on the buyers side

On-carriage:
Domestic: subsequent transportation beyond main carriage
International: transportation from the arrival pint on the buyers side

Transportation Definitions

Door to Door
Contract of carriage that includes pre-carriage, main-carriage
and on-carriage by the same carrier

Door to (Air) Port:


Contract of carriage including pre-carriage and main-carriage to
airport or ocean port or truck terminal port or rail port

(Air) Port to (Air) Port:


Contract of carriage for main carriage only

(Air) Port to Door:


Contract of carriage including main carriage and on-carriage

Type of Transportation?
Company A

Company

Door to Door one contract for all


carriage (pre-, main, and on-carriage)

Type of Transportation?
Company A

Door to Port contract for pre-carriage


and main-carriage

Company B responsible for arranging


pick up at Arrival Airport

A Few More Definitions..

Omni-modal: Used with terms that use all modes of


transportation (truck, airplane, vessel, train)

Marine-restricted: Terms that only apply to carriage by


vessel (sea)

Shipment Contract: sales/purchase contract where the


sellers responsibility ends when goods are handed over
to the first carrier

Arrival Contract: sales/purchase contract where sellers


responsibility ends when goods have arrived at agreed
place

Packaging Definitions

The packaging of the goods to comply with any


requirements under the contract of sale.

The packaging of goods so that they are fit for


transportation.

The stowage of the packaged goods within a


container or other means of transport.
Only Definition 1 & 2 are addressed in Incoterms 2010.
Definition 3 must be addressed within the contract
between the parties.

Key questions to ask in structuring


a transaction

Who furnishes the goods?


Who packages the goods in a manner suitable for shipment (export)?
Who moves the goods from the sellers factory to a port, airport, or
border crossing in the sellers country?
Who arranges for export clearance in the sellers country (if
applicable)?
Who arranges for main carriage (international transportation) from the
departure port to the arrival port?
Who pays for main carriage?
Who insures the shipment?
Who arranges for import clearance?
Who pays import duties?
Who pays for on-carriage from the arrival port to the delivery
destination?
Who arranges and pays for country-specific documentation (e.g.,
consular invoices, inspection reports, licenses)?

What do Incoterms 2010 Do?

Divides up tasks, responsibilities, costs and risks to deliver


goods from seller to buyer
If used correctly, no duplication of effort between seller
& buyer
Acts as signposts for who needs to have additional
contracts (i.e., with vessel steamship line, inland
trucking company, etc.) to complete transaction
If something goes wrong, clearly defines
responsibilities based on where the goods were in the
transportation chain of delivery
Address String sales
Shipments where ownership changes in transit

Contd.
Address

Cargo Security concerns


Defines mode of transportation by their use
4 Terms are for Marine-Restricted for sea & inland
waterway transport only
7 Terms are Omni-modal for use with all modes of
transportation
Increasingly considered replacement for Uniform
Commercial Code (UCC) shipment/delivery terms.

What Incoterms 2010 DO NOT


Do
Automatically Apply
Determine

When Ownership Changes

When delivery occurs or when payment


happens can impact when ownership changes
Must be addressed specifically in contract
Under US Law, it is when the product is delivered
If jurisdiction is under another sovereign nation law,
you need to address per that country regulation
If contract is subject to the United Nations
Convention on Contracts for the International Sale
of Goods (CSIG) the law does not specify if it is not
addressed specifically within the contract

What Incoterms 2010 DO NOT


Do

Identify when Revenue is Recognized


Identify if a Breach of Contract occurs, when it happened
Does not determine remedies for breach of contract

Provide relief from obligations/exemptions from liability in


unexpected or unforeseeable situations

Address Payment issues


Tells you that the buyer must pay, but not when or where

Contd.
Address

more than one contract

Drop Shipments are TWO Contracts


1) between the seller and their supplier and
2) between the seller and the buyer

Incoterms 2010 could be the same or


different in each contract
Specifically

task a party with container


stowage obligations

Incoterms
2000

vs.

