INTERNATIONAL LAW

PARMA UNIVERSITYInternational Business and Development

International Market and Organization LawsProf. Gabriele Catalini

INCOTERMS ®

What are Incoterms?

Incoterms are standard international “trade terms” (such as FCA, FOB and CIF), wich enable exporters to quote prices that clearly allocate the costs and ricks of international transport between seller and buyer.

Insurance responsibilities (under CIF and CIP) and responsibility for customs duties and formalities are also covered by Incoterms.

Trade terms are essential elements of a properly drafted international contract of sale, because they notify the buyer what is “included” in the sales price.

• In essence, Incoterms allocate the following key contract elements between seller and buyer:

1.Transport costs

2.Risk of loss or damage to the goods

3.Export and import customs clerance and payment of duties ( if any)

4.Insurance responsabilities

• First published in 1936, Incoterms® rules provide internationally accepted definitions and rules of interpretation for most common commercial terms.

• The rules have been developed and maintained by experts and practitioners brought together by ICC and have become the standard in international business rules setting

Launched in mid-September 2010, Incoterms® 2010 came into effect on 1 January 2011.

They help traders avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers.

Incoterms® rules are recognized by UNCITRAL as the global standard for the interpretation of the most common terms in foreign trade.

All contracts made under INCOTERMS® 2000 remain valid even after 2011.

Moreover, although ICC recommend using Incoterms® 2010 after 2011, parties to a contract for the sale of goods can agree to choose any version of the Incoterms rules after 2011. It is important however to clearly specify the chosen version INCOTERMS® 2010, INCOTERMS® 2000 or any earlier version.

- http://www.youtube.com/watch?v=D3iWkJFbytI#t=47

• If a seller in Berlin inform a buyer in Beijing taht a certain product costs «1.000,00 euros per unit», we still do not know (until we add an Incoterm and a named place) where the goods will be delivered, who will pay for the shipment from Berlin to Beijing, who will clear the goods trough custums and pay any necessary insurance or import duties.

There are actually 11 Incoterms®Rules for any mode of transport

EXW (Ex Works)

FCA (Free Carrier)

CPT (Carriage Paid To)

CIP (Carriage and Insurance Paid To)

DAT (Delivered at Terminal)

DAP (Delivered at Place)

DDP (Delivered Duty Paid)

There are actually 11 Incoterms®

Rules appropriate when the point of delivery and the place ti witch the goods are carried are both port

FAS (Free Alongside Ship)

FOB (Free On Board)

CFR (Cost and Freight)

CIF (Cost Insurance and Freight

Ex Work• 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.

• The parties should precisely specify the point within the named place of delivery, as all costs and risks up that point are for the seller’s account.

• The buyer thereafter bears all cost and risks of transport

Ex Work • EXW represents the seller’s minimum obligation.• The seller has no obligation to load the goods, even

though it mat be in a better position to do so

FCA – Free Carrier• “Free Carrier” means that the seller delivers the goods to

the carrier or another person nominated by the buyer at the seller’s premises or another named place.

• The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

• FCA requires the seller to clear the goods for export, where applicable.

CPT – Carried Paid To• “Carriage Paid To” means that the seller delivers the

goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

• CPT requires the seller to clear the goods for export if necessary. However, the seller has no import clearance or duty obligation.

CIP – Carriege and Insurance Paid To

• “Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

CIP – Carriege and Insurance Paid To

• The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover.

• Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”

DAT – Delivered At Terminal• “Delivered at Terminal” means that the seller delivers

when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination.

• “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal.

• The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

DAP – Delivered At Place• “Delivered at Place” means that the seller delivers when

the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.

DDP – Delivered Duty Paid• “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.

FAS – Free Alongside Ship• ““Free Alongside Ship” means that the seller delivers

when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment.

• The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

FOB – Free On Board• “Free On Board” means that the seller delivers the goods

on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

CFR – Cost and Freight• “Cost and Freight” means that the seller delivers the

goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

CIF – Cost insurance and Freight

• “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

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CIF – Cost insurance and Freight

• “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

•

CIF – Cost insurance and Freight

• The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”