1. What do the Changes Mean?
Incoterms 2010
What do the Changes Mean?

2. International Commercial Terms History
Initially created in 1936 by the International Chamber of Commerce (ICC) and have been periodically revised (Incoterms® is the 8th revision)
Incoterms® are generally good for approximately 10 years ~ not a magic number, but historically about accurate
Incoterms® reflect world-wide trade practices, as practices change, Incoterms® are revised
Incoterms® were written by the ICC, represented by 8 individuals from various countries/areas of the world
Met 11 times in person
Received over 2000 suggestions in first request
Refined suggestions over 4 proposals
Controlling source document is written in British English and will be translated into 35+ languages over the next year.
World-wide Practice: Intended to reflect trade practice, not to tell you what to do. Incoterms drafting committee requested opinions of business professionals in 100 countries how they do business.
Suggestions were received from EU, USA, Brazil, Mexico, Asia, Peru, South Africa, Chile, Iran, China, Singapore and Malaysia amongst others. Some of the suggestions provided by countries were wonderful, some were off the fringe, some contradicted each other, others were common. The working group consolidated all suggestions and refined them, sending out draft after draft incorporating new suggestions generated by each draft. By fourth proposal, most felt that there was enough consensus to adopt as Incoterms Not everyone got everything as they wanted it, but it was well thought out, debated and adopted.

3. Eleven (11) Incoterms® 2010 (used to be 13 terms)
What are Incoterms ® 2010?
Eleven (11) Incoterms® (used to be 13 terms)
Four (4) terms were deleted and two (2) new terms were created
Incoterms® will begin January 1, 2011, but you don’t have to use them on that date
Available worldwide through 100 International Chamber of Commerce National Committees
The terms aren’t law; no laws that require their use and are not all inclusive
Country neutral – they don’t favor one country over another
Self-contained – all information that determines responsibility and risk are in one place
Recommendation: Start talking about Incoterms 2010, but start implementing in contract in April/May 2010 timeframe. Your partners may not be up to speed on the new requirements, obligations, terms – this will give the trading community time to adjust to new terms. You may not use/reference terms prior to 1/1/11.

4. Definitions….. Just what do we mean?
Go through the definitions prior to explaining what Incoterms® do or don’t do. Understanding the definitions as used in Incoterms® will help audience understand key differences that must be addressed in contract language and not assumed by one side or the other to be included in the Incoterms® as written.

5. You must know your contract and your Incoterm®
Key Definitions
What is Delivery?
It is not always:
When the goods arrive in your customer’s hands or
When the goods leave your dock
Defined the same in all countries
You must know your contract and your Incoterm®
Note: A Purchase Order and a matching Acknowledgement will constitute a “contract” if there isn’t a separate stand-alone contract related to the transaction.
As defined in Incoterms® 2010, “it is used to indicate where the risk of loss of or damage to the goods passes from the seller to the buyer.”
Delivery is a key definition to know.
Ask the attendees to define delivery for you…..write them on the whiteboard/post-it easel paper, etc., once exercise is completed, click to bring in Incoterms® definition.
There are many interpretations on what “delivery” means throughout the world, but the Incoterms® has specifically defined in the Introduction section of the Incoterms® book what delivery is to be interpreted as under any of the Incoterms®
In US we tend to equate “Delivery” with the arrival of goods at a desired place. This is NOT equivalent with Incoterms 2010 definition of “Delivery”

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 seller’s side to the arrival pint on the buyer’s side
On-carriage:
Domestic: subsequent transportation beyond main carriage
International: transportation from the arrival pint on the buyer’s side
Give some examples:
Shipment goes from Shipper Location A via Joe’s Man in a Van Service who delivers it to the local international airport and turns over to ABC Airline. ABC Airline flies it to Airport in Country/State X where Jim’s Haul & Tote picks up and delivers to Customer Location C. Who is performing the transportation on-carriage? (Jim’s Haul & Tote)
Shipment is picked up from Shipper Location C by Big Brown Express who delivers it to Country/State W. After changing Countries (clearing customs)/States, Jim’s Haul & Tote picks up the package and delivers to Buyer A. What carriage is Big Brown Express handling? (pre- & main-carriage)
Shipment is picked up from Shipper Location L, Purple Express delivers to Freight Forwarder Blue. Freight Forwarder Blue delivers to Customer 3. What is Freight Forwarder Blue handling? (main-carriage, there is no on-carriage – the main-carriage is continued with the same firm through to final destination