EXW Ex Works

FCA Free Carrier


FAS Free Alongside Ship
FOB Free On Board

CFR Cost and Freight


CIF Cost, Insurance & Freight
CPT Carriage Paid To
CIP Carriage & Insurance Paid To

DEQ Delivered Ex Quay


DES Delivered Ex Ship
DAF Delivered at Frontier
DDU Delivered Duty Unpaid
DDP Delivered Duty Paid
Marine Restricted
Omni-Modal

2010

EXW Ex Works

FCA Free Carrier


FAS Free Alongside Ship
FOB Free On Board

CFR Cost and Freight


CIF Cost, Insurance & Freight
CPT Carriage Paid To
CIP Carriage & Insurance Paid To

DAT Delivered At Terminal


DAP Delivered At Place
DDP Delivered Duty Paid

Group Term Definitions


F Terms
C Terms
D Terms

F-Group Terms
Are

considered to be Shipment Contracts


Are considered Seller Friendly
Seller
Handles Export Clearance
Handles Pre-carriage
Named Place on Sellers
Side

Buyer
Contracts for Main Carriage
In charge of Carrier (and
usually forwarder) selection
Control over Freight Costs
Control of Documentation

C-Group Terms

Are considered to be Shipment Contracts


Are considered Buye Friendly

Seller
Contracts for Main Carriage
In charge of carrier (and
usually forwarder) selection
Handles pre-carriage
Has control over freight
costs
In control of documentation
Passes risk of loss
(delivers) to Buyer prior
main carriage
Handles export clearance

Buyer
Named Place is on Buyers
side
Has risk of loss while goods
are in transit with carrier
selected and paid for by
seller
Must rely heavily on Seller
for data elements required
for ocean shipments such
as Importers General
manifest
If informed, should not
consider C terms due to
downside described

D-Group Terms
Are

considered to be Arrival Contracts


Seller

Contracts for Main Carriage


In charge of carrier (and
usually forwarder) selection
Handles pre-carriage
Has control over freight costs
In control of documentation
Passes risk of loss (delivers)
to Buyer at freight arrival
point
Handles export clearance
Seller may have revenue
recognition issues since
delivery occurs on arrival
side, meaning revenue is
recognized only upon arrival

Buyer
Named Place on Buyers
side
Must rely heavily on Seller
for data elements required
for ocean shipments such
as Importers General
manifest
Undertakes less risk than in
C terms
If inexperienced, or does
not have good relationship
with carriers, is served will
by D terms

Omni-Modal Incoterms
2010

Ex Works (EXW) + (Named Place)


Named Place is generally Sellers Location (or where product initially ships from)

Delivery Seller delivers goods when placed at buyers disposal at the name
place of delivery

Goods are packaged


Goods are NOT LOADED on the collecting vehicle

Seller Risks Minimum obligation for seller; once packaged there is a loss of
control over transportation movement, where package is finally received, how
export or import documentation is presented to relevant governments
Buyer Risks Buyer bears all costs and risks involved in taking the goods
from the named place
Carriage: Buyer responsibility to arrange for pre-carriage, main carriage, oncarriage
Insurance: Neither party required to insure goods
Export/Import Clearance: Buyer must handle all requirements, pay all
associated duties and fees

Note: Should NOT be used when the buyer cannot carry out
export requirements directly or indirectly

Free Carrier (FCA) + (Named Place)


Named

Place is generally:

Sellers Place of Business

Seller responsible for having goods available when promised,


packaged to the extent known or agree, loaded onto collecting
vehicle
Buyer responsible for pre-carriage, main carriage, on-carriage

Another Location on Sellers side (i.e., International


Airport, Freight Forwarder Warehouse for
consolidation, another location agreed by Seller and
Buyer)

Seller responsible for having goods available when promised,


packaged to the extent known or agree, loaded onto collecting
vehicle, pre-carriage
Buyer responsible for unloading pre-carriage delivering
vehicle, main carriage, on-carriage

FCA + (Named Place)

Contract of Carriage: Buyer is responsible to make a


contract of Carriage, however if requested or the buyer
does not give instruction in due time, the seller may
contract for carriage on usual terms at the buyers risk
and expense.
Risks: passes to buyer at point of delivery
Insurance: Neither party required to insure goods
Export Clearance: Handled by Seller
Import Clearance: Handled by Buyer responsible for
the customs formalities and any duties, fees, other
charges due upon importation.

This is the most versatile of the F terms.

FCA
Free Carrier(named place)
SELLER

Seller/
Export
Exporter Documents
Premises Formalities

Delivered
at named
place of:
Frontier/
Terminal/
Quay

Loading
Port of
Shipment

Onboard
Ship
Rail
Plane
Ships
Ships
Rail
Rail

BUYER

Discharging
Delivery at
Import
Port of
named place of Documents
Arrival
destination:
Formalities
Frontier/
Terminal/Quay

Buyer/
Importer
Premises

Sellers Risks

Buyers
Risks

Sellers Cost

Buyers Cost

Carriage Paid To (CPT) +


Named Place (on Buyers Side)

