Introduction to Incoterms 2010
March 21, 2013
Presenter
Theresa Sekula – Manager, BDP Corporate
Compliance Team
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Joined BDP in 2005, various roles including marine
procurement, operations, and compliance roles
Pending Customhouse broker license
Delivery and management of BDP internal audits,
compliance manuals, and comprehensive internal
and external training and audit programs.
Incoterms® 2010
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Background
Purpose
General Notes
Important changes for 2010
What Incoterms don‟t do
What Incoterms aren‟t
Recommended Usage
Incoterm Groupings
Closing Notes
Incoterms® – History & Background
INternational COmmercial TERMS
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Published by the International Chamber of Commerce
(ICC), located in France
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ICC issued first Incoterms in 1936
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11 terms of shipment and delivery in Incoterms 2010 (13
terms in Incoterms 2000)
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Effective 1/1/2011 – ICC publication #715
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Revisions are approximately every decade in recent
history (1980, 1990, 2000, 2010)
Purpose: Provide Common Ground in
International Trade
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Provide an internationally accepted definition of:
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The responsibilities of the Buyer & Seller
The allocation of delivery costs
The assumption of delivery risks
Created to adapt to the most contemporary
commercial practices
Should be referred to as „Guidelines‟
Translated into different languages
Endorsed by the ICC & respective ICC national
organizations
General Notes
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Incoterms divide Costs, Risks, and Responsibilities
between the Buyer and Seller
Written to reflect rather than dictate trade practice
Terms of sale must be negotiated in conjunction with
the terms of payment
Incoterms focus on the Seller‟s delivery obligations
Incoterms can be modified as long as the Buyer and
Seller agree and it is documented
Effective date of January 1st, 2011 does not invalidate
older versions; they can still be used as long as the
Buyer and Seller agree on the version used
Important Changes for 2010
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Incoterms 2010 contains 11 terms of delivery
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DAF, DES, DDU and DEQ have been removed
DAP and DAT are new and have been added
Container arrival costs (i.e., THC and other
destination charges) are not expressed
Exact cost transfer points need to be addressed
elsewhere in the contract
DAT is the only term that specifically tasks the
seller with unloading
FOB changed to “on board vessel” (ship’s rail
reference removed)
Incoterms do not...
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Dictate the terms & conditions of carriage
Convey title to/point of sale of goods
Address revenue recognition
Include all of the duties of the Buyer/Seller in a
transaction
Automatically apply (you must specify)
Deal with a breach in contracts
Speak about payment disputes between the
Buyer/Seller
Incoterms are not...
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Law - Incoterms must be specified in sales
contracts in order to apply.
This is normally done by citing the current
Incoterms version in sales quotations and
purchase orders.
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All-inclusive - Detailed situations beyond the
scope of Incoterms must be covered elsewhere
in the sales contracts.
Recommended Usage
Any Mode:
Maritime Only:
EXW
FAS
FCA
FOB
CPT
CFR
CIP
CIF
DAP
DAT
DDP
E Group-EXW
EX WORKS…named place of delivery (usually
Seller‟s premises)
• Transport mode: All
Recommendation: the use of EXW is
questionable, except as a starting point for a
more appropriate Incoterm.
• Seller‟s cost and risk end when Seller places
goods at the disposal of the Buyer, at Seller‟s
premises or named place.
Group E
Door
EXW
EX Works
All Modes
Pre-Carriage
Carrier
Port
Customs
Delivery
Seller
Buyer
Costs
Seller
Buyer
Risk
F Group-FCA
FREE CARRIER…named place of delivery (usually
Seller‟s premises or a Buyer appointed carrier
terminal on the Seller‟s side)
• Transport Mode: All
• Seller‟s cost & risk end when goods are
delivered to Buyer‟s carrier at the Seller‟s
premises or another named place.
F Group-FAS
FREE ALONGSIDE SHIP… named port of shipment
• Transport Mode: Vessel
Recommendation: Consider FOB which at least
provides a definitive delivery document
• Seller‟s cost and risk end when goods are placed
alongside the vessel nominated by the Buyer at the
named port of shipment.
F Group-FOB
FREE ON BOARD… named port of shipment
• Transport Mode: Vessel
• Seller‟s cost and risk end when the goods are
delivered on board the vessel nominated by the
Buyer.
Group F
Door
FCA
Free Carrier
All Modes
FAS
Free Alongside Ship
Maritime Only
FOB
Pre-Carriage
Carrier
Port
Customs
Delivery
Seller
Buyer
Costs
Seller
Buyer
Risk
Seller
Buyer
Costs
Seller
Buyer
Risk
Seller
Buyer
Costs
Seller
Buyer
Risk
Free On Board
Maritime Only
C Group-CFR
COST AND FREIGHT… named port of destination
• Transport Mode: Vessel
Recommendation: for containerized shipments,
consider CPT, showing the destination port or an
inland location on the Buyer’s side
• Seller‟s risks for loss and damage ends when the
goods are on board the vessel.