7. Transportation Definitions
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 for main carriage only
(Air) Port – to – Door:
Contract of carriage including main carriage and on-carriage

8. Type of Transportation?
Company A
Company B
Door to Door – one contract for all carriage (pre-, main, and on-carriage)

9. Type of Transportation?
Company A
Door to Port – contract for pre-carriage and main-carriage
Company B responsible for arranging pick up at Arrival Airport

10. A Few More Definitions…..
Omni-modal: Used with terms that use all modes of transportation (truck, airplane, vessel, train…)
Marine-restricted: Terms that only apply to carriage by vessel
Shipment Contract: sales/purchase contract where the seller’s responsibility ends when goods are handed over to the first carrier
Arrival Contract: sales/purchase contract where seller’s responsibility ends when goods have arrived at agreed place

11. Packaging Definitions
The packaging of the goods to comply with any requirements under the contract of sale.
The packaging of goods so that they are fit for transportation.
The stowage of the packaged goods within a container or other means of transport.
Incoterms® only address 1 & 2. The third definition MUST be addressed in the associated contract.
3. Further clarification: The stowage of the packaged goods within a container or other means of transport. The loading of a container for weight, balance, humidity, etc. must be addressed in the contract. Additionally, if the container is being placed on a ship, where in the ship’s vessel plan should it be loaded? If you have requirements that your goods are impacted by weather, seawater etc. and must be stowed below decks, then that must be addressed specifically in the contract.
Only Definition 1 & 2 are addressed in Incoterms®
Definition 3 must be addressed within the contract between the parties.

12. What Questions to Ask? Who furnishes the goods?
Who packages the goods in a manner suitable for shipment (export)?
Who moves the goods from the seller’s factory to a port, airport, or border crossing in the seller’s country?
Who arranges for export clearance in the seller’s country (if applicable)?
Who arranges for main carriage (international transportation) from the departure port to the arrival port?
Who pays for main carriage?
Who insures the shipment?
Who arranges for import clearance?
Who pays import duties?
Who pays for on-carriage from the arrival port to the delivery destination?
Who arranges and pays for country-specific documentation (e.g., consular invoices, inspection reports, licenses)?
Key questions to ask in structuring a transaction. If you can answer all these questions, you can determine what the correct Incoterm® to use should be.

13. Now that we have some basic definitions…

14. What do Incoterms® 2010 Do?
Divides up tasks, responsibilities, costs and risks to deliver goods from seller to buyer
If used correctly, no duplication of effort between seller & buyer
Acts as signposts for who needs to have additional contracts (i.e., with vessel steamship line, inland trucking company, etc.) to complete transaction
If something goes wrong, clearly defines responsibilities based on where the goods were in the transportation chain of delivery
Address “String sales”
Shipments where ownership changes in transit
Address Cargo Security concerns
Authorized Economic Operator (AEO), Customs-Trade Partnership Against Terrorism (C-TPAT), Importer Security Filing (ISF 10+2)
Defines mode of transportation by their use
4 Terms are for Marine-Restricted for sea & inland waterway transport only
7 Terms are Omni-modal for use with all modes of transportation
Increasingly considered replacement for Uniform Commercial Code (UCC) shipment/delivery terms.
Incoterms 2000 or 2010 (and identified as which version) should be negotiated and included in all contracts for durable goods.
By use of Incoterms, you must think through the entire transaction at time of contract in order to determine the correct term to include, and to know what is included in the seller’s obligations to ensure pricing is adequate to cover costs of adhering to obligations accepted.
String Sales are typically seen in commodity transactions where the seller may sell to a distributor “en route” and the distributor sells prior to or upon arrival in destination country port. Interiors is working to have string sales for shipments leaving IDC for deliveries to Boeing or Airbus with the ownership changing from IDC to Interiors US location (i.e., Jamestown, Phoenix) and selling in transit with delivery to Boeing or Airbus

15. What Incoterms® 2010 DO NOT Do…
Automatically Apply
Determine When Ownership Changes
When delivery occurs or when payment happens can impact when ownership changes
Must be addressed specifically in contract
Under US Law, it is when the product is delivered
If jurisdiction is under another sovereign nation law, you need to address per that country regulation
If contract is subject to the United Nations Convention on Contracts for the International Sale of Goods (CSIG) the law does not specify if it is not addressed specifically within the contract
Identify when Revenue is Recognized
Under GAAP and Securities & Exchange Commission (SEC) Rules 1) ownership must pass prior to recognizing revenue and 2) delivery must occur
If not specifically addressed in contract, look to applicable contract law
All the issues identified in DO NOT Do section (2 pages) MUST be addressed in the contract between the parties.
“D” Terms are less attractive to publically traded companies since you can’t recognize revenue until “delivery” on buyer’s side – However, this may also be advantageous for Tax purposes.

