INTERNATIONAL COMMERCIAL TERMS USED IN EXPORT IMPORT – INCOTERMS

Incoterms are internationally accepted commercial terms, developed in 1936 by the International Chamber of Commerce (ICC) in Paris. Incoterms 2000 define the respective roles of the buyer and seller in the agreement of transportation and other responsibilities and clarify when the ownership of the merchandise takes place. These terms are incorporated into export-import sales agreements and contracts worldwide and are a necessary part of foreign trade.

Incoterms are used in union with a sales agreement or other methods of sales transactions and define the responsibilities and obligations of both, the exporter and importer in Foreign Trade Transactions.

The main objectives of Incoterms 2000 revolve around the contract of Foreign Trade concerned with the loading, transport, insurance and delivery transactions. Its main function is the distribution of goods and regulation of transport charges.

Another significant role played by Incoterms is to identify and define the place of transfer and the transport risks involved in order to justify the ownership for support and damage of goods by shipments sent by the seller or the buyer in an event of execution of transport.

Incoterms make international trade easier and help traders in different countries to understand one another. These International Commercial Terms are the most widely used international contracts protected by the ICC copyright.

Incoterms safeguard the following issues in the Foreign Trade contract or International Trade Contract:

(a) To determine the critical point of the transfer of the risks of the seller to the buyer in the process forwarding of the goods (risks of loss, deterioration, robbery of the goods) allow the person who supports these risks to make arrangements in particular in term of insurance.

(b) To specify who is going to subscribe the contract of carriage that is to say the seller (exporter) or the buyer (importer).

(c) To distribute between the seller and the buyer the logistic and administrative expenses at the various stages of the process.

(d) It is important to define who is responsible for packaging, marking, operations of handling, loading and unloading, inspection of the goods.

(e) Need To confirm and fix respective obligations for the achievement of the formalities of exportation and importation, the payment of the rights and taxes of importation as well as the sending of the documents. In dealing Foreign Trade there are 13 Incoterms globally adopted by the International Chamber of Commerce

INTERNATIONAL INCOTERMS

Incoterms or International commercial terms make trade between different countries easier. International Commercial Terms are a series of international trade terms that are used are used worldwide to divide he transaction costs and responsibilities between the seller and the buyer.

Incoterms directly deal with the questions related to the delivery of the products from the seller to the buyer. This includes the carriage of products, export and import responsibilities, who pays for what and who has the risk for the condition of the products at different locations within the transport process.

Incoterms and world customs Incoterms deal with the various trade transactions all over the world and clearly distinguish between the respective responsibilities of the seller and the buyers.

Departure of goods by international transport with the risks and dangers to the Seller (Exporter) and Buyers (Importers)

The 13 International Incoterms are:

EXW - Ex Works

Title and risk pass to buyer including payment of all transportation and insurance cost from the seller's door. Used for any mode of transportation.Seller : In EXW shipment terms the Seller (Exporter) provides the goods for collection by the Buyer (Importer) on the seller or exporter's promise. Responsibility for the seller is to put the goods, in a good package which is adaptable and disposable by the transport.Buyer : The buyer or Importer arranges insurance for damage transit goods. The Buyer or importer has to bear all costs and risks involved in shipment transactions.(However, if the parties wish the seller to be responsible for the loading of the goods on departure and to bear the risks and all the costs of such loading, this should be made clear by adding explicit wording to this effect in the contract of sale. )

FCA - Free Carrier named point

Title and risk pass to buyer including transportation and insurance cost when the seller delivers goods cleared for export to the carrier.Seller is obligated to load the goods on the Buyer's collecting vehicle; it is the Buyer's obligation to receive the Seller's arriving vehicle unloaded.Seller : The Seller’s responsibility is to deliver the goods into the custody of the transporters at defined points. It is important for the chosen place of delivery to have an impact on the obligations of loading and unloading the goods.Buyer : The Buyer nominates the means of transport or shipping mode and pays the shipment charges.The seller and the buyer agree upon the place for delivery of goods. If the buyer nominates a person other than a carrier or transporter to receive the goods, the seller is deemed to fulfill his obligation to deliver the goods when they are delivered to that person.FAS - Free Alongside Ship

