Welcome to Incoterms® 2010 Rules Lecture
ICC Rules for the use of Trade Terms or
Incoterms® 2010 Rules
Welcome to this Training Course
Presented by: Mark Goodger
Ghana: October 2012
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Management
International Trade is the Lifeblood of
our business world
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distributed without the express written permission of
Management
ICC Accredited Training Programme
of GMLS
This Incoterms® 2010
Rules Training Course
is presented by Mark
Goodger, a Fully
Accredited ICC
Accredited Trainer
ICC Website:http://www.iccwbo.org/
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distributed without the express written permission of
Management
OBJECTIVES OF THIS COURSE
Upon completion of this Course you will be able to further
understand and have insight of:The ICC Role and the development of Incoterms® 2010 Rules
The application of the Incoterms® 2010 Rules
The difference between 2000 and Incoterms® 2010 Rules
Correct use and choice of the most appropriate Incoterms® 2010 Rules for
the specific transaction
The respective roles & responsibilities of the Buyer & the Seller, regarding:a) Delivery b) Obligations, c) Risks, d) Costs
Making recommendations regarding the use of Incoterms® 2010 Rules
The legal use of Incoterms® 2010 Rules
The impact of a particular Incoterms® 2010 Rules on other 3rd Party
Contracts, Transport Documents, Marine Insurance and Payment instruments
and institutions
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IMPORT / EXPORT QUESTIONS
Banking
Requirements
Modes of
Transport
Freight
Agents
Other Govt.
Departments
Exports
Import
Control
Procurement
Department
Forwarding
Marine
Insurance
Shipping
Expertise
Shipping
Dept
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5
Management
Stock
Control
Costings
Central
Control
Customs
Duties
RECOMMENDATIONS WHEN USING THE FOLLOWING
“Incoterms® 2010 Rules” in Text
“Incoterms® 2010 Rules by the International Chamber of Commerce (ICC)”. This is for
instance when it is shown on advertising material on websites, articles etc.;
The 4 symbols (modes of transport 4 blocks) which should be a full colour, no less than
4.5 cm wide. A High Resolution graphic will be provided with permission;
Encourage these whenever visual presentations of the “Incoterms® 2010 Rules are
required;
“Incoterms® 2010 Rules ” is trademark of the International Chamber of Commerce
registered in several countries;
Always utilise the registered Trademark symbol with the ® next to the trademark
“Incoterms” i.e. “Incoterms® 2010 Rules ”
Use Incoterms® 2010 Rules as an adjective and not a noun;
Always utilise “Incoterms® 2010 Rules ” with the final “s” at the end;
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Incoterms® 2010 Rules : INTRODUCTION
Incoterms, or international trade terms, are key
elements of international contracts of sale, since
they tell the parties what to do with respect to:The obligations of the parties relevant to Delivery, and
Carriage of goods from seller to buyer, and
Export and import clearance, and
Explanation of the division of costs, risks and obligations of the respective
parties.
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Incoterms® 2010 Rules MEAN
The purpose and scope of Incoterms® 2010 Rules is
to provide a set of Rules for the interpretation of the
most commonly used trade terms in foreign trade.
The uncertainties can be avoided or at least reduced
to a considerable degree.
They can be correctly incorporated into sales
contracts.
Incoterms have always been primarily intended for
use where goods are sold for delivery across national
borders. Now also applicable to Domestic trade.
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Management
Since 1936 ... to 2011
2011
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distributed without the express written permission of
Management
THE GLOBAL SUPPLY CHAIN
The Global
Supply Chain
Works
Carrier
Alongside Ship
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Management
On Board Vessel Border Arrival
Quay
Destination Place
Buyers Warehouse
INCORPORATION OF Incoterms® 2010
Rules INTO CONTRACTS OF SALE
It is important to ensure that where the parties intend to incorporate Incoterms®
2010 Rules into their contract of sale, an express reference is always made to the
current version of Incoterms® 2010 Rules
Failure to refer to the current version may then result in disputes as to whether the
parties intended to incorporate that version or an earlier version as a part of their
contract
Merchants wishing to use Incoterms® 2010 Rules should therefore clearly specify
that their contract is governed by “Incoterms® 2010 Rules”
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Management
Incoterms® 2010 Rules
Spell
DANGER
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HOW TO USE Incoterms® 2010 Rules
Incorporate correctly into Contract of Sale
Choose the applicable & appropriate Incoterms® 2010 Rules, followed by the
named place specified in detail.