16. What Incoterms® 2010 DO NOT Do…
Identify if a Breach of Contract occurs, when it happened
Does not determine remedies for breach of contract
Provide relief from obligations/exemptions from liability in unexpected or unforeseeable situations
Address Payment issues
Tells you that the buyer must pay, but not when or where
Address more than one contract
Drop Shipments are TWO Contracts
1) between the seller and their supplier and
2) between the seller and the buyer
Incoterms® could be the same or different in each contract
Specifically task a party with container stowage obligations
Drop Shipments:
Between the seller and their supplier – Company A is buying goods from Company B and having them delivered to Company C. In this case Company A is actually the buyer in this contract.
Between the seller and the buyer – this is the normal sale as if the shipment left from Company A’s shipping dock and shipping directly to Company C’s receiving dock. In this case Company A is the “seller”
Stowage Obligations:
Incoterms 2000 used the term “passing the ship’s rail” as when risk & responsibilities changed hands from seller to buyer. Ship’s rail was deemed in this round of negotiations to not add any value. It depended on how the ship was loaded.
If the commodity was oil – it was loaded via hose – when did the oil pass the ship’s rail? The first gallons or the last?
If the commodity was grain – it was loaded via hopper – when did the grain pass the ship’s rail?
If the commodity was loaded in containers – if there was more than one and only one passed the ship’s rail – who was responsible for what portion of the shipment?
If the commodity was large (i.e., 10 ton turbine) and had to be loaded via crane – where to put it on the ship?
Rather than making assumptions in Incoterms® that wouldn’t work for all cases as above, it is now left up the parties in the contract to determine stowage and container packing obligations.
Breach of Contract: Not determined in Incoterms 2010 but they do have a provision for pre-mature transfer of risk/loss to the buyer if the seller can’t complete their requirements in a timely manner if the buyer doesn’t complete their actions (i.e. Incoterms 2000 – DDU if the buyer doesn’t clear customs, the seller can’t deliver – the buyer will then assume the risk of loss. Timely manner is not defined, but if the buyer doesn’t clear customs and the goods are sent to General Order for not clearing within regulatory timeframes, this would be considered as an untimely manner)

17. Incoterms® 2000 vs. 2010 EXW – Ex Works EXW – Ex Works
FCA – Free Carrier
FAS – Free Alongside Ship
FOB – Free On Board
CFR – Cost and Freight
CIF – Cost, Insurance & Freight
CPT – Carriage Paid To
CIP – Carriage & Insurance Paid To
DEQ – Delivered Ex Quay
DES – Delivered Ex Ship
DAF – Delivered at Frontier
DDU – Delivered Duty Unpaid
DDP – Delivered Duty Paid
EXW – Ex Works
FCA – Free Carrier
FAS – Free Alongside Ship
FOB – Free On Board
CFR – Cost and Freight
CIF – Cost, Insurance & Freight
CPT – Carriage Paid To
CIP – Carriage & Insurance Paid To
DAT – Delivered At Terminal
DAP – Delivered At Place
DDP – Delivered Duty Paid
DEQ (Delivered Ex Quay) has been changed to DAT (Delivered at Terminal) to change to Omni-modal status (all types of terminals – truck, bus, train, airline, vessel) and name changed to better reflect the new status from Quay to Terminal.
DES (Delivered Ex Ship), DAF (Delivered At Frontier) and DDU (Delivered Unpaid) have been all incorporated into DAP (Delivered at Place)
Marine Restricted Omni-Modal

18. Group Term Definitions
F – Terms
C – Terms
D – Terms

19. F-Group Terms Are considered to be “Shipment Contracts”
Are considered Buyer Friendly
Seller
Handles Export Clearance
Handles Pre-carriage
Named Place on Seller’s Side
Buyer
Contracts for Main Carriage
In charge of Carrier (and usually forwarder) selection
Control over Freight Costs
Control of Documentation