Title and risk pass to buyer including payment of all transportation and insurance cost once delivered alongside ship by the seller. Used for sea or inland waterway transportation. The export clearance obligation rests with the seller.In FAS has price includes all the costs incurred in delivering the goods alongside the vessel at the port or nominated place of the buyer but there is not applicable charges to the seller for loading the goods on board of vessel and no ocean freight charges and marine insurance.Seller: The responsibility of the seller are fulfilled when the goods are placed cleared along the

ship.Buyer: Buyer or Importer bear all the expenses and risks of loss or damage of transit goods which are delivered along the ship.

FOB - Free On Board

The FOB (Free on Board) price is inclusive of Ex-Works price, packing charges, transportation charges upto the place of shipment.Seller also responsible for o clear customs dues, quality inspection charges, weight measurement charges and other export related dues. It is important that the shipment term in the Bill of Lading must carry the wording "Shipped on Board' it must bear with signature of transporter or carrier or his authorized representative with the date on which goods were "Boarded".Seller :Seller responsible for clear customs dues, quality inspection charges, weight measurement charges and other export related dues. It is important that the shipment term in the Bill of Lading must carry the wording "Shipped on Board' it must bear with signature of transporter or carrier or his authorized representative with the date on which goods were "Boarded".Buyer : The buyer indicates the ship and pays freight, transfer expenses and risks is done when the goods passes or forwarding to the buyers warehouse by rail or ship.

CFR - Cost  And Freight

In this term the exporter bears the cost of carriage or transport to the selected destination port, in this term the risk transferable to the buyers at the port of shipment.Seller: The chooses the carrier, concludes and bears the expenses by paying freight to the agreed port of destination, unloading not included. The loading of the duty-paid goods on the ship falls on him as well as the formalities of forwarding. On the other hand, the transfer of risks is the same one as in FOB.Buyer: The buyers supports all the risk of transport, when the goods are delivered aboard by ship at the loading port, buyer receives it from the carrier and takes delivery of the goods from nominated destination port.

CIF - Cost, Insurance And Freight

Title and risk pass to buyer when delivered on board the ship by seller who pays transportation and insurance cost to destination port. Used for sea or inland waterway transportation.This Term involves insurance with FOB price and ocean freight. The marine insurance is obtained by the exporter at his cost against the risk of loss or damage to the goods during the carriage.Seller: The CFR extends additional obligation to the seller for providing a maritime So insurance against the risk of loss or damage to the goods. The seller pays the insurance premium.Buyer: He supports the risk of transportation, when the goods have been delivered aboard the ship at the loading port. He takes delivery of the goods from the carrier to the appointed port or destination.

CPT - Carriage Paid ToTitle, risk and insurance cost pass to buyer when delivered to carrier by seller who pays transportation cost to destination. Used for any mode of transportation.This term uses land transport by rail, road and inland waterways. The seller and exporter are responsible for the carriage of goods to the nominated destination and have to pay freight up the first carrier.Seller: The seller or exporter controls the supply chain after paying customs clearance for export. Seller or Exporter select the carrier and pay the expenses up to the destination.Buyer: The risks of goods damages or loss are supported by the buyer as goods are given by the first carrier. The buyer or importer has to pay importation customs clearance and the unloading costs.

CIP - Carriage And  Insurance Paid To

Title and risk pass to buyer when delivered to carrier by seller who pays transportation and insurance cost to destination. Used for any mode of transportation.This term is similar to Carriage Paid To but the seller has to arrange and pay for the insurance against the risk or loss or damage of the goods during the shipment.Seller: The seller or buyer has to provide insurance and seller pays the freight and insurance premium.Buyer: The buyer or importer supports the risks of damages or loss, as goods are given to the first carrier. The buyer has to pay customs clearance and unloading charges.

