Incoterms 2000

1. Incoterms 2000 • WELCOME David Brush & Associates

2. Incoterms 2000 Introduction & Overview • Internationally recognised Official Rules for trade terms • International Chamber of Commerce (ICC) • Created 1936 - Incoterms 1936 • Updated regularly to keep pace with changes and developments in international trade - 1953,1967,1976,1980,1990 • Incoterms 2000 Deals with complexities of today’s Global economy • 13 definitions in the 2000 revision David Brush & Associates

3. Incoterms 2000 EXW•FCA•FAS•FOB•CFR•CIF•CPT CIP•DAF•DES•DEQ•DDU•DDP • Incoterms such as FOB,CIF and DDU have become part of the language of international trade and are in constant use throughout the world • Sales contracts drafted after 1 January 2000 make reference to this revision in the text of the contract David Brush & Associates

4. Incoterms 2000 Purpose of Incoterms • Designed for Parties to a Contract • Provides a set of international rules for foreign trade • Reduces uncertainties • Avoids different interpretations in different countries • Additional costs and time can be avoided David Brush & Associates

5. Incoterms 2000 THE SELLER’S OBLIGATIONS A1 Provision of goods in conformity with the contract A2 Licences, authorisations and formalities A3 Contract of carriage and insurance A4 Delivery A5 Transfer of risks A6 Division of costs A7 Notice to the buyer A8 Proof of delivery, transport document or equivalent electronic message A9 Checking – packaging – marking A10 Other obligations David Brush & Associates

6. Incoterms 2000 THE BUYER’S OBLIGATIONS B1 Payment of the price B2 Licences, authorisations and formalities B3 Contract of carriage B4 Taking delivery B5 Transfer of risks B6 Division of the costs B7 Notice to the seller B8 Proof of delivery, transport document of equivalent electronic message B9 Inspection of goods B10 Other obligations David Brush & Associates

7. Incoterms 2000 1. to 4. Scope of Incoterms • Incoterms is limited • to rights and obligations of the parties to contract of sale with respect to the delivery of the goods sold. • Do not deal with the consequences of breach of contract • primarily intended for for use where goods are sold for delivery across national boundaries, hence international commercial terms • Can be used in contracts for sale of goods directly David Brush & Associates

8. Incoterms 2000 5. Structure • Group E Departure • EXW Ex Works (.....…........named place) • Group F Main carriage unpaid • FCA Free Carrier (....….........named place) • FAS Free Alongside Ship (........….named port of shipment) • FOB Free On Board (............named port of shipment) David Brush & Associates

9. Incoterms 2000 5. Structure (continued) Group C Main carriage paid • CFR Cost and Freight (...........named port of destination) • CIF Cost, Insurance & Freight (.....named port of destination) • CPT Cost Paid To (...........named port of destination) • CIP Carriage and Insurance paid to (…… .named place of destination) • Group D Arrival • DAF Delivered at Frontier (.....………………….....named place) • DES Delivered Ex Ship (...........named port of destination) • DEQ Delivered Ex Quay (....…....named port of destination) • DDU Delivered Duty Unpaid (…...named place of destination) • DDP Delivered Duty Paid (.........named place of destination) David Brush & Associates

10. Incoterms 2000 6. Terminology Drafting of Incoterms aimed to achieve consistency throughout the 13 terms, with use of the same expressions in the 1980 UN Convention on Contracts for the International Sale of Goods • “shipper” • “delivery” • “usual” • “charges” • “ports”,”places”,”points”,and “premises” • “ship” and “vessel” • “checking” and “inspection” David Brush & Associates

11. Incoterms 2000 7. Seller’s delivery obligations • Precise distribution of functions and costs in connection with the seller’s delivery of the goods. • Continuing commercial relationships (“course of dealing”) • New commercial relationships (through brokers) • Difficult to incorporate all scenarios • Commodity trade goods delivered in FAS and FOB contracts vary in different sea ports. David Brush & Associates

12. Incoterms 2000 8. Passing of risks and costs to the goods • Obligations passing from seller to buyer once goods delivered. • Passing of risk may occur before delivery • Stipulation of the terms determines passing of risk David Brush & Associates

13. Incoterms 2000 9 . The Terms • 9.1 The “E” Term is the term in which seller’s obligation is at its minimum • 9.2 The “F” Term require the seller to deliver as instructed by the buyer • 9.3 The “C” Term require the seller to contract for carriage at his expense • 9.4 The “D” Term signifies arrival contracts David Brush & Associates

14. Incoterms 2000 10. The expression “No obligation” • Expression of “seller must” and “buyer must” only concern the obligations to each other • “no obligations” inserted when one party does not owe an obligation to the other • In the interest of either party to perform a task despite obligation. David Brush & Associates

15. Incoterms 2000 11. Variants of Incoterms • In practice adding words to Incoterms for precision is common • Incoterms do not give guidelines for additions • Serious problems could result in additions due to consistency • Avoid where possible David Brush & Associates

