International Commercial Terms 2010

Priyanka Jadhav

International Commercial Terms: History

Initially created in 1936 by the International Chamber of Commerce (ICC) and have

been periodically revised (Incoterms® 2010 is the 8 th revision)

Current revision (“Incoterms 2010”) to become effective January 2011

These Trade Terms are Short abbreviation for lengthy Contract provisions . New Layout – Divided into two distinct sections

Any Mode Terms: DDP, DAP, DAT, CIP, CPT, FCA, EXW Waterway/Maritime Terms: FOB, FAS, CFR, CIF As opposed to 2000 version that began with EXW and progressed to DDP – Least

to most risk 11 Terms (Down from 13)

DAF, DES, DDU, & DEQ have been removed and replaced by DAP & DAT respectively

Incoterms are set of international rules of interpretation of most commonly used terms in international trade .

Objective :

To achieve uniformity

To Avoid and minimize the uncertainties of trade in different countries

Obligations, transfer of risks and allocation of costs in connection to delivery of a consignment from seller to buyer.

Up to which place the risks are borne by seller.

Up to which place the costs are borne by seller.

Which responsibilities are borne by the seller.

Which responsibilities are borne by the buyer.

Incoterms:

• EXW• FCA• FAS• FOB

• CFR• CIF• CPT• CIP

• DAT• DAP• DDP

Group E Group F

Group C Group D

Departure

Arrival

Main Carriage Unpaid

Main Carriage Paid

Incoterms 2010 :

Ex means from .Work means factory ,mill or warehouse which are sellers premise. The only term where the seller /exporter makes the goods available at his own premises to

buyer .

Seller: Minimum Obligations

• Goods to be made available only at seller premises .

Buyer :Maximum Obligations

• Is responsible for loading goods on truck or container at sellers premises and for subsequent cost and risk .

• Arranges for export and Import Licenses Carriage ,risks and cost transfers to Buyers

Group E:EXW (Ex works) (…named place of delivery )

Main Carriage Unpaid Are considered Seller Friendly The seller /exporter is only responsible to deliver the goods to a carrier named by the buyer.

Three types :

1. FCA (Free Carrier )

2. FAS (Free Alongside Ship )

3. FOB (Free On Board )

Seller Responsibility :

• Handles Export Clearance• Handles Pre-carriage• Named Place on Seller’s Side

Buyer Responsibility :

• Contracts for Main Carriage• Control over Freight Costs

Group F Terms

The delivery of goods on truck , rail car or container at the specified point of departure .

Seller:

• Clears the goods for export .• Pre carriage .• Delivers goods to the carrier (transport

vehicle )specified by the buyer at the named place.

Buyer :

• Contracts for Main Carriage.• Insurance • Costs and Risks transfers once goods have

been delivered to the carrier at named pace .

Carriage ,Risks and Cost transfers to Buyers

1. FCA (Free carrier ) (…named place of delivery )

Goods are placed in the dock shed or at the side of the ship , on the dock within the reach of its loading equipment so that they can be loaded aboard the ship at seller expense.

Seller:

• Clears the goods for export .• Pre-carriage • Places the goods along side the vessel at

the “named port of shipment”.• Commonly used in the sale of bulk

commodity like oils grains and ore .

Buyer :

• Loading fees .• Contracts for Main Carriage.• Insurance • Costs and Risks transfers once goods have

been placed alongside ship.

Carriage ,Risks and Cost transfers to Buyers

2.FAS (Free Alongside ship ) (…named port of shipment )

The delivery of goods on board the vessel at the named port of origin (loading) at sellers expense .

Seller:

• Clears the goods for export .• Pre-carriage • Is responsible for delivering the goods, on

board the ship at the port of shipment .

Buyer :

• Contracts for Main Carriage• Cargo insurance • Costs and Risks transfers once goods have

been placed on board of ship.

Carriage ,Risks and Cost transfers to Buyers

3. FOB (Free on Board ) (…named port of shipment )

The seller contracts and pays for carriage . Not responsible for costs and risks once the goods have been shipped . Are considered Buyer Friendly.

Three types

1. Cost and Freight (CFR )

2. Cost Insurance freight (CIF)

3. Carriage Paid To (CPT)

4. Carriage and Insurance Paid To (CIP)

Seller Responsibility :

• Contracts for Main Carriage• Handles pre-carriage• Has control over freight costs• Passes risk of loss (delivers) to

Buyer prior main carriage• Handles export clearance

Buyer Responsibility :

• Named Place is on Buyer’s side• Has risk of loss while goods are in

transit with carrier selected and paid for by seller.

Group C Terms

The delivery of goods to the named port of destination (discharge ) at sellers expense .

Seller:

• Clears the goods for export .• Pre carriage • Is responsible :

• For contracting and paying for carriage of the goods .

