International business Law

Incoterms
Nkonda Kevin
Nedroumi Amine
Soumar Bala
Tebbi Lyes
INCOTERMS
I. Introduction
International Commerce Terms.
Incoterms are standard trade definitions most commonly used in international sales contracts.
evised and !ublis"ed by t"e International C"amber of Commerce #ICC$% t"ey are at t"e "eart
of &orld trade.
T"e fisrt Incoterms &ere !ublis"ed in '()*% t"ere &as si+ back t"en. T"e second edition of t"e
Incoterms &as !resented in '(,) at t"e International C"amber of Commerce con-ress of
.ienna. In total% t"ey "ave been ada!ted si+ times since '()*% in order to follo& t"e evolution
of trade conditions and t"e evolution of t"e models of trans!ort. T"e current version is
Incoterms /000 #!ublis"ed on 1anuary '
st
% /000$. .ersions of Incoterms !recedin- t"e /000
edition may still be incor!orated into future contracts if t"e !arties so a-ree. 2o&ever% t"is is
course is not recommended because t"e latest version is desi-ned to brin- Incoterms into line
&it" t"e latest develo!ments in commercial !ractice.
Contrary to a la& or an international convention% Incoterms are not com!ulsory and not
automatic. If t"e !arties &ant to a!!ly t"em to t"eir transaction% t"ey must mention it
s!ecifically in t"e contract.
II. 3"at !roblems do t"e Incoterms deal &it" 4
T"ese !roblems can be -rou!ed to-et"er in 5 cate-ories 6
'. elivery of t"e merc"andises
elivery is t"e most im!ortant obli-ation of t"e seller. T"e seller delivers &"en t"e -oods are
!laced alon-side t"e vessel at t"e named !ort of s"i!ment. In accordance to t"e term c"osen%
t"e delivery can occur before or after t"e o!eration of trans!ort. If t"e delivery occurs before
it% it7s a 8vente au de!art9. If it occurs after% it7s a 8vente : l7arrive9.
/. Transfer of risks
T"e transfer of risks occurs durin- t"e e+ecution by t"e seller of "is obli-ation to deliver. T"e
buyer "as to bear all risks of loss of or dama-e to t"e -oods from t"at moment.
). ;e!artition of t"e e+!enses
T"e seller "as to bear all t"e e+!enses related to t"e merc"andise until t"e delivery. If t"e
seller is in c"ar-e of t"e trans!ortation% in accordance &it" t"e term c"osen% "e "as to bear t"e
costs related to t"at trans!ortation. <t"er&ise% t"e seller only bears t"e costs of t"e delivery.
5. ocumentary formalities
T"e Incoterms s!ecify &"ic" one of t"e buyer and t"e seller "as to bear t"e e+!enses of t"e
formalities of e+!ort and im!ort.
III. Issues not taken into account by t"e Incoterms
'. T"e met"ods of !ayment
/. T"e transfer of !ro!erty
Indeed% t"e transfer of !ro!erty can be delayed% in t"e case of a sale on credit% until t"e
com!lete !ayment of t"e !rice by t"e buyer% &"ic" allo&s t"e seller to take back t"e
merc"andise if t"e buyer &ouldn7t fulfil "is obli-ation of !ayment. But if t"e !arties &ant to
take t"at !recaution% t"ey "ave to s!ecify it in t"e contract. T"e !roblem is t"at suc" term isn7t
valuable in every national la&.
). Insurance
It7s only an obli-ation for t"e seller in CI= #Cost% Insurance and =rei-"t$ and CI> #Carria-e
and Insurance >aid to$ sales.
5. Arbitration
,. T"e la& a!!licable
T2? ST;@CT@;? <= INC<T?;AS

In '((0% for ease of understandin-% t"e terms &ere -rou!ed in four basically different
cate-oriesB namely startin- &it" t"e term &"ereby t"e seller only makes t"e -oods available to
t"e buyer at t"e sellerCs o&n !remises #t"e D?EFterm ?+ &orks$B follo&ed by t"e second -rou!
