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An in-depth presentation about International Commercial Terms that helps you understand this trade standard with the aid of intuitive pictures, charts and graphical interpretations.

An in-depth presentation about International Commercial Terms that helps you understand this trade standard with the aid of intuitive pictures, charts and graphical interpretations.

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All about INCOTERMS latest revision All about INCOTERMS latest revision Presentation Transcript

  • INCOTERMS Guta Mihai Alexandru Gaspar George Dan Ghergu Andrei Catalin in using Trends
  • What does INCOTERM stand for ? ‣ Def : The  word  INCOTERM  is  an  abbreviation  for  International           Commercial  Terms  which  provide  a  common  set  of  rules  used  for   defining  the  responsibilities  of  sellers  and  buyers  in  the  delivery  of   goods  under  sales  contracts.   ‣ They  are  widely  used  in  international  commercial  transactions.  
  • Are they important ?
  • For sure ! but...
  • Why is that ? ‣ Set  international  rules  for  commonly  used  terms  in  foreign  trade   ‣ Define  obligations  of  both  parties  involved  in  the  transaction   ‣ Determine  the  distribution  &  transfer  of  risks  regarding  the  goods   delivered  from  seller  to  buyer     ‣ State  the  clear  sharing  of  expenses  between  the  parties  during  transport Because they : So...
  • When and where did they appear ? ‣ First  conceived  by  International  Chamber  of  Commerce  (ICC)  in  1921  and   implemented  starting  from  1936,  since  they  have  been  updated  6  times  in   order  to  keep  pace  with  the  evolution  of  international  trade.     ‣ In  1923,  a  Trade  Terms  Committee  developed  the  first  6  rules  :  FOB,  FAS,   FOT,  FOR,  Free  Delivered  CIF  and  C&F,  as  the  precursor  for  what  would  later   be  known  as  INCOTERM  rules.  
  • Revising the INCOTERMS ‣ In  order  to  keep  up  with  the  continuous  evolution  of  commercial   practices,  types  of  goods  and  transport  and  international  law,   INCOTERMS  need  to  be  regularly  updated  by  specialised  experts.     ‣ Some  significant  revisions  :     1980  -­‐    FCA  was  introduced,  for  dealing  with  cases  where  the  reception           point  was  no  longer  the  ship's  rail,  but  a  point  on  land  where  goods  were   stored  in  a  container   followed by...
  • ‣ 1990  -­‐  the  seller  was  permitted  to  provide  the  proof  of  delivery   electronically  by  EDI-­‐messages  instead  of  paper  documentation     ‣ 2000  -­‐  export  clearance  and  other  formalities  under  FAS  are  placed  on   the  seller  (previously  buyer)                        -­‐  in  FCA,  it  became  the  seller's  obligation  to  load  the  goods  on  the     buyer's  vehicle  or  the  buyer's  obligation  to  receive  the  seller's  arriving   vehicle  unloaded  
  • Updating INCOTERMS every 10 years - The  answer  is  Yes  -­‐  because  of  the  rapid  expansion  of  world  trade  and  the   continuous  changes  in  international  market's  structure,  the  same  rules  cannot   be  applied  effectively  in  any  circumstances  without  considering  the  new  factors   and  influences  that  might  occur.          The  most  recent  key  drivers  include  :     ‣  a  need  for  improved  cargo  security   ‣ changes  in  the  Uniform  Commercial  Code  in  2004  resulting  in  a  deletion  of  US   shipment  and  delivery  terms     ‣ new  trends  in  global  transportation   ...is it necessary ?
  • General all types of transport • EXW • FCA • CPT • CIP ! ! • FAS • FOB • CFR • CIF INCOTERMS 2010 - latest revision What is new ?    Entered  into  force  1st  January  2011,  containing  the  following  amendments:   ‣ reduction  from  13  to  11  terms  by  replacing  4  delivery  terms  :  DEQ,  DAF,  DES,   DDU  with  2  new  ones  :  DAT(Delivery  at  Terminal)  and  DAP(Delivery  at  Place)     ‣ terms  grouped  in  2  categories,  according  to  the  means  of  transport  used  :     Special sea & inland waterway • DAT • DAP • DDP
  • More changes... ‣ transfer  of  risks  'on  board'  in  INCOTERMS    FOB,  CFR,  CIF  while  in  previous   INCOTERMS  2000,  the  risk  passed  when  the  goods  were  off  'the  ship's  rail'   ‣ goods  in  containers  can  be  delivered  only  using  Incoterms  for  any  mode  of   transport  but  not  sea  Incoterms     ‣ security  related  information  must  be  provided  by  the  seller  who  has  the   obligation  to  assist  the  buyer  concerning  the  safety  of  goods,  all  costs  being   borne,  however  by  the  buyer.  