Specify Place/Port clearly / Point
Check Guidance Notes
Know the Difference between NAMED PLACE vs PLACE OF DELIVERY
Understand Risks and Cost division
Variants (BE CLEAR)
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Classification of the Incoterms® 2010 Rules
The 11 Incoterms® 2010 Rules are presented in two distinct classes:RULES FOR ANY MODE OR MODES OF TRANSPORT:ExW
EX WORKS
FCA
FREE CARRIER
CPT
CARRIAGE PAID TO
CIP
CARRIAGE AND INSURANCE PAID TO
DAT
DELIVERED AT TERMINAL (NEW)
DAP
DELIVERED AT PLACE (NEW)
DDP
DELIVERED DUTY PAID
RULES FOR SEA AND INLAND WATERWAY TRANSPORT:FAS
FREE ALONGSIDE SHIP
FOB
FREE ON BOARD
CFR
COST AND FREIGHT
CIF
COST INSURANCE AND FREIGHT
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Main features of the New
Incoterms® 2010 Rules
2 NEW Incoterms® 2010 Rules – DAT & DAP – these
have replaced the Incoterms 2000 Rules DAF, DES, DEQ
& DDU;
Classification of the 11 Incoterms® 2010 Rules
Rules for domestic and international trade
Guidance Notes
Electronic communication
Insurance cover
Security-related clearances and information required
for such clearances – Global Supply Chain Security
Terminal handling charges
String sales
Variants of Incoterms Rules
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2 NEW Incoterms® 2010 Rules –
DAT & DAP
The number of Incoterms Rules has been reduced from 13 to 11. This has been achieved by
substituting two new Rules that may be used irrespective of the agreed mode of transport –
DAT, Delivered at Terminal, and DAP, Delivered at Place – for the Incoterms 2000 Rules DAF,
DES, DEQ and DDU.
Under both new Rules, delivery occurs at a named destination: in DAT, at the buyer’s disposal
unloaded from the arriving vehicle (as under the former DEQ rule); in DAP, likewise at the
buyer’s disposal, but ready for unloading (as under the former DAF, DES and DDU Rules).
The named terminal in DAT may well be in a port, and DAT can therefore safely be used in
cases where the Incoterms 2000 rule DEQ once was. Likewise, the arriving “vehicle” under
DAP may well be a ship and the named place of destination may well be a port: consequently,
DAP can safely be used in cases where the Incoterms 2000 rule DES once was. These new
Rules, like their predecessors, are “delivered”, with the seller bearing all the costs (other than
those related to import clearance, where applicable) and risks involved in bringing the goods
to the named place of destination.
