CHAPTER VI INTERNATIONAL TRADE TERMS

1. CHAPTER VI INTERNATIONAL TRADE TERMS • American Foreign Trade Definitions of 1990 • Incoterms of 2010 Copyright(c) 2012 Dr. Chase C. Rhee

2. Functions of International Trade Terms • Quotation at a fixed location • Delivery point of the goods • Passage of title to the goods • Passage of risk of loss of or damage to the goods Copyright(c) 2012 Dr. Chase C. Rhee

3. American Foreign Trade Definitions of 1990 Understand but don’t use them in international trade • EXW (Point of Origin): EX Factory or Warehouse • FOB (Free On Board) • FOB (name inland carrier at named inland point of departure) • FOB (same plus Freight Prepaid to named point of exportation) • FOB (same plus Freight Allowed to (name point of exportation) Freight collect Copyright(c) 2012 Dr. Chase C. Rhee

4. American Foreign Trade Definitions of 1990 • FOB (Free On Board) • FOB (named inland carrier at named point of exportation) • FOB Vessel (at named port of shipment) • FOB (at named inland point in country of importation Copyright(c) 2012 Dr. Chase C. Rhee

5. American Foreign Trade Definitions of 1990 • FAS Vessel (Free Alongside Vessel) Delivery to alongside the ocean carrier • C & F (Cost & Freight) Cost of goods plus all freights to port of importation • CIF (Cost, Insurance & Freight) Cost of goods plus marine insurance premium plus all freights to port of importation • DEQ Duty Paid (named port of importation) CIF plus import duty & customs clearance Also called “Ex Dock Duty Paid” Copyright(c) 2012 Dr. Chase C. Rhee

6. Incoterms of 2010 Acronym of International Commercial Terms • Incoterms 2010 replaced 2000 as of 1/1/2011 • DAT replaced DAF, DES, DEQ • DDP replaced DDU Copyright(c) 2012 Dr. Chase C. Rhee

7. Incoterms of 2010 • Group I: • Rules for Any Mode or Modes of Transport • EXW, FCA, CPT, CIP, DAT, DAP, DDP Copyright(c) 2012 Dr. Chase C. Rhee

8. Incoterms of 2010 EXW (EX Works)--named place of shipment • Seller makes the goods available to buyer at seller’s premises or another named place • Seller is not responsible for loading • Buyer is responsible for all expenses and risks from a named place • Buyer clears goods for export • Represents minimum obligation of seller Copyright(c) 2012 Dr. Chase C. Rhee

9. Incoterms of 2010 • FCA (Free Carrier) --named place of shipment • Seller delivers goods to carrier or another person nominated by buyer at the seller’s premises or another named place • If delivery occurs at seller’s premises, seller is responsible for loading goods on buyer’s mode of transport. Copyright(c) 2012 Dr. Chase C. Rhee

10. Incoterms of 2010 • FCA (Free Carrier) (continued) • If delivery occurs at another named place, seller is responsible for placing goods at the disposal of carrier or another person nominated by buyer ready for unloading. Seller is not responsible for unloading. • Seller clears the goods for export. Copyright(c) 2012 Dr. Chase C. Rhee

11. Incoterms of 2010 • CPT(Carriage Paid To)--named place of destination • Seller delivers the goods to carrier or another person nominated by seller at agreed place. • Seller's responsibilities stop when goods have been delivered to carrier. • If several carriers are used, delivery obligation is fulfilled when goods are delivered to first carrier • Seller clears the goods for export. • Seller pays the freight. Copyright(c) 2012 Dr. Chase C. Rhee

12. Incoterms of 2010 • CIP (Carriage & Insurance Paid )--named place of destination • Seller delivers the goods to carrier or another person nominated by seller at agreed place. • Seller's responsibilities stop when the goods have been delivered into the custody of the carrier. • Seller clears the goods for export. • Seller pays the freight & insurance premium. • Seller is obligated to obtain only minimum insurance coverage. Copyright(c) 2012 Dr. Chase C. Rhee