  • How INCOTERMS evolved 1936 EXW FOR FAS FOB CFR CIF EXQ EXS 2000 EXW CIP FCA DAF FOB DES CFR DEQ CIF DDU CPT DDP 2010 EXW CIP FCA DAP FAS DAT FOB DDP CFR CIF CPT Beginning Present R e v i s i n g
  • I Rules for any mode of transport
  • EXW (Ex Works) ‣ delivers  goods  at  his  own   premises  (factory/warehouse)   ‣ minimal  obligations,  risks  &costs ‣ responsible  for  loading  goods  onto   carrier  and  all  other  transport  cost,   duties  and  insurance   ‣ clearance  of  goods  for  export   ‣ bears  the  whole  risk  on  his  own Seller Buyer      minimal  costs  &  risks  for  exporter        lowest  service  offered   loss  of  competitiveness
  • FCA (Free Carrier) ‣ completes  and  bears  costs  of  export   clearance  and  obtaining  necessary   documents   ‣ delivers  goods  at  agreed  place  to   carrier   ‣ liable  for  the  load  if  delivery  is  made  on   his  premises ‣ import  clearance  formalities   ‣ responsible  for  unload  if  delivery   occurs  in  a  facility  or  transport   infrastructure Seller Buyer  flexible,  various  delivery  points    any  type  of  cargo  and  different  payment  methods    best  suited  for  goods  transported  in  containers  
  • CPT (Carriage Paid To) ‣ contracts  and  pays  transport  to   the  buyer's  country  delivery  place   ‣ completes  formalities  and  bears   export  customs  clearance  costs   ‣ risk  of  transport  is  transferred   when  the  goods  are  delivered  to   the  first  carrier  in  the  seller's   country   ‣ supports  transport  costs  starting  from   the  moment  goods  have  reached  the   place  of  delivery  in  his  country   ‣ import  clearance  costs  and  formalities   ‣ supports  the  transport  risk  since  the   goods  have  been  delivered  to  1st   carrier  and  the  insurance  for   international  transport   Seller Buyer
  • CIP (Carriage and Insurance Paid To) ‣ bears  the  same  costs  and   obligations  as  in  case  of  CPT    +    the  obligation  of  hiring  insurance   to    cover  the  buyer's  risk  during   international  transport   ‣ contracts  the  insurance  and  pays   the  premium ‣ beneficiary  of  the  insurance  paid  by   the  seller   ‣ must  take  into  account  that  the  buyer   is  obliged  only  to  a  minimum  coverage   insurance   ‣ he  needs  to  agree  with  the  seller  to   hire  additional  insurance  if  he  wants  a   larger  coverage Seller Buyer
  • DAT (Delivery at Terminal) ‣ delivers  goods  unloaded  at  a  port   terminal  or  another  place  of   destination  in  the  buyer's  country   ‣ complete  the  formalities  and  bear   costs  of  customs  clearance  for   export     ‣ transport  risk  passes  to  the  buyer   at  the  time  of  delivery  to   destination  country   ‣ import  customs  clearance  and  tariffs   paid   ‣ clearly  mention  the  specific  point   chosen  for  delivery Seller Buyer
  • DAP (Delivery at Place) ‣ delivers  goods  ready  for  unloading  in   the  country  of  destination,  in  a  place   other  than  a  transport  terminal,  such   as  the  buyer's  premises  or  a  place   nearby   ‣ risk  is  transferred  to  buyer  in  the  same   place  where  goods  are  delivered   ‣ complete  formalities  and  bear  export   clearance  costs   ‣ pays  the  costs  of  import   clearance  customs   Seller Buyer useful  for  sales  between  countries   of  same  economic  area  (EU)  as   there  are  no  import  customs  
  • DDP (Delivery Duty Paid) ‣ delivers  goods  ready  for  unloading  in   the  country  of  destination,  usually  at   buyer's  premises   ‣ all  costs  and  risks  borne  by  seller   ‣ customs  clearance  of  export  and   import  also  covered  by  seller   ‣ any  import  tax,  including  VAT  are   paid  by  the  seller   ‣ only  cost  he  assumes  is  the   unloading  of  goods  at  delivery   place   ‣ if  the  parties  agree  in  the  contract   of  sale,  the  VAT  or  other  taxes  can   be  paid  by  the  buyer,  in  what  is   known  as  a  variant  of  DDP,  called   'DDP  VAT  unpaid'     Seller Buyer
  • II Special INCOTERMS for sea transport
