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INCOTERMS 2000

INCOTERMS 2000. Incoterms – what are they and what can they do for you. Incoterms is an abbreviation of International commercial terms It is a vital term of the contract of sale and not of the contract of carriage It guides seller and buyers with regard to:

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INCOTERMS 2000

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  1. INCOTERMS 2000

  2. Incoterms – what are they and what can they do for you • Incoterms is an abbreviation of International commercial terms • It is a vital term of the contract of sale and not of the contract of carriage • It guides seller and buyers with regard to: - carriage of goods from seller to buyer - export and import clearance and also the division of costs and risk between the parties

  3. Incoterms • Use generally recognized key words • Agree on the most common understanding of those key words • Avoid misunderstandings in their use

  4. Incoterms • Problems still occur because: - commercial practice is inconsistent - variations of the key word may not be appropriate - the Incoterm is not sufficiently precise - the parties inadvertently choose the wrong term

  5. Incoterms – what are they and what they cannot do for you • Incoterms do not deal with: - transfer of property rights in the goods - relief from obligations and exemptions from liability in case of unexpected or unforeseen events

  6. Incoterms – what are they and what they cannot do for you • Incoterms also do not deal with: - consequences of various breeches of contract, except those relating to the passing of risk and costs when the buyer is in breach of his obligation to accept the goods or to nominate the carrier under an F-term

  7. Incoterms –referencing in a contract of sale • Parties are strongly advised to - include in the contract of sale in conjunction with the trade term the words “Incoterms 2000” and … • check that standard contract contains such a reference or superimpose

  8. and now let’s discuss Incoterms 2000

  9. The seller’s minimum obligationonly to make goods available for the buyer at the seller’s premises(EXW)

  10. EXW Group E: departureEx Works (…named place) • Carriage to be arranged by the buyer • Risk and Cost transfer from the seller to the buyer when the goods are at the disposal of the buyer

  11. The sellers’ extended obligation to hand over goods for carriage either to a carrier nominated by the buyer (FCA, FAS, FOB) or, (why?) to a carrier chosen and paid for by the seller (CFR, CPT)

  12. together with insurance against risks in transit (CIF, CIP)CFR versus CIF?

  13. FCA Group F: main carriage not paid by sellerFree Carrier (…named place)

  14. FCA Group F: main carriage not paid by sellerFree Carrier (…named place)

  15. FCA Group F: main carriage not paid by sellerFree Carrier (…named place) CONTINUED… Critical Points: • Risk and Cost transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place • Carriage to be arranged by the buyer or by the seller on the buyer’s behalf

  16. FAS Group F: main carriage not paid by sellerFree Alongside Ship (…named port of shipment)

  17. FAS Group F: main carriage not paid by sellerFree Alongside Ship (…named port of shipment) CONTINUED… Critical Points: • Risk and Cost transfer from the seller to the buyer when the goods have been placed alongside the ship • Carriage to be arranged by the buyer

  18. FOB Group F: main carriage not paid by sellerFree on Board (…named port of shipment) • Only to be used when: • when maritime transport will take place • when goods are to be lifted across a ship’s rail • tendered to the ship in hoses for liquid cargo • filled form silos when the cargo is to be carried loose in bulk • If not above, instead use FCA, thereby indicating the actual place where goods are handed over for carriage

  19. FOB Group F: main carriage not paid by sellerFree on Board (…named port of shipment)

  20. FOB Group F: main carriage not paid by sellerFree on Board (…named port of shipment) CONTINUED… Critical Points: • Risk and Cost transfer from the seller to the buyer when the goods pass the ship’s rail • Carriage to be arranged by the buyer

  21. CFRGroup C: main carriage paid by sellerCost and Freight (…named port of destination)

  22. CFRGroup C: main carriage paid by sellerCost and Freight (…named port of destination) Critical Points: • Carriage to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods pass the ship’s rail • Cost transfer at port of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

  23. CIFGroup C: main carriage paid by sellerCost, Insurance and Freight (…named port of destination)

  24. CIF Group C: main carriage paid by sellerCost, insurance and freight (…named port of destination) CONTINUED…

  25. CIFGroup C: main carriage paid by sellerCost Insurance and Freight (…named port of destination) Critical Points: • Carriage and Insurance to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods pass the ship’s rail • Cost transfer at port of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

  26. CPTGroup C: main carriage paid by sellerCarriage paid to (…named place of destination)

  27. CPTGroup C: main carriage paid by sellerCarriage paid to (…named place of destination) CONTINUED…

  28. CPTGroup C: main carriage paid by sellerCarriage paid to (…named place of destination) Critical Points: • Carriage to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods have been delivered to the carrier • Cost transfer at port of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

  29. CIPGroup C: main carriage paid by sellerCarriage and Insurance paid to (…named place of destination)

  30. CIPGroup C: main carriage paid by sellerCarriage and Insurance paid to (…named place of destination) CONTINUED…

  31. CIPGroup C: main carriage paid by sellerCarriage and Insurance paid to (…named place of destination) Critical Points: • Carriage and Insurance to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods have been delivered to the carrier • Cost transfer at place of destination, buyer paying such costs as are not for the seller’s account under the contract of carriage

  32. The seller’s maximum obligation to deliver the goods at destination(DAF, DES, DEQ, DDU or DDP)

  33. DAFGroup D: arrivalDelivered at Frontier (…named place)

  34. DAFGroup D: arrivalDelivered at Frontier (…named place) Critical Points: • Carriage to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods have been delivered at the frontier • Cost transfer from the seller to the buyer when the goods have been delivered at the frontier

  35. DESGroup D: arrivalDelivered ex ship (…named port of destination)

  36. DESGroup D: arrivalDelivered ex ship (…named port of destination) Critical Points: • Carriage to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship • Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship

  37. DEQGroup D: arrivalDelivered ex Quay (…named port of destination)

  38. DEQGroup D: arrivalDelivered ex Quay (…named port of destination) Critical Points: • Carriage to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship • Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship

  39. DDUGroup D: arrivalDelivered duty unpaid (…named place of destination)

  40. DDUGroup D: arrivalDelivered duty unpaid (…named place of destination) Critical Points: • Carriage to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer • Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer

  41. DDPGroup D: arrivalDelivered duty paid (…named place of destination)

  42. DDPGroup D: arrivalDelivered duty paid (…named place of destination) Critical Points: • Carriage to be arranged by the Seller • Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer • Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer

  43. Now which one is appropriate? • Commercial practice and the type of goods will dictate whether - the seller should refrain from undertaking additional obligations - the seller is prepared to do more than make the goods available to the buyer at the seller’s premises - the buyer’s bargaining position allows him to require the seller to undertake additional obligations - the seller is able to undertake additional obligations , and in particular, to quote a more competitive price by extending his obligations

  44. Now which one is appropriate? • Commercial practice and the type of goods will also dictate whether - it is necessary to use the maritime terms FAS, FOB, CFR or CIF when the goods are intended to be resold before they reach their destination - But …. in the case of manufactured goods (containerized), it is more appropriate to use FCA, CPT or CIF and not FAS, FOB, CFR or CIF - Manufactured goods will rarely be picked out of the ship by the buyer/quay(DES, DEQ) but rather delivered in cargo terminal, therefore DDU, DDP will be more appropriate

  45. Thank you

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