IBMR

INCOTERMS
Mr. Swapnil Jain In the enlightening guidance of PRESENTED BY

Mrs. Megha Jain

Rules at the core of world trade

IN-CO-TERMS
International commercial terms

WHAT ARE INCOTERMS ?

1. ICC (International Chamber of Commerce) Official Rules for the Interpretation of Trade terms. 2. First published by the ICC in 1936 Since then, ICC expert lawyers and trade practitioners have updated them six times to keep pace with the development of international trade.

3. ICC is currently revising Incoterms 2000. The new edition, Incoterms 2011, is expected to enter into force on 1 January 2011.

WHAT ARE INCOTERMS ?

4. Incoterms are available from ICC Publishing and ICC national committees throughout the world. 5. Incoterms are developed, maintained and promoted by the ICC Commission on Commercial Law and Practice (CLP). 6. The English text is the original and official version of Incoterms 2000, authorized translations into 31 languages are available from ICC national committees.

Why Incoterms?
Incoterms are international rules that are accepted by governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade. They either reduce or remove altogether uncertainties arising from differing interpretations of such terms in different countries. Incoterms make international trade easier and help traders in different countries to understand one another. These standard trade definitions that are most commonly used in international contracts are protected by ICC copyright.

What do they cover?

The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold, but excluding "intangibles" like computer software.

INCOTERMS 2000

Four Groups of Incoterms

Less Control
Seller More Control 1) E group 2) F group 3) C group 4) D group Less Control

More Control
Buyer

( INCOTERMS )
GROUP E TERM EXW Stands for Ex Works

F
FCA FAS FOB Free Carrier Free Alongside Ship Free On Board

C
CFR CIF CPT CIP Cost and Freight Cost, Insurance and Freight Carriage Paid To Carriage and Insurance Paid To Delivered At Frontier Delivered Ex Ship Delivered Ex Quay Delivered Duty Unpaid Delivered Duty Paid

DAF DES DEQ DDU DDP

EXW EX WORKS (named place)

"Ex works" means the seller's only responsibility is to make the goods available at the seller's premises, i.e. factory, mill or warehouse The seller is not responsible for loading the goods on the vehicle provided by the buyer unless otherwise agreed. The buyer bears the full costs and risk involved in collecting the goods from there to the desired destination. Ex works represents the minimum obligation of the seller.

EXW
Ex Works (named place)
SELLER BUYER

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 Import Port of named place of Documents Arrival destination: Formalities Frontier/ Terminal/Quay Buyers Risks

Buyer/ Importer Premises

Sellers Risks

Sellers Cost

Buyers Cost

11

Obligations of the Salesperson.

Obligations of the Buyer.

Pay of the merchandise Freight internal (of factory to the export place)

He surrenders of Customs (documents, permits, requirements, the merchandise taxes) and necessary documents Export expenses (you maneuver, storage, agents) Pack and packing Freight international (of export place to the import
place) Import expenses (you maneuver, storage, agents)

Transport and sure (import place to plant)

Incoterms 2000
The F terms require the seller to deliver goods for carriage as instructed by the buyer. FCA FAS FOB

FCA FREE CARRIER (named place)

Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place. The risk of loss or damage to the goods is transferred from seller to buyer at that time and not at the ship's rail. Seller obligated to load goods on arriving vehicle if it arrives at the sellers premises. The term "carrier" means any person by whom or in whose name a contract of carriage by road, rail, air, sea, or a combination of modes has been made.

FCA
Free Carrier(named place)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

15

FAS -FREE ALONGSIDE SHIP (named port of shipment)

FAS or "free alongside ship" requires the seller to deliver the goods alongside the ship on the quay.
From that point on, the buyer bears all costs and risks of loss and damage to the goods. Unlike F.O.B., F.A.S. requires the buyer to clear the goods for export and pay the cost of loading the goods.

FAS
Free Alongside(named place)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

17

FOB FREE ON BOARD (... named port of shipment)

Under FOB the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement.
The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ship's rail (i.e., off the dock and placed on the ship). The seller pays the cost of loading the goods. If intent is not to deliver goods across the ships rail, use FCA

FOB
Free On Board(named port of shipment)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

19

Incoterms 2000
The C terms require the seller to contract for carriage at his expense to a specified point. CFR CIF CPT CIP

CFR COST AND FREIGHT (named port of destination)

Seller delivers when goods, cleared for export, pass the ships rail at the named port of shipment. 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 ships rail, use CPT

CFR
Cost and Freight (named port of destination)
SELLER BUYER

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 Buyers Risks

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Sellers Cost

Buyers Cost

22

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

CIF is CFR with the additional requirement that the seller procure transport insurance against the risk of loss or damage to goods. 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 buyers risk of loss. Seller is required to obtain insurance only on minimum cover.

