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INCOTERMS
Incoterms 2000,
Incoterms 2010
INCOTERMS INFORMATION:
Incoterms are standard trade
definitions most commonly used in international sales contracts. Devised
and published by the International Chamber of Commerce, they are at the
heart of world trade.
Among the best known
Incoterms are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance
and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To)
The internationally accepted terms of trade -
Delivery Terms
INCOTERMS
INCOTERMS - information:
Place Where the seller delivers the
goods to the buyer
Costs
What the seller pays up to that point of
delivery, unless otherwise agreed with the buyer
Risk When the seller passes the transit
risks to the buyer
(free means free from additional expense to
the buyer up to the point of delivery)
EXW EX Works (named place)
Place At the works or warehouse
Costs The seller packs for export and prepares
for despatch
Risk Passes when the goods are available for
the buyer
FCA FREE CARRIER (named place)
Place At the place, and to the carrier, named
by the buyer
Costs The seller pays up to the point of
delivery of the goods and for export facilities
Risk Passes when the seller delivers the goods
at the named place
FAS FREE ALONGSIDE SHIP (named shipment
port)
Place Along side the ship, and at the shipment
port, named by the buyer, or in lighters
Costs The seller pays for delivery of the
goods alongside the ship, or in lighters
Risk Passes when the seller delivers the goods
alongside the ship
(FAS can only be used for sea or inland
waterway transport)
FOB FREE ON BOARD (named shipment port)
Place On board the ship at the named port
Costs The Seller pays for delivery, export
formalities and loading, of goods over the ship's rail
Risk Passes when the goods have passed the
ship rail at the shipment port
(FOB can only be used for sea or inland
waterway transport)
CFR COST AND FREIGHT (named destination
port)
Place On board the ship at the port of
shipment
Costs The Seller pays for all costs and
freight to named destination port
Risk Passes when the goods have passed the
ship's rail at the port of shipment
(CFR can only be used for sea or inland
waterway transport)
CIF COST, INSURANCE AND FREIGHT (named
destination port)
Place On board the ship at the port of
shipment
Costs The Seller pays for all costs and
freight, and marine insurance, to the named destination port
Risk Passes when the goods have passes the
ship's rail at the port of shipment
(CIF can only be used for sea or inland
waterway transport)
CPT CARRIAGE PAYED TO (named destination
place)
Place Where the goods are handed over to the
first Carrier or Forwarder
Costs The Seller pays for all costs and
freight to the named destination place
Risk Passes when the goods have been handed
over to the first Carrier or Forwarder
CIP CARRIAGE AND INSURANCE PAID (named
destination place)
Place Where the goods are handed over to the
Carrier or Forwarder
Costs The seller pays for all costs and
freight, and marine insurance, to the named destination place
Risk Passes when the goods have been over to
the first Carrier or Forwarder
DAF DELIVERED AT FRONTIER (named place)
Place At the named frontier place, cleared for
export but not for import
Costs The seller pays for all costs and
freight to the named Frontier place
Risk Passes when the goods are available for
the buyer
DES DELIVERED EX SHIP (named destination
port)
Place On board ship at the named destination
port
Costs The seller pays all costs and freight to
the named destination port, but not unloading
Risk Passes when the goods are delivered to
the named destination port, but still on board ship
(DES can only be used for sea or inland
waterway transport)
DEQ DELIVERED EX QUAY (duty paid at named
destination port)
Place On the quay at the named destination
port
Costs The seller pays all costs and freight to
named destination port, and unloading and import clearance and states whether
duty is paid or unpaid
Risk Passes when the goods are unloaded and
cleared for import at the destination port
DDU DELIVERED DUTY UNPAID (named
destination port)
Place At the named destination place (in the
country of import)
Costs The seller pays all costs to the named
destination place, but not duties, taxes or import charges
Risk Passes when the goods are delivered to
the named destination place
DDP DELIVERED DUTY PAID (named destination
place)
Place At the named destination place (in the
country of import)
Costs The seller pays all costs to the named
destination place, including duties, taxes and import charges
Risk Passes when the goods are delivered to
the named destination place
(if the Buyer is going to pay the local VAT,
the TERM is "DDP, VAT unpaid")
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Introduction
Incoterms 2010
Incoterms changes
Tne
"traditional" Incoterms such as CIF continue to be used
inappropriately in a world where containerised and
multimodal movements of goods are the norm. So the rules are
now separated into two sections, clearly labelled "Rules for
any mode or mode of transport"
and "Rules for sea and inland waterway transport"
Furthermore there is now a "guidance" section heading up
each section, which advises, for example, that CIF "may
not be appropriate" where the goods are handed over to the
carrier before they are loaded on the vessel - the usual
container scenario.
