Name
AVP
TOPIC OUTLINE
Introduction to Incoterms®
Nature, Scope and Purpose
Overview (AVP)
History of the Incoterms Rules
Classification of Incoterms
Incoterms 2010 and its features
Differences between Incoterms 2010 from 2000
Keys to Use Incoterms 2010
Incoterms Illustrations (Table)
Modes of Transportation
METHODOLOGIES
PPT Presentation
AVP
Graphical illustrations
Tabulated illustrations
Q&A
INTRODUCTION
The goal of the ICC was to establish a standardized set of shipping terms that
importer and exporters could use around the world.
Incoterms® are intended to be used as a set of rules that sellers and buyers of
goods can use to guide them through the shipping process.
Incoterms are updated every ten (10) years since 1980 although it came out in
1936.
NATURE, SCOPE AND PURPOSE
It stands for “International Commercial Terms”
It also known as “International Delivery Terms”
It is a registered trademark of the International Chamber of Commerce.
The Incoterms® 2010 rules have allocated obligations between the buyer and seller to
obtain or to render assistance in obtaining security-related clearances, such as chain-of-
custody information.
It includes the cargo insurance.
In the contract between the seller and the buyer, the following is determined:
The duties of the buyer and the seller
Who takes care of the insurances, licences, permissions and all other formalities
Who arranges the transport untill which point and who is responsible for this
The point where the costs and risks pass on from the seller to the buyer.
NATURE, SCOPE AND PURPOSE
The documents and customs formalities necessary for export and import operations.
WHO NEEDS TO UNDERSTAND INCOTERMS?
The importance of Incoterms is due to its widespread use that makes them
internationally known. Therefore, all professionals involved in foreign trade should
understand Incoterms:
1. exporters and importers
2. carriers and freight forwarders
3. customs brokers
4. insurers
5. international credit professionals
6. sales and purchasing managers
7. consultants
INCOTERMS Defined
2. At what physical point in a supply chain the responsibility for all transporation,
customs clearance, duties and related charges shift from seller to buyer
As of January 1, 2011
1. EXW: Ex Works (named place of delivery)
2. FCA: Free Carrier (named place of delivery)
3. FAS: Free Alongside Ship (named port of shipment)
4. FOB: Free on Board (named port of shipment)
5. CFR: Cost & Freight (named port of destination)
6. CIF: Cost, Insurance & Freight (named port of destination)
11 OFFICIAL ICC 2010 INCOTERMS
The thing that will only change every ten (10) years.
Legends:
E- Ex Works
C- Carriage (Main carriage paid by seller)
D- Delivered
F- Free (Main carriage not paid by seller)
Incoterms® 2010 and its features:
EXW: Ex Works
Is intended to be used when the buyer is going to take responsibility for
loading the goods onto a carrier selected by the buyer without assistance
from the seller. If the seller is going to load the goods on the carriers
selected and contracted by the buyer, the FCA LOADED should be used.
Mode of Transportation:
Ex-Works can be used for any transportation mode.
Incoterms® 2010 and its features:
EXW: Ex Works
“Ex Works” means that the seller delivers when it places the goods at
the disposal of the buyer at the seller’s premises or at another named
place (i.e.,works, factory, warehouse, etc.). The seller does not need to
load the goods on any collecting vehicle, nor does it need to clear the
goods for export, where such clearance is applicable. All costs and
export risks are borne by the buyer.
Incoterms® 2010 and its features:
EXW: Ex Works
Incoterms® 2010 and its features:
EXW: Ex Works
EXW is the Incoterm that represents the minimum obligations, costs and risks for the
seller as he delivers the goods at his own premises (factory or warehouse) in his country.
Not even the seller is responsible for loading the goods onto the first carrier (usually
truck) that sends the buyer to pick them up. It is the only Incoterm in which the seller
does not clear the goods for export, when such clearance is applicable.
On the contrary, with EXW, the seller offers the lowest service of all Incoterms and
represents a loss of competitiveness in comparison with other companies that assume
part of international logistics.
