INCOTERMS 2000
PAEI Brown Bag
Presenter: Dennis Krier
March 4, 2008
© 2005 FedEx. All rights reserved.
Agenda
•
History and Purpose
•
Definitions
•
The Four Groups
•
Case Studies by Incoterms
•
Q&A
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INCOTERMS HISTORY
• First issued by ICC in 1936 (seven decades)
• Provides a set of “universal” rules for
interpretation of the most commonly used
international trade terms
• Specifies obligations imposed on the parties
involved in the international transaction
• Defines seller’s obligations to place the goods at
the disposal of the buyer, at a certain point
• Defines buyer’s risks and obligations beyond the
named port or place
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INTERNATIONAL COMMMERCIAL
TERMS “INCOTERMS”
• Cost & Risk of Loss term, not a transfer of
title or ownership for the goods
• Defines responsibilities for carriage and
Customs clearance of the goods
• Defines freight costs and cargo insurance
risk for the Exporter and Importer
• Can be used to transfer duty and Value
Added Taxes (VAT/GST/etc.) to the Buyer
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WHAT INCOTERMS DO:
• They DO determine the location and timing of
the transfer of insurance risk between the buyer
and seller
• They DO determine when the seller has fulfilled
their obligation to deliver the goods to the buyer
• They DO determine the point of revenue
recognition for the seller
• They DO provide a universally understood
meaning to all parties involved in the
international transaction
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WHAT INCOTERMS DO NOT:
• They are NOT part of the contract for
carriage
• They are NOT used to transfer property
rights or title for the goods
• They are NOT used to name a carrier
• They are NOT used to determine the effect
of breach of contract cases
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DEFINITIONS
• “SHIPPER”
PARTY CONTRACTING WITH THE
CARRIER. CAN BE SELLER OR BUYER.
• “DELIVERY”
WHEN THE SELLER HAS TURNED GOODS
OVER TO BUYER AND THE BUYER HAS
RECEIVED GOODS
• “CHARGES”
THOSE COSTS INCURRED AS A RESULT
OF THE TRANSACTION
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DEFINITIONS
• “NAMED POINT”
PORT OR PLACE WHERE THE BUYER
TAKES OVER RESPONSIBILITY FOR THE
SHIPMENT
• “PORT”
THE OCEAN PORT OF LOADING OR PORT
OF DELIVERY
• “PLACE”
NAMED PLACE OF DELIVERY FOR NONOCEAN SHIPMENTS
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INCOTERMS GROUPS
• “E” TERMS – Departure (Buyer Pays All)
– EXW
• “F” TERMS – Main Carriage Paid by Buyer
– FCA, FAS, FOB
• “C” TERMS – Main Carriage Paid by Seller
– CFR, CIF, CPT, CIP
• “D” TERMS – Arrival (Seller Pays All)
– DAF, DES, DEQ, DDU, DDP
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VARIANT TERMS
AVOID USING TERMS SUCH AS:
FOB-Origin
FOB-Destination
FOB-ON DECK
FOB-WAREHOUSE
CNFC&FThese terms have no universal meaning
under any of the Incoterms.
The “named point or place” is not specific.
Hint: If it’s not on Google Earth, don’t use it.
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“E” AND “F” TERMS
• EXW “NAMED PLACE”:
Any Mode to Named Place
• FCA “FREE AT CARRIER, NAMED PLACE”:
Any Mode to Named Place
• FAS “FREE ALONGSIDE SHIP, NAMED
PORT”:
Ocean Only, Port to Port
• FOB “FREE ON BOARD, NAMED PORT”:
Ocean Only, Port to Port
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“C” TERMS
• CPT “CARRIAGE PAID TO NAMED PLACE OF
DESTINATION”:
Air & Ocean Place to Place
• CIP “CARRIAGE AND INSURANCE PAID TO
NAMED PLACE OF DESTINATION”
Air & Ocean Place to Place
• CFR “COST AND FREIGHT PAID TO A NAMED
PORT OF DESTINATION”
Ocean Port to Port
• CIF “COST INSURANCE FREIGHT PAID TO A
NAMED PORT OF DESTINATION”
Ocean Port to Port
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“D” TERMS
•
DAF “DELIVERED AT FRONTIER TO A NAMED PLACE”:
Land Transport to Named Border Destination
•
DES “DELIVERED EX SHIP TO A NAMED PORT OF
DESTINATION”:
Ocean Port to Port
•
DEQ “DELIVERED EX QUAY TO A NAMED PORT OF
DESTINATION”
Ocean Port to Port
•
DDU “DELIVERED DUTY UNPAID TO A NAMED PORT
OF DESTINATION”
Any Mode Place to Place
•
DDP “DELIVERED DUTY PAID TO A NAMED PLACE OF
DESTINATION”
Any Mode Place to Place
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EXW “EX-WORKS” (Not Loaded)
• SELLER PREPARES AND MAKES AVAILABLE
ONLY AT ORIGIN
• SELLER RESPONSIBLE ONLY FOR THE PL,
CI, EXPORT PACKAGING AND MARKING
• BUYER RESPONSIBLE FOR ARRANGING
SHIPMENT, EXPORT DOCUMENTATION, ALL
COSTS AND RISKS
• ALL FREIGHT AND ACCESSORIALS ARE
COLLECT TO BUYER
• ANY MODE OF TRANSPORT OR CARRIER
THE BUYER CHOOSES
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EXW – CAUTIONS
• “EXW” CAN ADD AN ADDITIONAL RISK FOR
SHIPMENTS MADE UNDER LETTERS OF
CREDIT, ESPECIALLY A CONFIRMED L/C.