16. Incoterms 2000 12. Customs of the port or a particular trade • impossible always to set forth the obligations of the parties with precision • desirable that sellers and buyers keep themselves duly informed of any peculiarities • clarify their legal position by appropriate clauses in their contract of sale David Brush & Associates

17. Incoterms 2000 13. The buyers options as to the place of shipment • In some situations, it may not be possible at the time when thecontract of sale is entered into to decide precisely on the exact point or even the place where the goods should be delivered by the seller for carriage • For instance, reference might have been made at this stage merely to a “range” or to a rather large place, for example, seaport, and it is then usually stipulated that the buyer has the right or duty to name later on the more precise point within the range or the place David Brush & Associates

18. Incoterms 2000 14. Customs Clearance • The term “customs clearance” has given rise to misunderstandings • Obligation for duty as well as administrative matters • Insertion of term”where applicable” order for them to be used without any ambiguity where no customs procedures are required • DDU/DDP obligations on buyer and seller David Brush & Associates

19. Incoterms 2000 15. Packaging • In most cases, the parties would know before hand, which packaging is required for the safe carriage of the goods to destination • Seller’s obligation to pack the goods may well vary according to the type and duration of the transport envisaged • Seller is obligated to pack the goods in such a manner as is required for the transport David Brush & Associates

20. Incoterms 2000 16. Inspection of goods • In many cases, the buyer may be well advised to arrange for inspection of the goods before or at the time they are handed over by the seller for carriage (so-called pre-shipment inspection or PSI). • Unless the contract stipulates otherwise, the buyer would himself have to pay the cost for such inspection that is arranged in his own interest. • However, if the inspection has been made in order to enable the seller to comply with any mandatory rules applicable to the export of the goods in his own country, the seller would have to pay for that inspection, unless the EXW term is used, in which case the costs of such inspection are for the account of the buyer. David Brush & Associates

21. Incoterms 2000 17. Mode of transport and the appropriate Incoterm Any mode of transport • Group E EXW Ex Works (…...............named place) • Group F FCA Free Carrier (…................named place) • Group C CPT Cost Paid To (............named port of destination) CIP Carriage and Insurance paid to (..........named place of destination) • Group D DAF Delivered at Frontier (............named place) DDU Delivered Duty Unpaid (..........named place of destination) DDP Delivered Duty Paid (..........named place of destination) David Brush & Associates

22. Incoterms 2000 17. Mode of transport and the appropriate Incoterm (continued) Maritime and inland waterway transport only • Group F FAS Free Alongside Ship (..…..........named port of shipment) FOB Free On Board (…............named port of shipment) • Group C CFR Cost and Freight (............named port of destination) CIF Cost, Insurance & Freight (............named port of destination) • Group D DES Delivered Ex Ship (............named port of destination) DEQ Delivered Ex Quay (............named port of destination) David Brush & Associates

23. Incoterms 2000 18. The recommended use • Preamble recommends the use or non-use of a particular term • Important with respect to the choice between FCA and FOB • FOB is only appropriate to use where the goods are intended to be delivered “across the ship’s rail” or to the ship • Strong warning, FOB should not be used when the parties do not intend delivery across the ship’s rail • It is indicated in the preamble of each term whether it can be used for all modes of transport or only for carriage of goods by sea. David Brush & Associates

24. Incoterms 2000 19. The bill of lading and electronic commerce The on board bill of lading - only acceptable document • The bill of lading fulfils three important functions, namely: • Proof of delivery of the goods on board the vessel • Evidence of the contract of carriage • A means of transferring rights to the goods in transit to another party by the transfer of the paper document to him • Possession of the bill of lading is required in order to obtain the goods • Difficult to replace by electronic means of communication • Vital importance for a buyer or a bank that all originals are surrendered by the seller (so-called “full set”) • Bill of lading - it is expected that it will be replaced by electronic means in the near future. David Brush & Associates

25. Incoterms 2000 20. Non-negotiable transport documents instead of bills of lading • Bills of lading are frequently replaced by non-negotiable documents • Non-negotiable documents are quite satisfactory to use except where the buyer wishes to sell the goods in transit • The seller may use CPT and CIP where there is no requirement to provide a bill of lading David Brush & Associates

26. Incoterms 2000 21. The right to give instructions to the carrier • A buyer paying for the goods under a “C” term should ensure that the seller upon payment is prevented from disposing of the goods • Documents used instead of bills of lading for maritime carriage do not normally contain such a barring function • Introducing the 1990 “Uniform Rules for Sea Waybills” enabling the parties to insert a “no-disposal” clause David Brush & Associates

27. Incoterms 2000 22. ICC Arbitration • In the event of a dispute with their contracting partner should specifically and clearly agree upon ICC Arbitration • In their contract • In the exchange of correspondence • The following standard arbitration clause is recommended by ICC: “All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.” David Brush & Associates

28. Incoterms 2000 David Brush & Associates

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30. Incoterms 2000 David Brush & Associates

31. Incoterms 2000 Understanding is essential International tool of trade Used as a reference point in the exam