  • FAS (Free Alongside Ship) ‣ delivers  the  goods  placing  them   alongside  the  ship  chosen  by  the   buyer   ‣ export  clearance  must  be  covered   by  the  seller ‣ responsible  for  loading  the  goods  on   the  ship     ‣ must  have  very  good  knowledge  of   the  practices  in  the  port  of  shipment   Seller Buyer  only  used  for  certain  commodities  and  materials   that  are  not  packed  and  cannot  be  individualised   (grain,  timber,  minerals,  etc.)    delivery  is  done  in  ports  with  specialised  terminals    
  • FOB (Free on Board) ‣ delivers  goods  by  placing  them  on   board  of  the  ship  named  by  the   buyer   ‣ covers  the  terminal  costs  and   export  clearance ‣ assumes  the  transportation  risk  after   the  goods  have  been  delivered  on   board  of  the  ship   Seller Buyer  oldest  Incoterm  and  one  of  the  most  widely  used    preferably  used  with  bulk,  heavy  loads  and  in  case  of   complex  goods  (machinery)  whose  loading  involves   certain  risks    
  • CFR (Cost and Freight) ‣ delivers  the  goods  on  board  of  a  ship   but  he  also  pays  the  cost  of  freight   to  the  destination  point   ‣ covers  terminal  cost  and  export   clearance   ‣ the  risk  is  transferred  to  the  buyer   after  the  goods  had  reached  the   board  of  the  ship ‣ must  hire  an  insurance  for  transport   from  the  port  of  shipment  to  the   destination,  as  the  seller  is  not   obliged  to  do  this Seller Buyer used  mainly  for  large  volumes  of  general  cargo
  • CIF (Cost, Insurance and Freight) ‣ same  obligations  that  CFR  implies     +  seller  is  obliged  to  hire  insurance  for   transport  covering  at  least  the  way   from  the  port  of  shipping  to  the  port   of  destination     ‣ insurance  shall  cover  the  price  of  the   contract  +  10% ‣ he  might  want  to  hire  additional   insurance,  as  the  seller  is  only   obliged  to  purchase  a  minimum   coverage  insurance Seller Buyer used  for  general  cargo  of  consumer  or  industrial  products  of  high  value     CIF  value  is  used  in  most  of  the  customs  to  apply  tariffs  and  import   taxes,  facilitating  the  clearance  of  goods  for  export  
  • After so many types of terms... Here  is  a  simple  diagram  summarising  the  extent  of  costs  &  risks   covered  by  each  of  the  11  INCOTERMS  that  have  just  been  presented  :  
  • And a more detailed Bar Chart :
  • Using INCOTERMS correctly Following  the  three  letters  of  the  appropriate  chose  term  with  the   exact  destination  place  to  which  the  delivery  of  goods  is  to  be  made,   and  afterwards  the  expression  'Incoterms  2010'   by... Such as : FCA Port of New Orleans, USA, Incoterms 2010 Or CIPTianjin airport, China, Incoterms 2010 will certainly...
  • Benefit all the parties involved INCOTERMS  have  become  an  essential  framework  in  daily  language  of   trade,  providing  clear  rules  and  guidance  to  importers,  exporters,  lawyers,   forwarders,  insurers,  carriers            and        mainly e v e r y b o d y taking part in international trade transactions. as leading to :
  • However, if used incorrectly      Your  contract  may  be  ambiguous,  lacking  some  important  details  or   even  impossible  to  perform,  causing  lots  of  misunderstandings  and   prejudices   which can turn into... and eventually cause. . .
  • Undesirable effects such as or So...
  • As Eric Ambler stated ' International business may conduct its operations with scraps of paper, but the ink it uses is human blood ' thus in  order  to  practice  commercial  trade  in  a  successful  and  profitable  manner,   you  need  a  deep  understanding  of  all  factors  involved  as  well  as  a  careful   fulfilment  of  the  required  procedures  for  defining  and  avoiding  /  minimising   unnecessary  risks,  obligations  or  costs       And that is where ...
  • INCOTERMS have proven their essentially useful part in daily l a n g u a g e o f t r a d e