DAF - Delivered At Frontier

Title, risk and responsibility for import clearance pass to buyer when delivered to named border point by seller. Used for any mode of transportation.This term is used when the goods are to be carried by rail or road.Seller : The seller is responsible to make the goods available to the buyer by the carrier till the customs border as defined in sales contract.Buyer : The buyer takes delivery of the goods at the contract agreed point border and he is responsible for bearing all customs formalities.

DES - Delivered Ex-Ship

Title, risk, responsibility for vessel discharge and import clearance pass to buyer when seller delivers goods on board the ship to destination port. Used for sea or inland waterway transportation.Seller: The seller is responsible to make the goods available to the buyer up to the named quay or after crossing the customs border.Buyer: The buyer takes delivery of the goods from ship at destination port and pays the expenses of unloading.

DEQ - Delivered Ex-Quay

Title and risk pass to buyer when delivered on board the ship at the destination point by the seller who delivers goods on dock at destination point cleared for import. Used for sea or inland waterway transportation.

DDU - Delivered Duty Unpaid

Seller fulfills his obligation when goods have been made available at the named place in the country of importation.Seller: The seller is responsible for all transportation cost and accept the customs duty and taxes as per defined in customs procedures.Buyer: The buyer is responsible of the importation customs formalities.

DDP - Delivered Duty Paid

Title and risk pass to buyer when seller delivers goods to the named destination point cleared for import. Used for any mode of transportation.Seller: The seller is responsible to make the goods available to the buyer at his risk and cost as promised by the buyer. All the Taxes and duty on importation is promised by the buyer to the seller.Buyer: The buyer is responsible to take delivery at a nominated place and pays the expenses for unloading of goods.

Maritime Terms - Incoterms

BAF Bunker adjustment factor BKO Booking Office B/L Bill of lading CAF Currency adjustment factor C and F Cost and Freight CBR Commodity Box Rate CFS Container Freight Station CIF Cost Insurance Freight CIP Carriage and Insurance Paid To CKD Completely Knocked Down C/L Container Load COD Change of destination CPT Carriage Paid to CSP Container Service Port CST Container Service Tariff CT Conference Terms CTB Combined Transport Bill of

lading CY Container Yard DAF Delivered at Frontier DDP Delivered Duty Paid DES Delivered Ex Ship DEQ Delivered Ex Quay DGR Dangerous Goods Request DIC Delivery in Charges D/O Delivery Order DS Department Store ECD Empty Container Depot EDI Electronic Data Interchange EIF Equipment Investor Factor EQR Equipment Request ETA Estimated Time of Arrival ETD Estimated Time of Departure EXW Ex Work EZC European ZOne Charge FAK Freight All Kinds FCA Free Carrier

FCL Full Container Load FEU Forty Foot Equivalent Unit FIO Free In and Out FILO Free In lIner Out FOB Freignt On Board GSCR General Special Cargo Request IMO InterGovernmental Maritime

Consultant Organization ISO International Standard

Organization L/C Letter of Credit LCL Less than Container Load LIFO Liner in Free Out M Measuremnet MCBR Mixed Commodity Box Rates NAI Net All In NNW Non Negotiable Waybill NOE Not Otherwise Enumerated NTA Non Tariff Agreement NTR Non Tariff Rate OH Over Height OL Over Length OOG Out Of Gauge OW Over Width PLOA Place of Acceptance PLOD/POD Place of Delivery PLOR Place of Receipt POL Place of Loading RCR Reefer Cargo Request SCQ Special Commodity Quotation SITC Standard International Trade

Classification SISCQ Sundry Items Special

Commodity Quotation TCSP Trough Container Service Port TEU Twenty Foot Equivalent Unit THC Terminal Handling Charge T/S Transshipment W Weight W/M Weight / Measurement

