INCOTERMS. That are useful for export and import ppt
- 1. INTERNATIONAL FREIGHT FLOWS Supplier Inland freight Export customs Import customs Inland freight Buyer
- 2. What does INCOTERM stand for? • Def: the word ‘INCOTERM’ is an abbreviation for International Commercial Terms which provide a common set of rules used for defining the responsibilities of sellers and buyers in the delivery of goods under sales contracts • They are widely used in international commercial transaction
- 3. When & Where did they appear? • First conceived by International Chamber of Commerce (ICC) in 1921 and implemented starting from 1936, since they have been updated 9 times in order to keep pace with the evolution of international trade • In 1923, a Trade Terms Committee developed the first 6 rules: FOB, FAS, FOT, FOR, Free Delivered CIF and C&F, as the precursor for what would later be known as INCOTERM rules.
- 4. Why is that? • Because they: • Set International rules for commonly used terms in foreign trade • Define obligations of both parties involved in the transaction • Determine the distribution & transfer of risks regarding the goods delivered from seller to buyer • State the clear sharing of expenses between the parties during transport
- 5. INCOTERMS HAS FIXED FIVE POINTS 5 POINTS WHERE RISK OF DAMAGE GETS SHIFTED FROM SELLER TO BUYER S W B A U R Y E E H R O U S E S E L L E R P O R T B U Y E R S P O R T S E L L E S W A R E H O S E S E A R O U T E R U
- 6. Transportation Definitions • Pre-carriage: inland transportation on the seller’s side • Domestic: from the place where the shipment starts to any subsequent transportation carriage • International: from the place where the shipment starts to the departure point on the seller’s side • Main Carriage: • Domestic: Subsequent transportation beyond pre-carriage • International: Transportation from the point of departure on the arrival point on the buyer’s side • On-carriage: • Domestic: Subsequent transportation beyond main carriage • International: transportation from the arrival point on the buyer’s side
- 8. Transportation Definitions • Transhipment • Transhipments is the shipment of goods or containers to an intermediate destination, then to yet another destination • Door-To-Door • Contract of carriage that includes pre-carriage, main carriage and on-carriage by the same carrier • Door-To-(Air) Port • Contract of carriage including pre-carriage and main carriage to airport or ocean port or truck terminal port or rail port • (Air) Port-To-(Air) Port • Contract of carriage of main carriage only • (Air) Port-To-Door • Contract of carriage including main carriage and on-carriage
- 10. What Incoterms 2020 do… • Rules are not designed for a specific type of trade or commodity • It can be used for any type of trade • It describes: • Obligations between buyer and seller. • Risks – when the risk is transferred from seller to buyer • Costs – for whose account at which stage
- 11. What INCOTERMS Rules do… • Obligations: • Who does what – between buyer and seller • Delivery of goods • Come and take the goods from my place • Will deliver the goods at your place • Organizing carriage • Insurance to cover the transit risk • Obtaining shipping documents • Export / import clearance
- 12. What INCOTERMS Rules do… • Risks • Where and when seller delivers the goods • Where risk transfers from seller to buyer • Costs • Party responsible for which costs • Packing / Checking / loading and unloading / Security related costs
- 14. What Incoterm Rules do not do • Rules are not substitute to ‘contract of sale’ though it is a part of ‘contract’ • Do not deal with: • Specification of goods • Payment terms – when, where, how much to be paid and in which currency to be settled • Remedies for breach of contract • Method, venue or law of dispute resolution in case of such breach of contract • Consequences of delay in delivery • Effect of sanctions • Imposition of tariffs • Imposition of prohibitions for entry of goods. • Force majeure or hardships or • Intellectual Property Rights
- 15. INCOTERMS do not …… • They do not: • Apply to contracts for services. • Define contractual rights and obligations other than for delivery. • Specify details of the transfer, transport, and delivery of the goods. • Determine how title to the goods will be transferred.
- 16. INCOTERMS do not …… • Protect a party from his / her own risk of loss. • Define the remedies for breach of contract.