20. C-Group Terms Are considered to be “Shipment Contracts”
Are considered Seller Friendly
Seller
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 prior main carriage
Handles export clearance
Buyer
Named Place is on Buyer’s side
Has risk of loss while goods are in transit with carrier selected and paid for by seller
Must rely heavily on Seller for data elements required for ocean shipments such as Importer Security Filing (known as ISF or 10+2)
If informed, should not consider “C” terms due to downside described

21. D-Group Terms Are considered to be “Arrival Contracts” Seller Buyer
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
Seller may have revenue recognition issues since “delivery” occurs on arrival side, meaning revenue is recognized only upon arrival
Buyer
Named Place on Buyer’s side
Must rely heavily on Seller for data elements required for ocean shipments such as Importer Security Filing (known as ISF or 10+2)
Undertakes less risk than in “C” terms
If inexperienced, or does not have good relationship with carriers, is served will by “D” terms

22. Omni-Modal Incoterms® 2010

23. Ex Works (EXW) + (Named Place)
Named Place is generally Seller’s Location (or where product initially ships from)
Delivery – Seller delivers goods when placed at buyer’s disposal at the name place of delivery
Goods are packaged
Goods are NOT LOADED on the collecting vehicle
Seller Risks – Minimum obligation for seller; once packaged there is a loss of control over transportation movement, where package is finally received, how export or import documentation is presented to relevant governments
Buyer Risks – Buyer bears all costs and risks involved in taking the goods from the named place
Carriage: Buyer responsibility to arrange for pre-carriage, main carriage, on-carriage
Insurance: Neither party required to insure goods
Export/Import Clearance: Buyer must handle all requirements, pay all associated duties and fees
Unless Buyer is a foreign Embassy – No foreign buyer can get an ITAR license – therefore ITAR shipments cannot use EXW.
Buyer MUST give their main-carriage provider POA or authorization to file AES on their behalf if using EXW.
Delivery ends when the goods are packaged and the buyer notified that the goods are available for transportation to be arranged and picked up. Delivery occurs prior to being picked up from the loading dock.
Note: Should NOT be used when the buyer cannot carry out export requirements directly or indirectly

24. Free Carrier (FCA) + (Named Place)
Named Place is generally:
Seller’s Place of Business
Seller responsible for having goods available when promised, packaged to the extent known or agree, loaded onto collecting vehicle
Buyer responsible for pre-carriage, main carriage, on-carriage
Another Location on Seller’s side (i.e., International Airport, Freight Forwarder Warehouse for consolidation, another location agreed by Seller and Buyer)
Seller responsible for having goods available when promised, packaged to the extent known or agree, loaded onto collecting vehicle, pre-carriage
Buyer responsible for unloading pre-carriage delivering vehicle, main carriage, on-carriage
FCA = FOB (Factory) under UCC terms
This is the only term that has two possible named places that mean something different – the cost of pre-carriage is the difference.
There are two pages defining FCA in the presentation….

25. FCA + (Named Place)
Contract of Carriage: Buyer is responsible to make a contract of Carriage, however if requested or the buyer does not give instruction in due time, the seller may contract for carriage on usual terms at the buyer’s risk and expense.
Risks: passes to buyer at point of delivery
Insurance: Neither party required to insure goods
Export Clearance: Handled by Seller
Associated Licenses can be obtained and maintained under US Law
Automated Export System filings can be completed by Seller
Import Clearance: Handled by Buyer – responsible for the customs formalities and any duties, fees, other charges due upon importation.
This is the most versatile of the “F” terms.
AES – still can be “routed”, this is not a panacea for determining if something is “routed” under FTR. Since Buyer is responsible for transportation pre-carriage and main carriage, they can elect to authorize their freight forwarder to file AES on their behalf making the shipment “routed”.
Container Stowage requirements are the only big change in FCA from Incoterms 2000 to Incoterms 2010.