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WHAT DO THEY DO AND WHAT DON’T
THEY DO IN THE CONTRACT OF SALE
Specify Party obliged to make insurance and carriage
arrangements
Say nothing about price and method
Don’t deal with Transfer of Ownership
Be aware of Mandatory Local Law
Don’t deal with Breach of Contract
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Management
There is a relation between
Incoterms® 2010 Rules and
Contracts
of Carriage
Contracts
of Insurance
Contracts
of Payment
Contract of Sale incorporating Incoterms
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THE SELLER COST/RISK IS MAXIMISED BECAUSE HE MUST MAKE THE
GOODS AVAILABLE UPON ARRIVAL AT THE AGREED DESTINATION
RISK
COUNTRY OF EXPORT
PRE-CLEARANCE
IMPORT
CLEARANCE
EXPORT
CLEARANCE
MAIN CARRIAGE
ExW
FCA
CPT
CIP
+ INSURANCE
19
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COST
COUNTRY OF
IMPORT
ON-CARRIAGE
Incoterms® 2010 Rules OVERVIEW AT A
GLANCE RULES FOR ANY MODE OF TRANSPORT
ExW
•Ex Works - represents Min obligation for Seller
•Named place must be included i.e. (ExW, ABC Stores, 34 Pongola Road, Durban)
Delivery
FCA
•Free Carrier means the Seller delivers the goods to the carrier or another person nominated by the Buyer
•Named place must be included i.e. (FCA, Globewide Forwarders, 106 Point road, Durban)
Delivery
CPT
•Carriage paid to - means that the Seller delivers the goods to the carrier or another person nominated by the Seller at an
agreed place
•Named place must be included i.e. (CPT 1 Amherst Street, E40-281, Cambridge, MA 02142)
Delivery
CIP
DAT
•Named place must be included i.e. (CIP 1 Amherst Street, E40-281, Cambridge, MA 02142)
•Carriage & Insurance Paid to – means that the Seller delivers the goods to the carrier or another person nominated by the
Seller at an agreed place and that the Seller must contract for and pay the costs of carriage necessary to bring the goods
to the named place of destination.
•Replaces the old DAF, DES, DEQ & DDU Terms
•Named place must be included i.e. (DAT, Duxburry Container Terminal, Felixstowe)
•Delivered at Terminal means that the Seller delivers when the goods, once loaded from the arriving means of transport,
are placed at the disposal of the Buyer at the named terminal at the named port or place of destination.
Delivery
Delivery
DAP
•Replaces the old DAF, DES, DEQ & DDU Terms
•Named place must be included i.e. (DAP. , 1 Amherst Street, E40-281, Cambridge, MA 02142)
•Delivered at Place means that the Seller delivers when the goods are placed at the disposal of the Buyer on the arriving
means of transport ready for unloading at the named place of destination.
Delivery
DDP
•Named place must be included i.e. (DDP, , 1 Amherst Street, E40-281, Cambridge, MA 02142)
•Delivered Duty Paid means that the Seller delivers the goods when the goods are placed at the disposal of the Buyer,
cleared for import on the arriving means of transport ready for unloading at the named place of destination.
Delivery
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Incoterms® 2010 Rules OVERVIEW AT A GLANCE
RULES FOR SEA & INLAND WATERWAY TRANSPORT
FAS
FOB
CFR
CIF
•Free Alongside Ship means that the Seller delivers when the goods are placed alongside the vessel
nominated by the Buyer at the named port of shipment
•Named place must be included i.e. (FAS, Berth 106, Durban Harbour)
•Free on Board means that the Seller delivers the goods on board the vessel nominated by the Buyer at the
named port of shipment or procures the goods already so delivered.
•Named place must be included i.e. (FOB, “Maeve”, Durban Port)
•Cost and Freight means that the Seller delivers the goods on board the vessel or procures the goods already so
delivered
•Named place must be included i.e. (CFR, Hamburg Port)
•Cost, Insurance and Freight means that the Seller delivers the goods on board the vessel or procures the
goods already so delivered.
•Named place must be included i.e. (CIF, Hamburg Port)
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Delivery
Delivery
Delivery
Delivery
DELIVERY
It is particularly important to note that the term “delivery” is used in two
different senses in Incoterms® 2010 Rules :-
Firstly, to determine when the seller has fulfilled his delivery obligation
Secondly, the term “delivery” is also used in the context of the buyer’s
obligation to take or accept delivery of the goods
“Delivery” means first that the buyer “accepts” the nature of the terms
This obligation is important so as to avoid unnecessary charges for storage of
the goods until they have been incurred by the buyer
Delivery has multiple meanings in trade law & practice, but in Incoterms®
2010 Rules, it is used to indicate where the risk of loss of or damage to the goods
passes from the seller to the buyer
Default point
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Guidance Notes
Before each Incoterms® 2010 Rules term you will find a Guidance Note (View
the attached file by clicking on the Light Bulb icon below in the E-Learning
CD)
Guidance Notes explain the fundamentals of each Incoterms ® 2010 Rules
Term
The Guidance Notes are not part of the actual Incoterms® 2010 Rules
They are intended to help the user accurately and efficiently steer towards
the appropriate Incoterms rule for a particular transaction.
