International Commercial Terms INCOTERMS

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International Commercial Terms (INCOTERMS)

• The INCOTERMS is a universally recognized set of
  definitions of international trade terms, such as
  FOB, CFR and CIF, developed by the International
  Chamber of Commerce (ICC) in Paris, France.
• It defines the trade contract responsibilities
  and liabilities between buyer and seller. It is
  invaluable and a cost-saving tool.

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INCOTERMS 2000

• The INCOTERMS was first published in 1936
  -INCOTERMS 1936 - and it is revised periodically
  to keep up with changes in the international
  trade needs.
• The complete definition of each term is available
  from the current publication---INCOTERMS 2000.

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Exporter and Importer

• The exporter and the importer need not undergo a
  lengthy negotiation about the conditions of each
  transaction.
• Once they have agreed on a commercial term like
  FOB, they can sell and buy at FOB without
  discussing who will be responsible for the
  freight, cargo insurance, and other costs and
  risks.

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A common set of rules

• The Incoterms provide the most often used
  international terms of trade and an official
  version of the Incoterms should be referenced in
  the text of the contract.
• The goal is to alleviate or reduce confusion over
  interpretations of shipping terms by outlining
  who is obligated to take control of and/or insure
  goods at a particular point in the shipping
  process.
• Furthermore, the terms outline the obligations
  for the clearance of the goods for export or
  import and packing requirements.

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Not appropriate for every contract

• Specifically, the terms used in a contract state
  exactly when the shipper unloads and relinquishes
  obligation and when the buyer takes over for
  carriage and insurance.
• The Incoterms are not meant to replace statements
  in a contract of sale that outline transfers of
  ownership or title to goods.
• Therefore, the Incoterms may not be of use when
  looking to resolve disputes that may arise
  regarding payment or ownership of goods.

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Incoterms groups

• Incoterms fall into four different groups
• Departure (E),
• Main Carriage Unpaid (F),
• Main Carriage Paid (C),
• Arrival (D).
• The point at which liability and carriage
  transfer from the seller to the buyer
  distinguishes the groups and each groups letter
  corresponds to the first letter of an INCO Term.

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Groups

• E EXW Ex Works
• F FAS Free Alongside Ship
• FCA Free Carrier
• FOB Free On Board
• C CFR Cost and Freight (was CF)
• CIF Cost, Insurance and Freight
• CIP Carriage and Insurance Paid To
• CPT Carriage Paid To
• D DAF Delivered At Frontier
• DDP Delivered Duty Paid
• DDU Delivered Duty Unpaid
• DEQ Delivered Ex Quay
• DES Delivered Ex Ship

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EXW - EX WORKS

• Franco fabbrica

La merce è a disposizione dellacquirente presso
lo stabilimento del venditore.
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FAS - FREE ALONGSIDE SHIP

• Franco sottobordo (porto di imbarco convenuto)

Il venditore adempie i suoi obblighi quando la
merce viene posta sotto il bordo della nave sulla
banchina o su mezzi galleggianti nel porto
dimbarco convenuto. Da tale momento i rischi e
le spese si trasferiscono al compratore.
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FOB - FREE ON BOARD

• Franco a bordo (porto di imbarco convenuto )

Il venditore deve curare che la merce sia messa a
bordo della nave. Le spese e i rischi si
trasferiscono al compratore al momento del
passaggio della merce oltre la murata della nave.
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CFR - COST AND FREIGHT

• Costo e nolo (porto convenuto)

Il venditore ha a carico tutte le spese
necessarie per il trasporto della merce fino al
porto di destinazione convenuto.
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CIF - COST INSURANCE FREIGHT

• Costo assicurazione e nolo (porto di destinazione
  convenuto).

Il venditore ha gli stessi obblighi del CFR con
in più quello di stipulare un contratto di
assicurazione.
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DAF - DELIVERED AT FRONTIER

• Franco frontiera (luogo di consegna convenuto
  alla frontiera)

Il venditore paga le spese e si accolla i rischi
fino al passaggio della frontiera compreso.
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DDP - DELIVERED DUTY PAID

• Reso sdoganato luogo di destinazione convenuto

Tutte le spese e i rischi sono a carico del
venditore fino alla consegna presso lacquirente,
compreso lo sdoganamento.
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Incoterms and transport modes

• FOB indicates that the shipper (seller) has
  upheld his/her part of the agreement when the
  goods pass the ships rails at the port of exit.
  The receiving party (buyer) assumes risk and
  costs associated with the goods once they pass
  the ships rail in the sellers homeport. Due to
  the specific mention of the ship's rails, an
  aircraft or other mode of transport could not be
  used with FOB.
• For a shipment scheduled for delivery by air,
  rail, or some other form of transport with the
  same agreement as FOB one would need to use the
  Incoterm FCA, or Free Carrier. FCA can include
  other modes of transportation such as road, rail,
  inland waterway and air.

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Applicable trade terms in different modes of
transport
L land O ocean A air M multimodal.
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Responsibilities of the Seller (Exporter) and
Buyer (Importer)
O Seller is responsible O Buyer is responsible
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Responsibilities of the Seller (Exporter) and
Buyer (Importer)
O Seller is responsible O Buyer is responsible
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Responsibilities of the Seller (Exporter) and
Buyer (Importer)
O Seller is responsible O Buyer is responsible
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Examples

• In the range of Incoterms, DDP (Delivered Duty
  Paid) entails the most obligations for the
  seller, whereas EXW (Ex Works) represents the
  least.

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Examples

• If your agreement with a buyer calls for the
  seller to release goods at the sellers location
  (Departure group), the Incoterms EXW (Ex Works)
  would be used.
• Ex Works states principally that the buyer takes
  over carriage and insurance responsibilities at
  the sellers dock.

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Examples

• Alternatively, if the seller were to deliver
  goods to the buyers dock, including all carriage
  and insurance, a term from the arrival group such
  as DDP (Delivered Duty Paid) would be
  appropriate.
• DDP requires that the seller deliver goods to the
  buyers dock with all carriage, insurance and
  duties paid.

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