26. Carriage Paid To (CPT) + Named Place (on Buyer’s Side)
Delivery: Seller delivers goods to a carrier or another person nominated by the seller, at an agreed place, for transportation to the named destination on the Buyer's side, appropriately packaged
Carriage: Seller chooses and pays cost of carriage to bring the goods to the named destination (the final location, not the destination port)
Risks: Seller bears all risks and costs incurred until the goods are delivered to the first carrier on the Seller’s side
Export Clearance: handled by Seller
Import clearance: Buyer responsibility for paperwork and all costs
Insurance: Neither party required
Destination Charges such as terminal unloading charges at the arrival point must be addressed specifically in the contract.
If the first carrier loses or damages the goods prior to the delivery to the main-carriage provider, the loss or damage is the responsibility of the buyer even though the seller is paying to get the goods to the named place on the buyer’s side. If this is unacceptable to the buyer – any alterations must be addressed specifically in the contract.
Note: Risk of Loss passes on Seller’s side to Buyer BUT Cost is Seller’s responsibility to named location on Buyer’s side

27. Carriage and Insurance Paid To (CIP) + Named Place (on Buyer’s Side)
Delivery: Seller delivers goods to a carrier or another person nominated by the seller, at an agreed place, for transportation to the named destination on the Buyer's side, appropriately packaged
Carriage: Seller pays cost of carriage to bring the goods to the named destination (the final location, not the destination port)
Risks: Seller bears all risks and costs incurred until the goods are delivered to the first carrier on the Seller’s side
Export Clearance: handled by Seller
Import clearance: Buyer responsibility for paperwork and all costs
Insurance: Seller required to obtain minimum coverage
Same as CPT other than Seller is required to obtain minimal coverage for insurance. Is your company is self-insured – this is not one of the Incoterms® that we would want to use, it will require us to obtain more coverage than we already have.
Note: Risk of Loss passes on Seller’s side to Buyer BUT Cost is Seller’s responsibility to named location on Buyer’s side

28. Delivered at Terminal – DAT + Named Place (Buyer’s side)
Replaces DEQ Term
Delivery: Seller delivers goods to named destination terminal on Buyer’s side, packaged appropriately and unloaded
Carriage:
Seller responsible for pre-carriage and main carriage
Buyer responsible for on-carriage
Risks: Transfer from Seller to Buyer once goods are unloaded on buyer’s side at terminal
Export Clearance: Seller Responsibility
Import Clearance: Buyer Responsibility – documentation and fees associated
Insurance: Neither party required to insure
This Incoterm is generally used by bulk carriers such as grain, oil, etc.

29. Delivered at Place (DAP) + Named Place (Buyer’s Side)
Previously contained elements of DDU, DAF, DES terms
Delivery: Seller delivers the goods to the buyer at the named place on the Buyer’s side, appropriately packaged, but not unloaded
Carriage: Seller handles all carriage to named place on buyer’s side
Risks: Transfer from Seller to Buyer once goods are delivered to the named place on buyer’s side
Export Clearance: Seller handles
Import Clearance: Buyer handles and pays associated costs
Insurance: neither party required to insure
History of why the elements of DDU, DAF and DES were changed to DAP:
DAF – over history countries have protected their borders, many have different gauges from neighbor countries, so when it was Delivered at Frontier, goods had to be unloaded from one rail and put onto another gauge rail that was not addressed in Incoterms 2000 DAF terms. Also where was the “Frontier” line? Prior to Customs on the exporting side, at an imaginary line, in the middle of a river on the border, after customs on the importing side? Too many unknowns, so DAF was removed and positive elements were incorporated into DAP
DES – was a marine only term under Incoterms Elements were generally accepted, but needed to have more transportation options other than just marine transport
DDU – The committee and many shippers/buyers liked everything about the term other than the name. With “duty unpaid” in the name it didn’t work well to also use as a domestic term. The EU has become more and more like the US interstate transactions, crossing borders in the EU no longer requires customs duty changes, only when you leave the EU or enter from a non-EU country

30. Delivered Duty Paid (DDP) + Named Place (Buyer’s Side)
Delivery: Seller delivers goods to the Buyer, cleared for import on the arrival transportation, but not unloaded at the final destination
Carriage: Seller handles all carriage to named place on Buyer’s side
Risks: Transfer from Seller to Buyer once goods are delivered to the named place on the Buyer’s side
Export Clearance: Seller Handles
Import Clearance: Seller Handles & pays for any charges associated
Insurance: Neither party required to provide
DDP is the other bookend from EXW.
This term is seductive for buyers, but not a good option for sellers. The seller may not be able to import into the country of destination. Buyers have no control over what the sellers provide in terms of classification, or in the case of the US any exemptions or other importing requirements. If the customs authority of the importing country require redelivery after the goods have cleared for some reason such as marking or problems in the paperwork, the buyer has no recourse to speak to Customs – they were not the importer of record – the seller was.
Two pages on DDP…..

