INCOTERMS : International Commercial Terms (2010) zINCOTERMS: Rules defining the responsibilities of sellers and buyers for the delivery of goods under a sales contract (Updated in 2010) yINCOTERMS define: xCosts – Who pays what? xRisk – Who insures goods xTasks – Who is responsible for additional services required by transport xhttp:// rules/incoterms-2010-rules/ rules/incoterms-2010-rules/

Why are they Important? zReduce the uncertainty caused by trade practices in different countries. zSimplify the negotiations involved in international commerce. zEnsure common understanding of obligations

The Steps of Global Logistics Main International Transportation 4 Handling Inbound Customs Clearance Duties Final Transportation Unloading Packing Loading Preliminary Transportation Customs Clearance for Export Handling Outbound Insurance

Carriage & Responsibilities zCarriage: The transport of goods from place to another zPre-Carriage: The initial transport segment before being loaded on a ship zMain Carriage: The transport segment by ship or airplane zOn-Carriage: The final transport segment after being discharged from a ship zINCOTERM acronyms define seller/buyer responsibilities

Carriage Segments Goods Seller’s Risk Seller’s Cost PRE -CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance

INCOTERM Acronyms Goods Seller’s Risk Seller’s Cost PRE -CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance Acronyms dictate mode and where responsibility lines are drawn

INCOTERM Categories (4) & Acronyms (11) Incoterms Code Ex worksEXW Free carrier FCA Free alongside ship (Marine)FAS Free on board (Marine)FOB Cost & freight (Marine) CFR Cost, insurance & freight (Marine) CIF Carriage paid toCPT Carriage and insurance paid toCIP Delivered at Terminal DAT Delivered PlaceDAP Delivered Duty PaidDDP E Terms F Terms C Terms D Terms (Marine) used exclusively for marine shipments. The rest can be used with all transport like truck, rail and air or a combination of these with a ship.

Categories zCategory E: Seller pays least and has minimum responsibility. Buyer picks up at Seller’s facility zCategory F: Seller does NOT pay for main carriage zCategory C: Seller pays for main carriage but Buyer is responsible for risk of main carriage yCIF – Seller pays for insurance but Buyer keeps risk zCategory D: Seller pays to main carriage and is responsible for main carriage risk

E Terms: Departure EXW or Ex Works(named place) Under E-terms, the seller minimizes his risk by only making the goods available at his own premises. Goods Seller’s Risk Seller’s Cost PRE -CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance

EXW = Ex Works zThe seller fulfills his obligation to deliver when he has made the goods available at his premises to the buyer. zThe seller is not responsible for loading the goods on the vehicle provided by the buyer zThe seller is not responsible for clearing the goods for export, unless agreed. zThe buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination.

Category F: Main Carriage Not Paid by Seller z FAS - Free Alongside Ship z FCA - Free Carrier z FOB - Free On Board Under F-terms, the seller arranges and pays for pre-carriage in the country of export, including export clearance (export taxes and duties) under FCA and FOB

FAS (…named port of shipment) Goods Seller’s Risk Seller’s Cost PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE BUYER Export Clearance Import Clearance SELLER Buyer export documents nominates carrier, contracts carriage pays freight Seller delivers goods alongside ship (delivers to an export marine terminal) evidence of delivery

FCA (…named place) Goods Seller’s Risk Seller’s Cost PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance Buyer nominates carrier, contracts carriage pays freight Seller clears export customs, delivers goods to carrier (delivers to an export port, airport or truck depot) evidence of delivery

FOB (…named port of shipment) Goods Seller’s Risk Seller’s Cost PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance Buyer nominates carrier, contracts carriage pays freight Seller clears export customs, delivers and loads goods onto the ship (delivers to port & pays stevedoring cost) evidence of delivery

Group C: Main Carriage Paid by Seller z CFR - Cost & Freight z CIF - Cost, Insurance & Freight z CPT - Carriage Paid To z CIP - Carriage & Insurance Paid to… Under C-terms, the seller arranges and pays for the main carriage but without assuming the risk of the main carriage.

CFR (…named port of destination) Goods Seller’s Risk PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance Seller’s Cost Seller clears export customs, arranges & pays for main carriage NOT responsible for main carriage risk

CIF (…named port of destination) Goods Seller’s Risk PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance Seller’s Cost + Insurance Seller clears export customs, arranges & pays for main carriage NOT responsible for main carriage risk (However, seller agrees to pay insurance)

CPT (…named destination) Goods Seller’s Risk PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance Seller’s Cost + Insurance Seller clears export customs, arranges & pays for main carriage delivers goods to a destination NOT responsible for main carriage risk

CIP (…named destination) Goods Seller’s Risk PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLERBUYER Export Clearance Import Clearance Seller’s Cost + Insurance Seller clears export customs, arranges & pays for main carriage delivers goods to a destination NOT responsible for main carriage risk (However, Seller agrees to pay insurance)

Ocean vs Other zOcean TermsOther Terms yCFRCPT yCIFCIP

Group D: Arrival z DAT - Delivered At Terminal z DAP - Delivered At Place z DDP - Delivered Duty Paid Under D-terms, the seller’s cost/risk is maximized because he must make the goods available at the agreed destination. Including import clearance under DEQ and DDP

DAT (…named terminal) Goods Seller’s Risk Seller’s Cost PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLER BUYER Export Clearance Import Clearance Seller pays to destination terminal

DAP (…named destination) Cost Goods Seller’s Risk Seller’s Cost PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLER BUYER Export Clearance Import Clearance Seller pays to buyer’s location but NO taxes or duties Goods Seller’s Risk Seller’s Cost

DDP (…named destination) Goods Seller’s Risk Seller’s Cost PRE-CARRIAGE MAIN CARRIAGEON-CARRIAGE SELLER BUYER Export Clearance Import Clearance Seller pays to buyer’s location INCLUDING taxes or duties

Ocean vs Other zOcean TermsOther Terms y DAT y DAP y DDP

Sources zwww.wto.org zwww.icc.org zUNCTAD at United Nations zLocal Chambers of Commerce zInternational Chamber of Commerce - New York City Office