13. Incoterms of 2010 • DAT(Delivered At Terminal)-- named terminal at port or place of destination • Seller must place the goods at the disposal of the buyer, not cleared for import, on the terminal at the named port or place of destination. • Seller has to bear all costs and risks involved in bringing the goods to the named terminal and unloading them from the arriving means of transport. • Buyer is required to clear the goods for import and pay for all import customs formalities • Can be changed to DAT Duty Paid Copyright(c) 2012 Dr. Chase C. Rhee

14. Incoterms of 2010 • DAP(Delivered At Place)--named place of destination • Seller delivers the goods to the named place in the country of importation, not cleared for import and not unloaded. • Seller bears all the costs and risks to the named place of import excluding duties, taxes and other charges related to importation. • Buyer clears the goods for import. Copyright(c) 2012 Dr. Chase C. Rhee

15. Incoterms of 2010 • DDP(Delivered Duty Paid)--named place of destination • Seller delivers the goods to the named place in the country of importation. • Seller bears all the costs and risks to the named place including duties, taxes and other charges to the named place in the country of importation. • Seller clears the goods for import. • Represents maximum obligation of seller Copyright(c) 2012 Dr. Chase C. Rhee

16. Incoterms of 2010 • Group II: • Rules for Sea and Inland Waterway Transport • FAS, FOB, CFR, CIF Copyright(c) 2012 Dr. Chase C. Rhee

17. Incoterms of 2010 • FAS(Free Alongside Ship)--named port of shipment • Seller places the goods alongside vessel nominated by buyer. • Seller clears the goods for export. • Loading goods on board vessel is buyer’s responsibility • Buyer pays ocean freight & marine insurance • Used only for sea or inland waterway transport Copyright(c) 2012 Dr. Chase C. Rhee

18. Incoterms of 2010 • FOB(Free On Board)--named port of shipment • Seller loads the goods on board vessel. • Seller's risks stop when goods pass ship's rail. • Seller clears the goods for export. • Buyer pays freight & marine insurance premium • Used only for sea or inland waterway transport Copyright(c) 2012 Dr. Chase C. Rhee

19. Incoterms of 2010 • CFR(Cost & Freight)--named port of destination • Seller loads the goods on board the vessel. • Seller's risks stop when goods pass ship's rail. • Seller clears the goods for export. • Seller pays freight. • Buyer pays marine insurance premium. • Used only for sea or inland waterway transport Copyright(c) 2012 Dr. Chase C. Rhee

20. Incoterms of 2010 • CIF(Cost, Insurance & Freight)--named port of destination • Seller loads the goods on board the vessel. • Seller's risks stop when goods pass ship's rail. • Seller clears the goods for export. • Seller pays insurance premium & freight • Seller is obligated to obtain only minimum marine insurance coverage. • Used only for sea or inland waterway transport Copyright(c) 2012 Dr. Chase C. Rhee

21. INCOTERMS 2010 • Group I EXW EX WORKS (...named place of shipment) FCA FREE CARRIER (...named place of shipment) CPT CARRIAGE PAID TO (...named place of destination) CIP CARRIAGE AND INSURANCE PAID TO (...named place of destination) DAT DELIVERED AT TERMINAL (...named terminal at port or place of destination) DAP DELIVERED AT PLACE (...named place of destination) DDP DELIVERED DUTY PAID (...named place of destination) Copyright(c) 2012 Dr. Chase C. Rhee

22. INCOTERMS 2010 • Group II FAS FREE ALONGSIDE SHIP (...named port of shipment) FOB FREE ON BOARD (...named port of shipment) CFR COST AND FREIGHT (...named port of destination) CIF COST, INSURANCE AND FREIGHT (...named port of destination) Copyright(c) 2012 Dr. Chase C. Rhee

23. Copyright(c) 2012 Dr. Chase C. Rhee