Incoterms, Shipping And Tradeincoterms 2000

IncoTerms

Incoterms Highlight:- 

•    First published by the ICC in 1936
•    ICC (International Chamber of Commerce) Official Rules for the Interpretation of   Trade terms.

•    Purpose is to provide a set of international rules for the interpretation of the most commonly used trade terms.
•    13 categories describing where risks lie between seller and buyer
•    International Commercial Terms (INCOTERMS) are also referred as shipping terms, delivery terms or sometimes as trade terms.
  

Incoterms Introduction:-

•    Incoterms are the most commonly accepted terms of sale in international business.
•    Incoterms have been adopted by most countries.
•    Defines the responsibilities and risks for transactions.
•    To help parties to avoid misunderstandings, with all the waste of time and money  that this entails
•    They are used as part of the overall sales agreement.
 

 
Category of Incoterms 2000

Incoterms are divided into four (4) categories:-

•    “E” terms – Seller makes the goods available to the buyer at the seller’s premises or other place named by the seller

•    “F” terms  – Seller is responsible to deliver the goods to the export shipment point and carrier designated by the buyer

•    “C” terms – Seller is responsible for contracting carriage of goods to the place of destination, but does not assume risk of loss or damage to goods, or additional costs due to events occurring after shipment

•    “D” terms – Seller is responsible for all costs and risks associated with delivering goods to the named place in the country of destination.

The Structure of Incoterms:-

Group E          EXW         Ex Works (named place)

Group F          FCA          Free Carrier (named place)

FAS                Free alongside Ship (named port of shipment)

FOB                Free On Board (named port of shipment)

Group C         CFR          Cost and Freight (named port of destination)

CIF                   Cost Insurance and Freight (named port of destination)
CPT                 Carriage Paid To (named place of destination)
CIP                   Carriage Insurance Paid To (named place of destination)

Group D          DAF        Delivered at Frontier (named place)

DES                Delivered Ex Ship (named port of destination)
DEQ                Delivered Ex Quay (named port of destination)
DDU                Delivered Duty Unpaid (named place of destination)
DDP                Delivered Duty Paid (named place of destination)

Incoterms Classified:-

All modes of transport including multi-modal	Sea and inland waterway transport only
EXW – Ex Works	FAS – Free Alongside Ship
FCA – Free Carrier	FOB – Free Onboard
CPT – Carriage Paid To	CFR – Cost and Freight
CIP – Carriage and Insurance Paid To	CIF – Cost, Insurance, and Freight
DAF – Delivered at Frontier	DES – Delivered Ex Ship DEQ – Delivered Ex Quay
DDU – Delivered Duty Unpaid DDP – Delivered Duty Paid

 

EXW- EX WORKS (named place):-

EX Works means that the seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place (i.e. Factory, warehouse, premises) not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller (exporter), and the buyer (importer) has to bear all costs and risks involved in taking the goods from the seller's premises. However, if the parties wish the seller (exporter) to be responsible for the loading of the goods on departure and to bear the risks and all the costs of such loading, this should be made clear by adding explicit wording to this effect in the contract of sale.

FCA- FREE CARRIER (named place):-
 

Seller delivers when goods, cleared for export, to the carrier nominated by the buyer at a named place. Term may be used irrespective of the mode of transport. Seller obligated to load goods on arriving vehicle if it arrives at the seller’s premises. Seller not obliged to unload goods from his vehicle.            

FAS- FREE ALONGSIDE SHIP (named port of shipment):-
 

Seller delivers when goods, cleared for export, are placed alongside the vessel Seller obliged to clear goods for export. The buyer bears all costs and risks of loss or damage to the goods from that moment. Terms can be used for sea or inland waterway transport only.

FOB- FREE ON BOARD (named port of shipment):- 

Seller delivers when goods, cleared for export, pass the ship’s rail at the named port of shipment. The buyer bears all costs and risks of loss or damage to the goods from that point. Term can be used for sea or inland waterway transport only. If intent is not to deliver goods across the ship’s rail, use FCA.

 CFR- COST AND FREIGHT (named port of destination):-

 Seller delivers when goods, cleared for export, pass the ship’s 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 ship’s rail, use CPT.
 

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

Seller delivers when goods, cleared for export, pass the ship’s 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. The seller procures marine insurance, against buyer’s risk of loss.  Seller is required to obtain insurance only on minimum cover. Term can be used for sea or inland waterway transport. If intent is not to deliver goods across the ship’s rail, use CIP.

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. Term may be used irrespective of mode of transport.
 

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

Seller delivers the goods, cleared for export, 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 buyer’s risk of loss.  Seller is required to obtain insurance only on a minimum cover. Term may be used irrespective of mode of transport.
 

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. If delivery is to take place in the port of destination, DES or DEQ should be used.

 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 can be used only in sea or inland water transport. If the seller is to bear the costs of discharging the goods, DEQ should be used.
 

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.
 

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.
 

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.

 Summary:-

             Buyer’s Objective: maximize control of supply chain, use FOB, FCA, or FAS.
             Must name a place after the INCOTERMS
             INCOTERMS are negotiable.
             INCOTERMS should appear on all commercial documents.
             Establish a close relationship with a forwarder.
 

More information about incoterms visit:- www.exportgenius.in/