- 17. What Incoterm Rules DO NOT DO • Most important : • These Rules DO NOT deal with: • Transfer of property • Transfer of title • Transfer of ownership of the goods sold • To be more specific: • Incoterms Rules are not themselves a contract of sale • Becomes part of an existing contract when incorporated
- 18. INCOTERMS and Insurance: • INCOTERMS deal only with the seller’s obligation to take out insurance to the benefit of the buyer under CIF and CIP. • Under all other terms, it is for the parties themselves to arrange insurance as they see fit.
- 19. INCOTERMS Delivery to named port/place Deliver goods into custody of freight agent, carrier or owner Transport methods: Rail Road Sea Air Inland waterway Multi-modal (combination)
- 20. EXW – Ex Works FCA – Free Carrier FAS – Free alongside Ship FOB – Free on Board CFR – Cost & Freight CIF – Cost Insurance & Freight CPT – Carriage Paid to CIP – Carriage Insurance Paid DAF – Delivered at Frontier DES – Delivered Ex Ship DEQ – Delivered Ex Quay DDU – Delivered Duty Unpaid DDP – Delivered Duty Paid INCOTERMS 2000
- 21. INCOTERMS 2000 Origin Term (EXW) : {Departure} Seller only makes goods available at the seller’s own premises F – Terms ( FCA,FAS,FOB) {Main Carriage Unpaid} Seller is called upon to deliver the goods to a carrier appointed by the purchaser. Seller will be responsible only for handing over the goods to the purchaser’s international carrier in the country of export
- 22. INCOTERMS 2000 C – Terms (CFR,CIF,CPT,CIP) {Main Carriage Paid} Seller will be responsible for handing over the goods to the purchaser’s international carrier in the country of export duly paid for freight and/or insurance till port of entry/destination in the importer’s country D – Terms (DAP,DDU,DDP) {Arrival} Seller will be responsible for handing over the goods to the purchaser in the purchaser’s country at the port of entry/final destination duty cleared/ uncleared
- 23. Supplier Inland freight Export customs Import customs Inland freight Buyer EXW FOB FCA FAS DES DAF DEQ DDU CIF CFR CIP CPT DDP DAT DAP INTERNATIONAL FREIGHT FLOWS INCOTERMS 2000 INTERNATIONAL FREIGHT FLOWS INCOTERMS 2010
- 24. INTERNATIONAL FREIGHT FLOWS INCOTERMS 2010 Supplier Inland freight Export customs Import customs Inland freight Buyer EXW FOB FCA FAS CIF CFR CIP CPT DDP DAT DAP
- 25. EXW – Ex Works FCA – Free Carrier FAS – Free alongside Ship FOB – Free on Board CFR – Cost & Freight CIF – Cost Insurance & Freight CPT – Carriage Paid to CIP – Carriage Insurance Paid DAT – Delivered at Terminal DAP – Delivered at Place DDP – Delivered Duty Paid INCOTERMS 2010
- 26. INCOTERMS 2020® Sr. No. INCOTERMS 2010® INCOTERMS 2020® 1 EXW EXW 2 FCA FCA 3 FAS FAS 4 FOB FOB 5 CPT CPT 6 CIF CIF 7 CFR CFR 8 CIP CIP 9 DAT DPU 10 DAP DAP 11 DDP DDP
- 28. Division of Incoterms 2020 INCOTERMS are now classified according to risk and responsibilities
- 30. Using INCOTERMS correctly by… • Following the three letters of the appropriate chose term with the exact destination place to which the delivery of goods is to be made, and afterwards the expression ‘INCOTERMS 2020’ • Such as: FCA Port of New Orleans, USA, Incoterms 2020 Or CIP Tianjin airport, China, Incoterms 2020 Will certainly benefit…
- 31. Using INCOTERMS correctly by… All the parties involved as •INCOTERMS have become an essential framework in daily language of trade, providing clear rules and guidance to importers, exporters, lawyers, forwarders, insurers, carriers and mainly everybody taking part in international trade transactions. Leading to:
- 32. HOWEVER IF USED CORRECTLY • Your contract may be ambiguous, lacking some important details or even impossible to perform, causing lots of misunderstanding and prejudices Which can turn into… And eventually cause…