31. Should not be used if SELLER CANNOT clear goods in importing country
DDP Caveats
Should not be used if SELLER CANNOT clear goods in importing country
NOT recommended if Buyer wants control of import documents and declarations to Customs
DDP DOES NOT MEAN Buyer is absolved of all Customs Regulations & Responsibilities
If a country has drawback of duty elements, the buyer can’t take advantage, they can’t cite the import entry number, they weren’t the Importer of Record.
IF the product is coming into the US and the product is classified as ITAR, the foreign party, even if they are a non-resident IOR can’t use any exemptions – they are not eligible therefore the US party will need to get a license (at $250) to get it out.

32. Water Transport Only Incoterms® 2010

33. Insurance: Neither party required to insure goods
Free Alongside Ship (FAS) + Named Place (alongside vessel at port on Seller’s side)
Delivery: Seller delivers goods to Buyer alongside the vessel chosen by Buyer at the named port of shipment, packed appropriately
Carriage:
Seller handles pre-carriage
Buyer handles main carriage and on-carriage
Risks: Pass from Seller to Buyer once goods place alongside the vessel on Seller’s side
Insurance: Neither party required to insure goods
Export Clearance: Seller Handles
Import Clearance: Buyer is responsible for requirement and fees associated
FAS –
Ports are now secure as opposed to early shipments. You surrender your cargo to carrier, move several times within port, ship comes in, and then loaded
Carrier terminal is the place delivered to. Received for shipment transportation document should be provided by carrier, seller’s responsibility and costs end here. Seller never gets to ship side with cargo – too much security on port. Buyer appoints carrier, but seller is responsible for risk, surcharges are all invoiced to the buyer, but the seller is responsible. (in the US) (in Asia see FOB term information). Seller can deliver or procure goods that have been delivered (Commodities). String sales….buyer responsible for loading vessel

34. Insurance: Neither party is required to insure goods
Free On Board (FOB) + Named Place (loaded on vessel at a port on the Seller’s side)
Delivery: Seller delivers goods to Buyer on board the vessel chosen by the Buyer at the named port of shipment, packaged for shipment
Carriage:
Seller handles pre-carriage
Buyer handles main carriage and on-carriage
Risks: Pass from Seller to Buyer once goods are placed on board the vessel on the Seller’s side
Insurance: Neither party is required to insure goods
Export Clearance: Handled by Seller
Import Clearance: Handled by Buyer
FOB
Seller is responsible for condition of goods until they are loaded on the vessel on the seller’s side. Define in contract what loaded means. Seller needs to do stuff (loading) on buyer’s vessel. (Asia – big imports have squeezed profit out of freight – they are big enough to say we aren’t going to pay this, so carriers are leaning on smaller shippers to hit with terminal charges for loading and imposing FOB terms on Asian shippers using FCA terms) Not an appropriate term for container shipments – use FCA instead since it represents what happens to cargo on the ground.
NOTE:
“Ships Rail” is no longer part of Incoterms® If using Marine Terms, Contract or PO must exactly state what “on board the vessel” means for the transaction – where on the vessel is the container, item to be placed

35. Cost and Freight (CRF) + Named Place (port on Buyer’s side)
Delivery: Seller delivers goods packaged for shipment on board the Seller-designated vessel at the port on Seller’s side
Carriage:
Seller handles pre-carriage and main carriage
Buyer handles on-carriage following delivery to port on Buyer’s side
Risks: Passes from Seller to Buyer once goods are on board the vessel
Insurance: Neither party required to insure goods
Export Clearance: Handled by Seller
Import clearance: Buyer is responsible for the customs requirements and associated costs (fees, duties, etc.)
Place must be a PORT on the buyer’s side. Seller is responsible for all costs to get to that port and responsibility ends on loading on sellers side – contract to the agreed place, CFR doesn’t talk about unloading anything, must be in contract with carrier.
NOTE:
Even though risk passes from Seller to Buyer on Seller’s side (once loaded per contract), Seller contracts for and pays freight necessary to bring goods to the named port on the Buyer’s side

