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INCOTERMS 2000
y Published by International chamber of Commerce in 1936. y Used in International commercial transactions. y Purpose is to provide a set of international rules for the
interpretation of the most commonly used trade terms. y Used to divide transaction cost and responsibilities between buyer and seller
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obligation is at its minimum. y The seller makes the goods available at his premises. y The buyer is responsible for all charges.
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EXW
Ex Works (named place)
SELLER BUYER
Discharging Delivery at Import Port of named place of Documents destination: Formalities Arrival Frontier/ Terminal/Quay Buyers Risks
Sellers Risks
Sellers Cost
Buyers Cost
Incoterms
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the carrier nominated by the buyer at a named place. y Term may be used irrespective of the mode of transport. y Seller obligated to load goods on arriving vehicle if it arrives at the sellers premises. y Seller not obliged to unload goods from his vehicle.
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FCA
Free Carrier(named place)
SELLER BUYER
Discharging Delivery at Import Port of named place of Documents Arrival destination: Formalities Frontier/ Terminal/Quay
Sellers Risks
Sellers Cost
ship at the named port y Seller obliged to clear goods for export. y The buyer bears all costs and risks of loss or damage to the goods from that moment. y Terms can be used for sea or inland waterway transport only.
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FAS
Free Alongside(named place)
SELLER BUYER
Sellers Risks
Sellers Cost
nominated by the buyer, cost and risk being divided at ship's rail. y The buyer bears all costs and risks of loss or damage to the goods from that point. y Term can be used for sea or inland waterway transport only.
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FOB
Free On Board(named port of shipment)
SELLER BUYER
Discharging Delivery at Import Port of named place of Documents Arrival destination: Formalities Frontier/ Terminal/Quay
Sellers Risks
Sellers Cost
Incoterms 2000
y The C terms require the seller to contract for y y y y
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goods to the port of destination but the buyer bears the risk of loss and additional costs occurring after delivery. y Term can be used for sea or inland waterway transport. y If intent is not to deliver goods across the ships rail, use CPT
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CFR
Cost and Freight (named port of destination)
SELLER BUYER
Discharging Delivery at Port of named place of Arrival destination: Frontier/ Terminal/Quay Buyers Risks
Sellers Risks
Sellers Cost
Buyers Cost
goods to port of destination, but the buyer bears the risk of loss and additional costs occurring after delivery. y The seller procures marine insurance, against buyers risk of loss. y Term can be used for sea or inland waterway transport. y If intent is not to deliver goods across the ships rail, use CIP.
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CIF
Cost, Insurance and Freight (named port of destination)
SELLER BUYER
Discharging Delivery at Port of named place of Arrival destination: Frontier/ Terminal/Quay Buyers Risks
Sellers Risks
Sellers Costs
Buyers Cost
carrier. y The seller pays the costs of carriage necessary to bring goods to named destination, but the buyer bears the risk of loss and additional costs occurring after delivery. y Term may be used irrespective of mode of transport.
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CPT
Carriage Paid To (named port of destination)
SELLER BUYER
Sellers Risks
Buyers Risks
Sellers Cost
Buyers Costs
y Seller delivers the goods, cleared for export, to the carrier. y The seller pays the costs of carriage to named destination,
but the buyer bears the risk of loss and additional costs occurring after delivery. y The seller procures insurance against buyers risk of loss. y Term may be used irrespective of mode of transport.
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CIP
Carriage and Insurance Paid To (named port of destination)
SELLER BUYER
Discharging Delivery at Port of named place of Arrival destination: Frontier/ Terminal/Quay Buyers Risks
Sellers Risks
Sellers Cost
Buyers Cost
all the way to destination at the border or within the country of import. y DAF y DES y DEQ y DDU y DDP
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rail and road. y The seller pays for transportation to the named place of delivery at the frontier. y The buyer arranges for customs clearance and pays for transportation from the frontier to his factory.
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DAF
Delivered At Frontier(named place)
SELLER BUYER
Sellers Risks
Sellers Cost
y y y y
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. 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. Term used only for delivery by sea.
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DES
Delivered exShip(named port of destination)
SELLER BUYER
Sellers Risks
Sellers Cost
y This is similar to DES. y The passing of risk does not occur until the goods have
been unloaded at the port of destination. y Seller bears all costs and risks to bring goods to the named port of destination and discharging the goods on the quay. y Term used only for delivery by sea.
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DEQ
Delivered Ex Quay(named port of destination)
SELLER BUYER
Sellers Risks
Sellers Cost
destination in the contract of sale y Seller bears all costs and risks (except duty) to bring goods to the named place of destination. y Term may be used irrespective of mode of transport. y If delivery is to take place at the port, quay or on board a vessel, DES or DEQ should be used.
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DDU
Delivered Duty Unpaid(named place of destination)
SELLER BUYER
Discharging Delivery at Import Port of named place of Documents Arrival destination: Formalities Frontier/ Terminal/Quay
Sellers Risks
Sellers Cost
delivery is to take place at the port, quay or on board a vessel, DES or DEQ should be used.
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DDP
Delivered Duty Paid(named place of destination)
SELLER BUYER
Discharging Delivery at Import Port of named place of Documents Arrival destination: Formalities Frontier/ Terminal/Quay
Sellers Risks
Sellers Cost
Letter of Credit
y The letter of credit can also be source of payment for a
transaction, meaning that redeeming the letter of credit will pay an exporter. y Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. In such cases the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits applies. y The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client.
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Instructions given by an exporter to a bank that the documents attached to the draft for collection are deliverable to the drawee only against his or her acceptance of the draft.
y
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In Summary
y Buyers Objective: maximize control of supply chain, use
FOB, FCA, or FAS y INCOTERMS are negotiable! y INCOTERMS should appear on all commercial documents. y The five terms-DAF,DES,DEQ,DDU and DDP have been declared obsolete and would be replaced by three new terms DAT (Delivered at Terminal), DAP (Delivered at Place), and DDP (Delivered Duty Paid) by Jan 01,2011.
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