Delivery: Seller delivers goods to a carrier or another


person nominated by the seller, at an agreed place, for
transportation to the named destination on the Buyer's side,
appropriately packaged
Carriage: Seller chooses and pays cost of carriage to bring
the goods to the named destination (the final location, not
the destination port)
Risks: Seller bears all risks and costs incurred until the
goods are delivered to the first carrier on the Sellers side
Export Clearance: handled by Seller
Import clearance: Buyer responsibility for paperwork and
all costs
Insurance: Neither party required

Note: Risk of Loss passes on Sellers side to Buyer BUT Cost is


Sellers responsibility to named location on Buyers side

Carriage and Insurance Paid To (CIP)


+
Delivery: Seller delivers goods to a carrier or another
Named
Place
(onseller,
Buyers
Side)
person
nominated
by the
at an agreed
place, for

transportation to the named destination on the Buyer's side,


appropriately packaged
Carriage: Seller pays cost of carriage to bring the goods to
the named destination (the final location, not the destination
port)
Risks: Seller bears all risks and costs incurred until the
goods are delivered to the first carrier on the Sellers side
Export Clearance: handled by Seller
Import clearance: Buyer responsibility for paperwork and
all costs
Insurance: Seller required to obtain minimum coverage

Note: Risk of Loss passes on Sellers side to Buyer BUT Cost is


Sellers responsibility to named location on Buyers side

Delivered at Terminal DAT +


Named Place (Buyers side)

Replaced DEQ Term


Delivery: Seller delivers goods to named destination
terminal on Buyers side, packaged appropriately and
unloaded
Carriage:
Seller responsible for pre-carriage and main carriage
Buyer responsible for on-carriage

Risks: Transfer from Seller to Buyer once goods are


unloaded on buyers side at terminal
Export Clearance: Seller Responsibility
Import Clearance: Buyer Responsibility
documentation and fees associated
Insurance: Neither party required to insure

DAT
Delivered at Terminal +Named Place
(Buyers Side)

Delivered at Place (DAP) +


Named Place (Buyers Side)

Previously contained elements of DDU, DAF, DES terms


Delivery: Seller delivers the goods to the buyer at the
named place on the Buyers side, appropriately packaged,
but not unloaded
Carriage: Seller handles all carriage to named place on
buyers side
Risks: Transfer from Seller to Buyer once goods are
delivered to the named place on buyers side
Export Clearance: Seller handles
Import Clearance: Buyer handles and pays associated
costs
Insurance: neither party required to insure

DAP
Delivered at Place + Named Place
(Buyers Side)

Delivered Duty Paid (DDP) +


Named Place (Buyers Side)
Delivery:

Seller delivers goods to the Buyer,


cleared for import on the arrival transportation, but
not unloaded at the final destination
Carriage: Seller handles all carriage to named
place on Buyers side
Risks: Transfer from Seller to Buyer once goods
are delivered to the named place on the Buyers side
Export Clearance: Seller Handles
Import Clearance: Seller Handles & pays for any
charges associated
Insurance: Neither party required to provide

DDP Caveats
Should

not be used if SELLER CANNOT


clear goods in importing country

NOT

recommended if Buyer wants


control of import documents and
declarations to Customs

DDP

DOES NOT MEAN Buyer is


absolved of all Customs Regulations &
Responsibilities

Water Transport Only


Incoterms 2010

Free Alongside Ship (FAS) + Named Place


(alongside vessel at port on Sellers side)
Delivery:

Seller delivers goods to Buyer


alongside the vessel chosen by Buyer at the named
port of shipment, packed appropriately
Carriage:
Seller handles pre-carriage
Buyer handles main carriage and on-carriage

Risks:

Pass from Seller to Buyer once goods place


alongside the vessel on Sellers side
Insurance: Neither party required to insure goods
Export Clearance: Seller Handles
Import Clearance: Buyer is responsible for
requirement and fees associated

FAS
Free Alongside(named place)
SELLER

Seller/
Export
Exporter Documents
Premises Formalities

Delivered
at named
place of:
Frontier/
Terminal/
Quay

Loading
Port of
Shipment

Onboard
Ship
Rail
Plane
Ships
Ships
Rail
Rail

BUYER

Discharging
Delivery at
Import
Port of
named place of Documents
Arrival
destination:
Formalities
Frontier/
Terminal/Quay

Buyer/
Importer
Premises

Sellers Risks

Buyers
Risks

Sellers Cost

Buyers Cost

Free On Board (FOB) + Named Place


(loaded on vessel at a port on the Sellers side)

