International Commercial Terms (INCOTERMS)
ICC Official Rules for Interpretation of Trade Terms *
By Muhammad Hamayuon Bashir
[email protected]
* International Chamber of Commerce
Background to the presentation
The topic of Inco Terms is complicated yet interesting.
Inco Terms are used in the international trade.
Inco Terms are official rules of ICC
To understand Inco Terms it is essential to have a fair idea of international trade.
Activity to move a cargo from one country to other.
Inland Transportation, Loading & Unloading, Overseas transportation, Storage, documentation, Payment of goods, Clearance, Risk coverage, Handing over taking over of cargo.
Each of the above activity is an independent one and is performed by separate organization who has special manpower and equipment to cater the requirement.
The involvement of various organizations at different level demand for determination of the following:
What will be the point of delivery?
Who will pay the cost at different stages?
How the risk element shall be determined?
Purpose of Incoterms
Rules for the interpretation of trade terms in foreign trade
Reduce misunderstanding, disputes & litigation.
Scope Rights and obligations of the parties to the contract of sale with respect to the delivery of “tangible” goods sold and NOT including “intangibles” such as computer software etc.
Misconceptions
Incoterms apply to contract of carriage rather than to the contract of sale.
Incoterms assumed to provide for all the duties which parties may wish to include in a contract of sale.
Structure of Incoterms PART E
PART F
PART C
PART D
DEPARTURE
MAIN CARRIAGE UNPAID
MAIN CARRIAGE PAID
ARRIVAL
EXW
FCA FAS FOB
CFR CIF CPT CIP
DAF DES DEQ DDU DDP
Continued
Structure of Incoterms
Clause A1
Provision of goods
Clause A2
Licence, authorization & formalities
Clause A3
Contract of carriage and insurance
Clause A4
Delivery
Clause A5
Transfer of risks
Clause A6
Division of costs
Clause A7
Notice to the buyer
Clause A8
Proof of delivery
Clause A9
Checking – packing - marking
Clause A10
Other obligations
EXW
Seller Warehouse and Workshop
BUYE R
Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
SELLE R Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
EXW
EX WORKS Seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle.
Min obligation for the seller.
Buyer has to bear all costs and risks.
FCA
SELLER’S WAREHOUSE
Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
FCA
FREE CARRIER
Seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the name place.
Carrier means any person who undertake to perform a contract of carriage and include a nominee by the buyer.
FAS
CUSTOMS AREA OF SELLER’S PORT Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
FAS
FREE ALONGSIDE SHIP
Seller delivers when the goods are placed alongside the vessel at the name port of shipment.
FAS term requires the seller to clear the goods for export.
FO B
LOADING AREA OF THE SELLER’S PORT Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
FOB
FREE ON BOARD
Seller delivers when the goods pass the ship’s rail at the named port of shipment.
The FOB term requires the seller to clear the goods for export.
The buyer has to bear all costs and risks of loss of or damage to the goods from that point.
This term can be used only for sea or inland waterway transport.
CFR
BUYER’S PORT
Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
CFR
COST AND FREIGHT (….named port of destination)
Seller delivers when the goods pass the ship’s rail in the port of shipment.
Seller to pay the costs and freight for named port of destination
the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer.
CIF
BUYER’S PORT
Port chrgs on Duties arrival Taxes Dlvry at & to buyer Import the port Custms plant Clranc site
Marine Ware Load Exp Insrnc house on Seller Forwar Inland Liceof the Ocean Fab Load Storag der Freight nce goods Vesse e & Auth the / Air the Fee l Labor from Goods Freight Check Goods Termina Govt. on Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
CIF
COST INSURANCE & FREIGHT (….named port of destination)
Seller to pay the costs, freight and marine insurance during the carriage.
Seller to get insurance on min. cover. for greater cover, buyer to get his extra arrangement.
Seller to clear the goods for export.