The changes to the "D" terms
These are of course the most substantive changes in this
revision - the abolition of four "D" terms - DEQ, DES, DAF
and DDU - and the introduction of two new "D" terms, DAT
(Delivered at Terminal) and (DAP) Delivered at Place.
The
observation from the presenter was that they had expected
considerable opposition when the idea of removing these
was first proposed; however the reaction from the trading
community was very muted!
As
with the old "D" terms, risk passes at the point of
delivery, which for DAT is unloaded from the conveyance,
and for
DAP is on the conveyance ready for unloading.
It
is anticipated that DAT will replace DEQ, and will be the
Incoterm of choice for container operations where the seller
retains responsibility for the main carriage. It is expected
that DAP will replace DES, DAF and DDU.
The
new "D" rules seem straightforward and consistent with the
logic of the Incoterms structure.
Clarifications and "tidying
up"
There is welcome clarification on terminal handling charges
- a bugbear of importers, because carriers' practice on the
inclusion of THCs varies, and situations can arise where the
importer is in effect double charged for them. The new
Incoterms makes it clear that this should not happen - e.g.
CIP B6 buyer bears "unloading costs, unless such costs were
for the seller's account under the contract of carriage"
"String" trades. In the commodities business it is
commonplace for the goods to be bought once in transit, in
which case the new buyer does not contract with the carrier,
they merely acquire a carriage contract already made. The
new Incoterms recognise this
"Exit the ship's rail." The time-honoured formula for FOB,
CFR and CIF has been that risk transfers when the goods
cross the ship's rail during loading. This has been replaced
with "placing goods on board" the vessel.
Security issues
Throughout the revision process, there was much talk of the
impact of anti-terrorism programmes such as C-TPAT, and
the need for the Incoterms revision to provide guidance for
traders.
In the
event, Incoterms 2010 has relatively little to say about
this. For each Incoterm, there is a heading A10: "Assistance
with information and related costs" for the seller, and a
parallel B10 heading for the buyer. But the obligations of
each party
are stated in the most general terms, along the lines of
providing "requested information in a timely manner."
Parties are obliged to make reimbursement of costs
associated with the provision of such information; but these
reimbursements appear to operate in both directions, and
there is no detail as what this might mean in practice.
Conclusion
This
not a radical revision, but welcome improvements have been
made in many areas. As ever, the success of these
new rules will depend on the care that traders apply to the
detailed work of aligning their use of Incoterms with their
commercial agreements and their carriage contracts. However
the new format should focus the readers' minds on anomalies
in their current practice, and motivate them to start this
process! |
ICC -
More information about
INCOTERMS 2000 and INCOTERMS 2010.
CFR - COST AND FREIGHT
CIF - COST INSURANCE AND FREIGHT
CIP - CARRIAGE AND INSURANCE PAID
CPT - CARRIAGE PAID
DAF - DELIVERED AT FRONTIER
DDP - DELIVERED DUTY PAID
DDU - DELIVERED DUTY UNPAID
DEQ - DELIVERED EX QUAY
DES - DELIVERED EX SHIP
EXW - EX WORKS
FAS - FREE ALONGSIDE SHIP
FCA - FREE CARRIER
FOB - FREE
ON BOARD
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