EX
W
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The Mirror Concept in Incoterms® 2010
Rules
As in the Incoterms® 2010 Rules , the Seller’s and Buyer’s obligations are
presented in mirror fashion, reflecting under column A the Seller’s obligations
and under column B the Buyer’s obligations. These obligations can be carried
out personally by the Seller or the Buyer or sometimes, subject to terms in the
contract or the applicable law, through intermediaries such as Carriers, Freight
Forwarders or other persons nominated by the Seller or the Buyer for a specific
purpose.
The text of the Incoterms® 2010 Rules is meant to be self-explanatory.
However, in order to assist users, the text sets out guidance as to the sense in
which selected terms are used throughout the document.
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SELLER & BUYER OBLIGATIONS
A1
A2
A3
A4
A5
A6
A7
A8
A9
A10
• General obligations of Seller
B1
• Licenses, authorisations security clearances and other
formalities
B2
• Contracts of carriage and insurance
B3
• Delivery
B4
• Transfer of Risk
B5
• Allocation of costs
B6
• Notices to the Buyer
B7
• Delivery document
B8
• Checking-packaging-marking
B9
• Assistance with information and related costs
B10
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• General obligations of Buyer
• Licenses, authorisations security clearances and other
formalities
• Contracts of carriage and insurance
• Taking delivery
• Transfer of Risk
• Allocation of costs
• Notices to the Seller
• Proof of delivery
• Checking-packaging-marking
• Assistance with information and related costs
DDP
A THE SELLER'S OBLIGATIONS
B THE BUYER'S OBLIGATIONS
A1
B1
General obligations of the seller
General obligations of the buyer
The seller must provide the goods and the commercial The buyer must pay the price of the goods as provided
invoice in conformity with the contract of sale and any
in the contract of sale.
other evidence of conformity that may be required by
the contract.
Any document referred to in B1-B10 may be an
equivalent electronic record or procedure if agreed
Any document referred to in A1-A10 may be an
between the parties or customary.
equivalent electronic record or procedure if agreed
between the parties or customary.
A2
B2
Licences, authorizations, security clearances and
Licences, authorizations, security clearances and
other formalities
other formalities
Where applicable, the seller must obtain, at its own Where applicable, the buyer must provide assistance to
risk and expense, any export and import licence and the seller, at the seller’s request, risk and expense, in
other official authorization and carry out all customs
obtaining any import licence or other official
formalities necessary for the export of the goods, for
authorization for the import of the goods.
their transport through any country and for their
import.
26
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Risks
Transit Risk:-
-
Theft
Damage
Other losses due to fire, water, etc
Passing of Risk:-
-
At Origin
At Destination
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Responsibilities
Origin Costs:-
Destination Costs:-
-
-
Manufacture & Supply
Packing
Compliance / Documentation
Transportation
Port Handling
Insurance
Main Carriage Costs:-
Freight
Loading / Discharging
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Port Handling
Clearing
Unpacking & Transport
Insurance
Payment
CONCLUSION (acknowledgement)
The ICC has been writing and publishing the Incoterms Rules for
more than 70 years, providing importers, exporters, lawyers,
transporters and insurers and students in the International Trade
arena with the Rules and guidance reflecting the latest developments
in the trading environment.
The ICC (International Chamber of Commerce), the World Business
Organisation based in Paris, is the global leader in the development
of standards, Rules and reference guides for International Trade.
The ICC are – Merchants of Trade and Peace !!
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Courses offered by GMLS, please contact us on:Website: www.gmls.co.za
Email: info@gmls.co.za
Office Mobile: +27 82 852 3626
Tel: +27 44 695 2251
or 695 2187
Fax: +27 86 504 3070
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