This term is suitable for exporting firms with little international experience and who
make groupage operations (boxes, pallets) in which the buyer sends a truck to collect
the goods at the seller's premises. When sending full containers, it is better to use FCA
as usually the seller makes the loading of the container on the truck sent by the buyer to
the seller's premises.It is not advisable to use EXW regularly because when the seller
delivers the goods in its own country, normally it is preferable to use FCA.
Incoterms® 2010 and its features:
“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. The seller bears
all the costs and risks involved in bringing the goods to the place of destination
and has an obligation to clear the goods not only for export but also for import, to
pay any duty for both export and import and to carry out all customs formalities.
Incoterms® 2010 and its features:
DPP: Carriage and Insurance Paid To
Incoterms® 2010 and its features:
DPP: Carriage and Insurance Paid To
In Incoterms DDP the seller delivers the goods, without unloading, at buyer's premises or a nearby place
in the country of destination. The transport risk is transferred from buyer to seller in the same place
where the goods are delivered.
DDP is somewhat the reverse of Incoterms EXW; it represents the greatest obligation for the seller
because he assumes all costs and risks of the operation, including import procedures, to deliver the
goods at the agreed place in buyer's country. The only cost do not assume by the seller is the unloading
of goods at delivery place.
Any import tax and specifically VAT, are paid by the seller, unless the parties agree in the contract of sale
that VAT or other taxes are paid by the buyer. In that case a variant of DDP, known as "DDP VAT unpaid",
should be used.
The only difference between Incoterms DDP and DAP is that in DDP all costs and taxes of import
clearance are paid by the seller while in DAP are paid by the buyer. In the event that the seller has no
capacity by himself or through his representatives for doing import clearance, Incoterm DDP should not
be used.
If between the country of origin and the country of destination there is no customs (e.g. European Union)
and the goods are delivered at buyer's premises, Incoterm DAP must be used instead of DDP, because
will not be necessary to clear goods for import.
Differences between Incoterms 2000 and 2010
1. The revised version that has been in force since 1 January 2011 contains only
eleven instead of the original 13 clauses.
2.These were divided into two categories:
• a. The EXW, FCA, CPT, CIP and DDP clauses that apply to all types of
transportation.
• b. FAS, FOB, CFR, CIF – exclusively for sea and inland navigation.
Differences between Incoterms 2000 and 2010
3. Under CIF, the seller is required to pay for more insurance than previously.
4. The DEQ incoterm is replaced by DAT (with a slightly different meaning).
5. The DAF, DES, and DDU incoterms are replaced by DAP.
6. If you need to receive hard copies (as opposed to electronic versions) of your
shipping documents, make this point clear in your contract.
7. With CIF, CFR and FOB, the risk is no longer transferred at the ship’s railing
(“suspended”) to the buyer, but instead when the goods are deposited on the
ship’s deck.
8. With the C-clauses there is a new obligation for the buyer to provide insurance-
related information.
Differences between Incoterms 2000 and 2010
Security-related information
Incoterms 2010 establishes the obligation of the seller to assist the buyer to obtain all
information concerning the safety of the goods or their transportation to their final
destination. However, Incoterm 2010 states that any costs resulting from obtaining such
information will be borne by the buyer.
Keys to Use Incoterms® 2010
The first function of Incoterms is to define exactly the place of delivery of the goods. To
do so, following the Incoterm should be included as accurately as possible the place of
delivery (seller's or buyer's premises, transportation hub, port, airport, etc.), the city,
province and country where goods are delivered. It is important to mention the city and
country where delivery takes place as the world's geography is vast and is not always
easy to locate a city in a country.
Incoterms of delivery in the country of destination (Incoterms in "D") should only be used
in low-risk countries in which the seller has the means to control logistics. The concept of
risk is broad and covers both the political risk (war, social conflicts), commercial
(customer default), logistic (deficiencies in transport infrastructure) or administrative
(complex customs procedures). Any of these risks can jeopardize international sale when
seller and buyer agree to deliver the goods in the country of destination, under "D"
terms.
Keys to Use Incoterms® 2010
Reference to Incoterms 2010 version
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