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

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 Buyers Risks

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Sellers Costs

Buyers Cost

24

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. Accordingly, "freight/carriage paid to" can be used for all modes of transportation, including container or roll-on roll-off traffic by trailers and ferries.

CPT
Carriage Paid To (named port of destination)
SELLER BUYER

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

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Buyers Risks

Sellers Cost

Buyers Costs

26

CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)

Seller delivers the goods, cleared for export, to 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 buyers risk of loss. Seller is required to obtain insurance only on a minimum cover.

This term is the same as "freight/carriage paid to (CPT)" but with the additional requirement that the seller has to procure transport insurance against the risk of loss or damage to the goods during the carriage.

CIP
Carriage and Insurance Paid To (named port of destination)
SELLER BUYER

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 Buyers Risks

Import Documents Formalities

Buyer/ Importer Premises

Sellers Risks

Sellers Cost

Buyers Cost

28

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

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.

DDU
Delivered Duty Unpaid(named place of destination)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

31

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.

DDP
Delivered Duty Paid(named place of destination)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

33

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.

DAF
Delivered At Frontier(named place)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

35

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.

DES
Delivered exShip(named port of destination)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

30 November, 2009

37

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.

DEQ
Delivered Ex Quay(named port of destination)
SELLER BUYER

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

Buyer/ Importer Premises

Sellers Risks

Buyers Risks Buyers Cost

Sellers Cost

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39

Summary of terms
For a given term, "Yes" indicates that the seller has the responsibility to provide the service included in the price. "No" indicates it is the buyer's responsibility. If insurance is not included in the term (for example, CFR) then insurance for transport is the responsibility of the buyer or the seller depending on who owns the cargo at time of transport. In the case of CFR terms, it would be the buyer while in the case of DDU or DDP terms, it would be the seller.
30 November, 2009

Load to truck

Exportduty payment

Unload Transport from to truck at exporter's the port origin's port No Yes No No

Unload Landing Transport Landing onto charges at to charges at trucks origin's import's importer's from the port port port importers' port No No No No No No No No

Transport Entry Entry to Insurance Customs Duties destinatio clearance and Taxes n

EXW FCA

No Yes

No Yes

No No

No No

No No

No No

FAS
FOB CFR CIF CPT CIP DAF

Yes
Yes Yes Yes Yes Yes Yes

Yes
Yes Yes Yes Yes Yes Yes

Yes
Yes Yes Yes Yes Yes Yes

Yes
Yes Yes Yes Yes Yes Yes

No
Yes Yes Yes Yes Yes Yes

No
No Yes Yes Yes Yes Yes

No
No No No No No No

No
No No No No No No

No
No No No No No No

No
No No Yes No Yes No

No
No No No No No No

No
No No No No No No

DES

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

Yes

No

No

DEQ

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

Yes

No

No

DDU

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

DDPFebruary 8, 2006 Yes Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Mode of Transport and Appropriate Incoterm - Any Mode of Transport

EXW FCA CPT CIP DAF DDU DDP

30 November, 2009

Mode of Transport and Appropriate Incoterm Maritime and Inland Waterway Transport Only
FAS FOB CFR CIF DES DEQ

30 November, 2009

 Always specify which terms are applicable. When completing documents ensure that you are using the correct format of a term e.g. The term CFR is persistently misused/replaced with C&F or C+F. C+F has never existed. C&F did exists but was replaced with CFR in 1980. If C&F is used by mistake a court of law will use the pre 1980 meaning of the term which is very different from the current meaning of CFR as in Incoterms 1990 and Incoterms 2000.

Guidelines to Using Incoterms

..guidelines to using Incoterms

Draw up a check list of your duties and rights under the selected term and check that every intended or completed transaction conforms to this list, and that nothing is omitted. Request your trading partner to do the same, and exchange this information with them. Inform your bank and insurance company which Incoterm(s) have been selected for your business, so that they can determine exactly what your duties and rights are with regard to a transaction in which they may have a role to play.

In Summary
Must name a place after the INCOTERM
INCOTERMS are negotiable! INCOTERMS should appear on all commercial documents Establish a close relationship with a forwarder
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Reference
Short overview of international commerce vocabulary International Chamber of Commerce (ICC) incoterm list

INCOTERMS 2000
Wikipedia.

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