36. Cost Insurance Freight (CIF) + Named Place (port on Buyer’s side)
Delivery: Seller delivers goods packaged for shipment on board the Seller-designated vessel at the port on Seller’s side
Carriage:
Seller handles pre-carriage and main carriage
Buyer handles on-carriage following delivery to port on Buyer’s side
Risks: Passes from Seller to Buyer once goods are on board the vessel
Insurance: Seller required to procure minimum coverage against Buyer’s risk of loss or damage to the goods during carriage
Export Clearance: Handled by Seller
Import clearance: Buyer is responsible for the customs requirements and associated costs (fees, duties, etc.)
String Sales are in this term….
NOTE: Even though risk passes from Seller to Buyer on Seller’s side (once loaded per contract), Seller contracts for and pays freight necessary to bring goods to the named port on the Buyer’s side
Same as CPT + Insurance coverage

37. Price Considerations with Incoterms® 2010
When negotiating a contract, keep in mind the following:
Basic Rule of Thumb: The more responsibility the Seller takes on, the more they must charge the Buyer.
Example: What is the price the Seller should quote for 10 units to be shipped from Hilltown to Seattle?
$10,000 EXW, Johnsburg Factory
$10,200 FCA, Carrier in Hilltown
$10,600 CIP, Newark Airport
$10,800 DAT, O’Hare Airport
$12,000 DDP Seattle
EXW – No transportation/insurance responsibilities for Seller – Price is strictly for units sold plus packaging costs
FCA – Seller responsible for getting the goods from Johnsburg to Hilltown - $200 is for transportation to get units from factory to carrier’s location in London
CIP – Seller responsible for getting the goods from Johnsburg to Hilltown and pre & main-carriage to Newark Airport. Remember, under CIP the Seller is responsible for transportation to the named place – so if in this scenario the Incoterms® was CIP (Seattle) instead of CIP (Newark Airport) the cost would be more, the Seller needs to pay for transportation to Seattle + minimum insurance coverage. But the Seller’s risk would end when it was delivered to the Carrier in Hilltown (delivery to first carrier)
DAT – Seller delivers to O’Hare Airport TERMINAL and responsible for pre & main carriage to O’Hare, no insurance. Seller’s risk to delivery at O’Hare
DDP – Johnsburg is a non-resident Importer into the US, so they could used DDP, but they would be responsible for all costs, all risks delivery to Seattle.

38. Importing and Incoterms® 2010
Some charges if included and detailed in commercial invoice need to be deducted from the dutiable value of the shipment
Main carriage
Any foreign inland freight
Insurance
Supply chain security fees
Terminal handling fees
Etc.
See U.S. Cross Rulings HRL H (April 7, 2010) and HRL H (Sept 9, 2010) for additional information.
Imports if specific fees are included and specified, the importer must deduct them from the dutiable value

39. Cargo Security
With the US programs C-TPAT and ISF (10+2 for ocean shipments) and other countries’ similar programs in use proper use of Incoterms® is critical to both the Seller and the Buyer
Control over who is arranging/paying for transportation when is critical to maintaining control over data elements required by governmental entities.
Control over carriers (C-TPAT, AEO, PIP etc.)
Control over documentation (waybills, AES data reporting, ITAR licensing requirements)
Control over Importer Security Filing (ISF aka 10+2 in US), the EU is also implementing a similar ocean shipment filing requirement shortly

40. What Questions to Ask? Who furnishes the goods?
Who packages the goods in a manner suitable for shipment (export)?
Who moves the goods from the seller’s factory to a port, airport, or border crossing in the seller’s country?
Who arranges for export clearance in the seller’s country (if applicable)?
Who arranges for main carriage (international transportation) from the departure port to the arrival port?
Who pays for main carriage?
Who insures the shipment?
Who arranges for import clearance?
Who pays import duties?
Who pays for on-carriage from the arrival port to the delivery destination?
Who arranges and pays for country-specific documentation (e.g., consular invoices, inspection reports, licenses)?
Key questions to ask in structuring a transaction. If you can answer all these questions, you can determine what the correct Incoterm® to use should be.

41. Final Thoughts
All Incoterms® can be used for domestic transactions.
Incoterms® 2010 titles have removed all references to duty
Principles apply, just not the last items on who is responsible for export/import formalities
Determining proper Incoterms® to use
Revenue Recognition is NOT part of Incoterms® 2010
Delivery + Title Passage = Revenue Recognition
Delivery is addressed
Title is not and must be addressed elsewhere
Where do you want risk and responsibility?
AES, Licensing concerns, C-TPAT, ISF should play a part in determining appropriate Incoterms® use
Look at the entire transaction, answer questions early in process for who does what, when
Some transportation charges are deducted upon import from dutiable value (reducing duties and fees) if specifically identified by Shipper

42. Questions?