Incoterm

From Wikipedia, the free encyclopedia

Incoterms or International Commercial terms are a series of international sales with terms, published by International Chamber of Commerce (ICC) and widely used in international commercial transactions. These are accepted by governments, legal authorities and practitioners worldwide for the interpretation of most commonly used terms in international trade. This reduces or removes altogether uncertainties arising from different interpretation of such terms in different countries. Scope of this is limited to matters relating to rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices. They closely correspond to the U.N. Convention on Contracts for the International Sale of Goods. The first version was introduced in 1936 and the present dates from 2000.

As of January 1, 2011 the eighth edition, Incoterms 2010,[1][2] have effect. The changes therein affect all of the five terms previously listed in section D, which are now obsolete and have been replaced with these three:

DAT (Delivered at Terminal)

DAP (Delivered at Place)

DDP (Delivered Duty Paid)

The new terms apply to all modes of transport.

Group E – Departure

EXW – Ex Works (named place)

The seller makes the goods available at his premises. The buyer is responsible for all charges.

This trade term places the greatest responsibility on the buyer and minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included.

EXW means that a seller has the goods ready for collection at his premises (Works, factory, warehouse, plant) on the date agreed upon.

The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination.

Group F – Main carriage unpaid

FCA – Free Carrier (named places)

The seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes

of transport, including carriage by air, rail, road, and containerised / multi-modal sea transport. This is the correct "freight collect" term to use for sea shipments in containers, whether LCL (less than container load) or FCL (full container load).

FAS – Free Alongside Ship (named loading port)

The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport only but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). This term is typically used for heavy-lift or bulk cargo.

FOB – Free on board (named loading port)

The seller must themself load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export. Maritime transport only but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). The buyer must instruct the seller the details of the vessel and port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. It does not include Air transport. This term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments.

Group C – Main carriage paid

CFR or CNF – Cost and Freight (named destination port)

Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail. Maritime transport only and Insurance for the goods is NOT included. Insurance is at the Cost of the Buyer.

CIF – Cost, Insurance and Freight (named destination port)

Exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Maritime transport only.

CPT – Carriage Paid To (named place of destination)

The general/containerised/multimodal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier.

CIP – Carriage and Insurance Paid (To) (named place of destination)

The containerised transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.

Group D – Arrival

DAF – Delivered At Frontier (Deliveplace)

This term can be used when the goods are transported by rail and road. The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier.

DES – Delivered Ex Ship (named port)

Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to

bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc… are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals - - - and where the seller either owns or has chartered, their own vessel.

DEQ – Delivered Ex Quay (named port)

This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port of destination.

DDU – Delivered Duty Unpaid (named destination place)

This term means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination. However, if the buyer wishes the seller to bear cost and risks associated with the import clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all needs to be explicitly agreed upon in the contract of sale.

DAP - Delivered At Place (named destination place)

This term 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. This is exactly what the old Incoterm DDU stipulated.

DDP – Delivered Duty Paid (named destination place)

This term means that the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used interchangeably with the term "Free Domicile". The most comprehensive term for the buyer. In most of the importing countries, taxes such as (but not limited to) VAT and excises should not be considered prepaid being handled as a "refundable" tax. Therefore VAT and excises usually are not representing a direct cost for the importer since they will be recovered against the sales on the local (domestic) market.

Summary of terms

NOTE: The following information refers to Incoterms 2000 and is now replaced with different information in Incoterms 2010[3] For a given term, "Yes" indicates that the seller has the responsibility to provide the service included in the price. "No" indicates it is the buyer's responsibility. If insurance is not included in the term (for example, CFR) then insurance for transport is the responsibility of the buyer or the seller depending on who owns the cargo at time of transport. In the case of CFR terms, it would be the buyer while in the case of CIF or CIP terms, it would be the seller.