• Seller must contract and pay the costs and freight
necessary to bring the goods to the named port of
destination.
C Group-CIF
COST INSURANCE AND FREIGHT…named port of
destination
• Transport Mode: Vessel
Recommendation: for containerized shipments,
consider CIP, showing the destination port or an
inland location on the Buyer’s side
• Seller‟s risks of damage or loss ends when goods are on
board the vessel
• Seller must contract for and pay the costs and freight
necessary to bring the goods to the named port of
destination
C Group-CPT
CARRIAGE PAID TO… named place of destination
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Transport mode: All
Recommendation: ideal for containerized shipments
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Seller‟s risk ends when goods are delivered to the carrier or
another person nominated by the Seller at an agreed place
Seller must contract for the costs of carriage necessary to bring
the goods at the named place of destination
Sellers: for delivery at inland locations on the Buyer‟s side, use
this only with door, port, or airport to door transportation.
Buyers: if the shipment is not on door-to terms, insist that the
Seller remain responsible for the condition of the goods until they
are handed over to the first main carrier.
C Group-CIP
CARRIAGE AND INSURANCE PAID TO…named place of
destination
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Transport Mode: All
Recommendation: the best Incoterm available for sellers shipping
containerized shipments
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Seller‟s risk ends when goods are delivered to the
carrier, or another person nominated by the Seller at an
agreed place
Seller must contract for the costs of carriage necessary
to bring the goods at the named place of destination
Seller must provide Buyer with Insurance Policy
Group C
Door
Pre-Carriage
CFR
Cost and Freight
Maritime Only
Maritime Only
Port
Customs
Seller
Seller
CIF
Cost, Ins. and Freight
Carrier
Buyer
Seller
CPT
Buyer
Costs
Risk
Buyer
Seller
Costs
Risk
Buyer
Seller
Delivery
Buyer
Costs
Carriage Paid To
All Modes
Seller
CIP
Risk
Buyer
Seller
Buyer
Costs
Carriage and Ins. Paid
All Modes
Seller
Buyer
Risk
D Group-DAT
DELIVERED AT TERMINAL…named terminal at port or
place of destination.
• Transport mode: All
Recommendation: when using DAT, specify as clearly as
possible the terminal at the agreed port or place of
destination, as the risks to that point are for the account of
the Seller.
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Seller‟s risks ends once goods are unloaded from the
arriving means of transport, and placed at the disposal
of the Buyer, at a named terminal at port or place of
destination.
Seller must contract for the costs of carriage to the
named terminal, at the agreed port or place of
destination.
D Group-DAP
DELIVERED AT PLACE…named place of destination.
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Transport mode: All
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Seller‟s risks ends when goods are placed at the disposal of
the Buyer on the arriving means of transport, ready for
unloading
Recommendation: when using this term, make clear which
party is responsible for unloading, and any type of oncarriage
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Seller bears the costs for the carriage of the goods to the
named place of destination, or the agreed place
D Group-DDP
DELIVER DUTY PAID…named place of destination
• Transport mode: All
• Seller bears all costs and risks involved in bringing
the goods to the place of destination, and has an
obligation to clear the goods not only for export,
but also for import, to pay any duty for both export
and import and to carry out all customs formalities
Group D
Door
DAT
Delivered At Terminal
All Modes
DAP
Delivered At Place
All Modes
DDP
Pre-Carriage
Carrier
Port
Customs
Delivery
Seller
Buyer
Costs
Seller
Buyer
Risk
Seller
Buyer
Seller
Costs
Seller
Risk
Seller
Costs
Seller
Risk
Delivered Duty Paid
All Modes
Closing Notes
Contract vs. Incoterms
Incoterms are a guide, the contract is a legally
enforceable document.
Changes and modifications are allowed
Don’t over complicate, and document properly
Sales makes the deals, supply chain/logistics executes
Make sure your sales personnel know their Incoterms
and the resulting Seller obligations
Thank you!
BDP International thanks you for your time
and participation. The next webcast in
this complimentary series will be
C-TPAT
on
Thursday, April 11th, 2013
Presented by Michael Ford
Thank you!
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Contact Information
Theresa Sekula
Manager, Corporate Compliance
510 Walnut Street, Philadelphia, PA 19106
Direct: 215.629.8210
Email: theresa.sekula@bdpint.com
www.bdpinternational.com