• Risk transfers once goods have been placed on board .

Buyer :

• Onward Carriage by buyer • Has risk of loss while goods are in transit

with carrier selected and paid for by seller.• Cargo Insurance

Risk transfers to buyers

Cost transfers to buyers at delivery at named place

1. CFR (Costs and Freight ) (…named port of destination )

The cargo insurance and delivery of goods to the named port of destination (discharge ) at the sellers expense .

Seller is responsible for procuring and paying for marine insurance in the buyer ‘s name for the shipment .

Seller:

• Clears the goods for export .• Is responsible :

• For contracting and paying for carriage of the goods .

• Insurance of goods

Buyer :

• Onward Carriage by buyer • Has risk of loss while goods are in transit

with carrier selected and paid for by seller.• Cargo Insurance

Risk transfers to buyers

Cost transfers to buyers at delivery at named place

2.CIF (Costs Insurance Freight ) (..named port of destination )

The delivery of goods to the named place of destination (discharge ) at sellers expense . Often used in sales where the shipment is by air fright .

Seller:

• Clears the goods for export.• Is responsible for :

• Carriage of goods to “named place of destination” arranged by seller .

• Risk transfers once goods have been delivered to first carrier .

Buyer :

• Has risk of loss while goods are in transit.

• Import Custom clearance

Risk transfers to buyers

Cost transfers to buyers

3. CPT (Carriage Paid To ) (…named place of destination )

The delivery of goods and the cargo insurance to the named place of destination (discharge ) at sellers expense .

Seller:

• Clears the goods for export.• Is responsible for :

• Carriage of goods and insurance to the “named place of destination” arranged by seller .

• Risk transfers once goods have been delivered to first carrier.

Buyer :

• Has risk of loss while goods are in transit.• Import Custom clearance

Risk transfers to Buyers

Cost transfers to buyers

4. CIP (Carriage and Insurance Paid To ) (…named place of destination )

The seller is responsible for all costs associated with bringing goods to the named plaice or port Are considered to be “Arrival Contracts” Are “Buyer friendly “

Three Types

1. DAT (Delivered At Terminal)

2. DAP (Delivered At Place )

3. DDP (Delivered Duty Paid )

Seller Responsibility :

• Contracts for Main Carriage• In charge of carrier (and usually

forwarder) selection• Handles pre-carriage• Has control over freight costs• In control of documentation• Passes risk of loss (delivers) to

Buyer at freight arrival point• Handles export clearance

Buyer Responsibility :

• Named Place on Buyer’s side

D Group Terms

Delivery of goods to the named terminal at the port or place of destination and unloaded .

Seller:

• Clears the goods for export .• Is responsible

• Delivery of goods to the named terminal at port or place of destination .

• Unload the goods at terminal .

Buyer :

• Import Custom clearance

Cost and Risks transfers to buyer once goods are made available to buyer .

1. DAT (Delivered at Terminal ) (….named terminal at port )

Delivery of goods to the named place of destination .

Seller:

• Clears the goods for export • Is responsible

• Delivery of goods to the named place of destination buyer side .

• Ready for Unloading by seller .

Buyer :

• Onward Carriage • Import Custom clearance

Cost and Risks transfers to buyer once goods made available at port .

2. DAT (Delivered at Place) (named place of destination)

Delivery of goods at the named place of destination with import clearance .

Seller:

• Clears the goods for export • Is responsible

• Delivery of goods to the named place of destination

• Goods are ready for Unloading .• Import Custom clearance by seller .

Buyer :

• Onward Carriage

Cost and Risks transfers to buyer once goods made available at named destination .

3. DDP (Delivered Duty Paid ) (named place of Destination )

Incoterms 2010 Chart

Any Mode Terms Control of Costs

Main Carriage Cost

Risk of Costs

Departure

EXW (Ex-Works) Buyer Buyer Buyer

Main Carriage Unpaid

FCA (Free Carrier) Buyer Buyer Buyer

Main Carriage Paid

CIP (Carriage & Insurance Paid To) Seller Seller Buyer

CPT (Carriage Paid To) Seller Seller Buyer

Arrival, Freight Prepaid

DAT (Delivered at Terminal) Seller Seller Seller

DAP (Delivered at Place) Seller Seller Seller

DDP (Delivered Duty Paid) Seller Seller Seller19

Incoterms 2010 Chart

Sea, Inland Waterway Transport Terms

Control of Costs

Main Carriage Cost

Risk of Costs

Main Carriage Freight Collect

FAS (Free Alongside Ship) Buyer Buyer Buyer

FOB (Free on Board) Buyer Buyer Buyer

Main Carriage Freight Prepaid

CFR (Cost and Freight) Seller Seller Buyer

CIF (Cost, Insurance, and Freight) Seller Seller Buyer

20

Thank You