Delivery: Seller delivers goods to Buyer on board the vessel


chosen by the Buyer at the named port of shipment, packaged for
shipment
Carriage:
Seller handles pre-carriage
Buyer handles main carriage and on-carriage
Risks: Pass from Seller to Buyer once goods are placed on board
the vessel on the Sellers side
Insurance: Neither party is required to insure goods
Export Clearance: Handled by Seller
Import Clearance: Handled by Buyer
NOTE:

Ships Rail is no longer part of Incoterms 2010. If using Marine Terms, Contract or PO must
exactly state what on board the vessel means for the transaction where on the vessel is the
container, item to be placed

FOB
Free On Board(named port of shipment)
SELLER

Seller/
Export
Exporter Documents
Premises Formalities

Delivered
at named
place of:
Frontier/
Terminal/
Quay

Loading
Port of
Shipment

Onboard
Ship
Rail
Plane
Ships
Ships
Rail
Rail

BUYER

Discharging
Delivery at
Import
Port of
named place of Documents
Arrival
destination:
Formalities
Frontier/
Terminal/Quay

Buyer/
Importer
Premises

Sellers Risks

Buyers
Risks

Sellers Cost

Buyers Cost

Cost and Freight (CFR) +


Named Place (port on Buyers side)

Delivery: Seller delivers goods packaged for shipment on board


the Seller-designated vessel at the port on Sellers side
Carriage:
Seller handles pre-carriage and main carriage
Buyer handles on-carriage following delivery to port on
Buyers side
Risks: Passes from Seller to Buyer once goods are on board the
vessel
Insurance: Neither party required to insure goods
Export Clearance: Handled by Seller
Import clearance: Buyer is responsible for the customs
requirements and associated costs (fees, duties, etc.)

Even though risk passes from Seller to Buyer on Sellers side (once
loaded per contract), Seller contracts for and pays freight necessary
to bring goods to the named port on the Buyers side

CFR
Cost and Freight (named port of destination)
SELLER

Seller/
Export
Exporter Documents
Premises Formalities

Delivered
at named
place of:
Frontier/
Terminal/
Quay

Loading
Port of
Shipment

Onboard
Ship
Rail
Plane
Ships
Ships
Rail
Rail

Discharging
Delivery at
Port of
named place of
Arrival
destination:
Frontier/
Terminal/Quay

Sellers Risks

Buyers Risks

Sellers Cost

Buyers Cost

BUYER

Import
Documents
Formalities

Buyer/
Importer
Premises

Cost Insurance Freight (CIF) +


Named Place (port on Buyers side)

Delivery: Seller delivers goods packaged for shipment on board the


Seller-designated vessel at the port on Sellers side
Carriage:
Seller handles pre-carriage and main carriage
Buyer handles on-carriage following delivery to port on Buyers
side
Risks: Passes from Seller to Buyer once goods are on board the vessel
Insurance: Seller required to procure minimum coverage against
Buyers risk of loss or damage to the goods during carriage
Export Clearance: Handled by Seller
Import clearance: Buyer is responsible for the customs requirements
and associated costs (fees, duties, etc.)

Even though risk passes from Seller to Buyer on Sellers side (once loaded
per contract), Seller contracts for and pays freight necessary to bring
goods to the named port on the Buyers side
Same as CPT + Insurance coverage

CIF
Cost, Insurance and Freight (named port of destination)
SELLER

Seller/
Export
Exporter Documents
Premises Formalities

Delivered
at named
place of:
Frontier/
Terminal/
Quay

Loading
Port of
Shipment

Onboard
Ship
Rail
Plane
Ships
Ships
Rail
Rail

Discharging
Delivery at
Port of
named place of
Arrival
destination:
Frontier/
Terminal/Quay

Sellers
Risks

Buyers Risks

Sellers
Costs

Buyers Cost

BUYER

Import
Documents
Formalities

Buyer/
Importer
Premises

Price Considerations
with Incoterms 2010
When negotiating a contract, keep in mind the following:
Basic Rule of Thumb: The more responsibility the Seller
takes on, the more they must charge the Buyer.
Example: What is the price the Seller should quote for 10
units to be shipped from Hilltown to Seattle?

$10,000 EXW, Johnsburg Factory


$10,200 FCA, Carrier in Hilltown
$10,600 CIP, Newark Airport
$10,800 DAT, OHare Airport
$12,000 DDP Seattle

Importing and Incoterms 2010

Some charges if included and detailed in commercial


invoice need to be deducted from the dutiable value of
the shipment
Main carriage
Any foreign inland freight
Insurance
Supply chain security fees
Terminal handling fees

Incoterms 2010 at a Glance

Anda mungkin juga menyukai