&"ereby t"e seller is called u!on to deliver t"e -oods to a carrier a!!ointed by t"e buyer #t"e
D=EFterms =CA% =AS and =<B$B continuin- &it" t"e DCEFterms &"ere t"e seller "as to
contract for carria-e% but &it"out assumin- t"e risk of loss of or dama-e to t"e -oods or
additional costs due to events occurrin- after s"i!ment and dis!atc" #C=;% CI=% C>T and
CI>$B and% finally% t"e DEFterms &"ereby t"e seller "as to bear all costs and risks needed to
brin- t"e -oods to t"e !lace of destination #A=% ?S% ?G% @ and >$. T"e follo&in-
c"art sets out t"is classification of t"e trade terms.
INCOTERMS
Hrou! ?
e!arture
?I3 ?+ 3orks
Hrou! =
Aain carria-e un!aid
=CA =ree Carrier #... named !lace$
=AS =ree Alon-side S"i! #...named !ort of s"i!ment$
=<B =ree <n Board #... named !ort of s"i!ment$
Hrou! C
Aain carria-e !aid
C=; Cost and =rei-"t #... named !ort of destination$
CI= Cost% Insurance and =rei-"t #... named !ort of destination$
C>T Carria-e >aid To #... named !lace of destination$
CI> Carria-e and Insurance >aid To #... named !lace of destination$
Hrou!
Arrival
A= elivered At =rontier #... named !lace$
?S elivered ?+ S"i! #... named !ort of destination$
?G elivered ?+ Guay #... named !ort of destination$
@ elivered uty @n!aid #... named !lace of destination$
> elivered uty >aid #... named !lace of destination$
Hrou! ?6 T"e salesman restricts "imself to !lace t"e -oods at t"e dis!osal of t"e !urc"aser% at
an indicated !lace of "is establis"ment
Hrou! =6 T"e salesman -ives t"e -oods to a conveyor a!!ointed by t"e !urc"aser.
Hrou! C6 T"e salesman undertakes trans!ort% but does not assume t"e risk of loss% neit"er of
dama-e to t"e -oods
Hrou! 6 T"e salesman su!!orts all t"e costs and risks to brin- t"e -oods to t"e country of
destination
Definition of some Incoterms:
EX WORKS !!! name" #lace$:
E% wor&s means t"at t"e seller delivers &"en "e !laces t"e -oods at t"e dis!osal of t"e buyer
at t"e sellerCs !remises or anot"er named !lace #i.e. &orks% factory% &are"ouse% etc.$ not
cleared for e+!ort and not loaded on any collectin- ve"icle. T"is term t"us re!resents t"e
minimum obli-ation for t"e seller% and t"e buyer "as to bear all costs and risks involved in
takin- t"e -oods from t"e sellerCs !remises 2o&ever% if t"e !arties &is" t"e seller to be
res!onsible for t"e loadin- of t"e -oods on de!arture and to bear t"e risks and all t"e costs of
suc" loadin-% t"is s"ould be made clear by addin- e+!licit &ordin- to t"is effect in t"e
contract of sale.T"is term s"ould not be used &"en t"e buyer cannot carry out t"e e+!ort
formalities directly or indirectly. In suc" circumstances% t"e =CA term s"ould be used%
!rovided t"e seller a-rees t"at "e &ill load at "is cost and risk.
'REE ON (O)RD !!! name" #ort$:
'ree on (oar" means t"at t"e seller delivers &"en t"e -oods !ass t"e s"i!Cs rail at t"e named
!ort of s"i!ment. T"is means t"at t"e buyer "as to bear all costs and risks of loss of or dama-e
to t"e -oods from t"at !oint. T"e =<B term reJuires t"e seller to clear t"e -oods for e+!ort.
T"is term can be used only for sea or inland &ater&ay trans!ort. If t"e !arties do not intend to
deliver t"e -oods across t"e s"i!Cs rail% t"e =CA term s"ould be used.
C)RRI)*E +)ID TO !!! name" #lace of "estination$:
Carria,e #ai" to!!! means t"at t"e seller delivers t"e -oods to t"e carrier nominated by "im
but t"e seller must in addition !ay t"e cost of carria-e necessary to brin- t"e -oods to t"e
named destination. T"is means t"at t"e buyer bears all risks and any ot"er costs occurrin-
after t"e -oods "ave been so delivered.