CPT
UNLOADING AREA OF THE BUYER’S PORT Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
CP T
CARRIAGE PAID TO (…named port of destination)
The seller deliver the goods to the carrier nominated by him
The seller must in addition pay the cost of carriage necessary to bring the goods to the name destination.
Buyer bears all risks and any other costs occurring after the goods have been so delivered.
CIP
UNLOADING AREA OF THE BUYER’S PORT Dlvry Port Ware Load Exp to house on chrgs Seller Forwar Inland LicePlant the upon Ocean Fab Load Storag der Freight nce Site Duties Vesse e & arrival Auth the / Air Taxes Marine the Fee l Labor from Goods & Insrnc of Freight Check Goods Termina Govt. on of shpmnt Cont. Import Cstm Export l goods of Exp the of Custms s Pack Charges Cntry truck Carriage Clranc Cleara Mark nce
CIP
CARRIAGE AND INSURANCE PAID TO (….named port of destination)
Seller delivers the goods to the carrier nominated by him.
Seller must in addition pay the cost of carriage necessary to bring the goods to the named destination.
The seller also has to procure insurance.
DAF
FRONTIER OF THE COUNTRY OF SELLER
Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
DAF
FRONTIER OF THE COUNTRY OF BUYER
Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
DA F
DELIVERED AT FRONTIER (….named places)
Seller delivers the goods when the goods are placed at the disposal of the buyer on the arriving means of transport, not unloaded, not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country.
DE S
UNLOADING AREA OF THE BUYER’S PORT Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
DE S
DELIVERED EX SHIP (….named port of destination)
Seller delivers when the goods are placed at the disposal of the buyer on board the ship, not cleared for import at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination before discharging.
DEQ
UNLOADING AREA OF THE BUYER’S PORT
Marine Dlvry Port Ware Load Exp to nsrnc house on chrgs Seller Forwar Inland Licethe the of upon Ocean Duties Fab Load Storag der Freight nce plant Vesse e & goods Taxes arrival Auth the / Air the Fee site l & Labor from Goods of Freight Check Goods Termina Govt. on Import shpmnt Cont. Cstm Export l of Exp the Custms of s Pack Charges Cntry Clranc truck Carriage Cleara Mark nce
DE Q
DELIVERED EX QUAY (….named port of destination)
Seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay (wharf) at the named port of destination.
The seller has to bear costs and risks involved in bringing the goods to the named port of destination and discharging the goods on the quay (wharf).
The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import.
DD U
Customs Clearance Area for Storage, Appraisement & Release to the importer WEST WHARF
UNLOADING AREA OF THE BUYER’S PORT Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Exp Ware Load house on Inland Licechrgs Forwar Seller the Freight upon Ocean der nce Fab Load Storag Vesse e & arrival Fee Auth the / Air the l from Labor Goods of Freight Termina Check Goods Govt. on l shpmnt Cont. Cstm Export of Exp Charges the of s Pack Cntry truck Carriage Cleara Mark nce
DDU
DELIVERED DUTY UNPAID (….named place of destination)
Seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination.
The seller has to bear the costs and risks involved in brining the goods thereto, other than, where applicable, any “duty” (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination.
Such duty has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time.
DDP
Customs Clearance Area for Storage, Appraisement & Release to the importer WEST WHARF UNLOADING AREA OF THE BUYER’S PORT Marine Insrnc of Duties goods Taxes Dlvry & to Import the Custms plant Clranc site
Port Ware Load Exp house on chrgs Seller Forwar Inland Licethe upon Ocean Fab Load Storag der Freight nce Vesse e & arrival Auth the / Air the Fee l Labor from Goods of Freight Check Goods Termina Govt. on shpmnt Cont. Cstm Export l of Exp the of s Pack Charges Cntry truck Carriage Cleara Mark nce
DDP
DELIVERED DUTY PAID (….named place of destination)
Seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination.
The seller has to bear all the costs and risks involved in brining the goods thereto including, where applicable, any “duty” (which term includes the responsibility for and the risks of the carrying out of customs formalities and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination.
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