DCarrierE means any !erson &"o% in a contract of carria-e% undertakes to !erform or to
!rocure t"e !erformance of trans!ort% by rail% road% air% sea% inland &ater&ay or by a
combination of suc" modes.
If subseJuent carriers are used for t"e carria-e to t"e a-reed destination% t"e risk !asses &"en
t"e -oods "ave been delivered to t"e first carrier.
T"e C>T term reJuires t"e seller to clear t"e -oods for e+!ort. T"is term may be used
irres!ective of t"e mode of trans!ort includin- multimodal trans!ort.
DELI-ERED D.T/ .N+)ID !!! name" #lace of "estination$:
Deli0ere" "ut1 un#ai" means t"at t"e seller delivers t"e -oods to t"e buyer% not cleared for
im!ort% and not unloaded from any arrivin- means of trans!ort at t"e named !lace of
destination. T"e seller "as to bear t"e costs and risks involved in brin-in- t"e -oods t"ereto%
ot"er t"an% &"ere a!!licable% any DdutyE #&"ic" term includes t"e res!onsibility for and t"e
risks of t"e carryin- out of customs formalities% and t"e !ayment of formalities% customs
duties% ta+es and ot"er c"ar-es$ for im!ort in t"e country of destination. Suc" DdutyE "as to be
borne by t"e buyer as &ell as any costs and risks caused by "is failure to clear t"e -oods for
im!ort in time.
2o&ever% if t"e !arties &is" t"e seller to carry out customs formalities and bear t"e costs and
risks resultin- t"ere from as &ell as some of t"e costs !ayable u!on im!ort of t"e -oods% t"is
s"ould be made clear by addin- e+!licit &ordin- to t"is effect in t"e contract of sale.
T"is term may be used irres!ective of t"e mode of trans!ort but &"en delivery is to take !lace
in t"e !ort of destination on board t"e vessel or on t"e Juay #&"arf$% t"e ?S or ?G terms
s"ould be used.
COST2 INS.R)NCE )ND 'REI*3T !!! name" #ort of "estination$:
Cost2 Insurance an" 'rei,4t means t"at t"e seller delivers &"en t"e -oods !ass t"e s"i!Cs
rail in t"e !ort of s"i!ment. T"e seller must !ay t"e costs and frei-"t necessary to brin- t"e
-oods to t"e named !ort of destination B@T t"e risk of loss of or dama-e to t"e -oods% as &ell
as any additional costs due to events occurrin- after t"e time of delivery% are transferred from
t"e seller to t"e buyer. 2o&ever% in CI= t"e seller also "as to !rocure marine insurance
a-ainst t"e buyerCs risk of loss of or dama-e to t"e -oods durin- t"e carria-e.
ConseJuently% t"e seller contracts for insurance and !ays t"e insurance !remium. T"e buyer
s"ould note t"at under t"e HI= term t"e seller is reJuired to obtain insurance only on
minimum cover. S"ould t"e buyer &is" to "ave t"e !rotection of -reater cover% "e &ould
eit"er need to a-ree as muc" e+!ressly &it" t"e seller or to make "is o&n e+tra insurance
arran-ements. T"e HI= term reJuires t"e seller to clear t"e -oods for e+!ort. T"is term can be
used only for sea and inland &ater&ay trans!ort. If t"e !arties do not intend to deliver t"e
-oods across t"e s"i!Cs rail% t"e CI> term s"ould be used.
Obli,ation of salesmen an" bu1ers:
T"e obli-ations of t"e salesman increase in im!ortance% &"ile t"ose of t"e !urc"aser
decreases eac" time t"at one move u! from one term to t"e ot"er.
T"us% t"e sale Ke+F&orkK #?I3$% first% makes &ei-" on t"e salesman a minimum of
obli-ations% &"ile t"e sale K elivered uty >aid9 #>$ carries to t"e ma+imum t"e
obli-ation of t"e salesman.