• FOLLOW UP WITH THE DESIGNATED
FREIGHT FORWARDER TO ACQUIRE THE
DOCUMENTATION REQUIRED BY THE L/C!
• RECORDKEEPING: YOU MUST REQUEST
THE FILED SED OR AES ABSTRACT FROM
THE CARRIER.
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FCA “FREE ALONGSIDE CARRIER”
Loaded on the Carrier Vehicle
•
SELLER MAKES GOODS AVAILABLE TO BUYER AT
THE NAMED POINT
•
FREIGHT COLLECT AND REVENUE RECOGNITION
AT THE NAMED POINT
•
SELLER RESPONSIBLE FOR EXPORT LICENSES,
CLEARANCE, CUSTOMS ISSUES OR DOCUMENTS
•
PRECARRIAGE RESPONSIBILITY (DOOR TO
AIRPORT) MUST BE DEFINED IN SALES CONTRACT,
USUALLY SELLER’S RESPONSIBILITY
•
ANY MODE OF TRANSPORT OR CARRIER THE
BUYER CHOOSES
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FAS “FREE ALONGSIDE SHIP”
• SELLER MAKES GOODS AVAILABLE AT NAMED
PORT
• FREIGHT COLLECT FROM PORTSIDE
• SELLER IS RESPONSIBLE FOR DOMESTIC LEG
OF SHIPMENT OR “PRECARRIAGE”
• SELLER IS RESPONSIBLE FOR EXPORT
LICENSES, CLEARANCE THROUGH EXPORT
CUSTOMS (SED), PORT AND ORIGIN
FORWARDER FEES
• REVENUE RECOGNITION UPON DELIVERY AT
PORT
• USED FOR OCEAN OR INLAND WATERWAY
SHIPMENTS ONLY
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FOB “FREE ON BOARD”
• SELLER MAKES AVAILABLE AT NAMED
PORT, AS GOODS PLACED ON VESSEL
• FREIGHT COLLECT, AND REVENUE
RECOGNITION, BEYOND THE SHIP RAILING
• SELLER RESPONSIBLE FOR:
PRECARRIAGE, EXPORT LICENSES, PORT
AND FORWARDER FEES
• SOMETIMES “FAS” IS A MORE
APPROPRIATE INCOTERM
• USED FOR SEA OR WATERWAY CARRIAGE
ONLY, NEVER FOR INTERNATIONAL AIR OR
LAND SHIPMENTS
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CFR “COST AND FREIGHT”
• SELLER MAKES GOODS AVAILABLE AT A
NAMED PORT OF DESTINATION
• FREIGHT PREPAID BY SELLER
• SELLER COVERS COST AND RISK OF MAIN
CARRIAGE
• GOODS MUST PASS OVER SHIP’S RAIL AT
PORT OF DESTINATION
• USED FOR SEA OR INLAND WATERWAY
CARRIAGE ONLY
• PLEASE DO NOT USE “CNF” OR “C&F”
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CIF “COST INSURANCE AND
FREIGHT”
• SELLER MAKES GOODS AVAILABLE AT A
NAMED PORT OF DESTINATION
• FREIGHT PREPAID BY SELLER
• SELLER COVERS COSTS OF MAIN CARRIAGE
AND INSURANCE COVERAGE THROUGHOUT
• GOODS MUST PASS OVER SHIP’S RAIL AT
PORT OF DESTINATION
• USED FOR SEA OR INLAND WATERWAY
SHIPMENTS ONLY
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CPT “CARRIAGE PAID TO”
• SELLER MAKES GOODS AVAILABLE AT
NAMED PLACE OF DESTINATION
• FREIGHT PREPAID BY SELLER
• SELLER COVERS COST OF MAIN
CARRIAGE
• SELLER PAYS CHARGES AT FOREIGN
PORT OR AIRPORT
• CAN BE USED WITH ANY MODE OF
TRANSPORT, AIR, SEA OR LAND
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CIP “CARRIAGE AND INSURANCE
PAID TO”
• SELLER MAKES GOODS AVAILABLE AT
NAMED PLACE OF DESTINATION
• FREIGHT AND INSURANCE PREPAID
• SELLER COVERS COST AND INSURANCE
FOR MAIN CARRIAGE
• SELLER PAYS CHARGES AT FOREIGN
PORT, FRONTIER OR AIRPORT
• CAN BE USED WITH ANY MODE OF
TRANSPORT, AIR, LAND OR SEA
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DAF “DELIVERED AT FRONTIER”
• SELLER MAKES GOODS AVAILABLE AT A
NAMED PLACE ON THE BORDER OR
FRONTIER
• FREIGHT PREPAID BY SELLER
• SELLER DOES NOT COVER CHARGES OF
FOREIGN PORT OR AIRPORT
• SELLER COVERS COST OF MAIN
CARRIAGE
• TYPICALLY USED FOR RAIL OR ROAD
TRANSPORT
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DES “DELIVERED EX SHIP”
• SELLER MAKES GOODS AVAILABLE AT A
NAMED PORT OF DESTINATION
• FREIGHT PREPAID
• SELLER DOES NOT COVER CHARGES OF
FOREIGN PORT
• SELLER COVERS COST OF MAIN CARRIAGE
• USED FOR SEA ON INLAND WATERWAY
SHIPMENTS ONLY
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DEQ “DELIVERED EX QUAY”
• SELLER MAKES GOODS AVAILABLE ON A
DOCK AT THE NAMED DESTINATION PORT
• FREIGHT PREPAID TO QUAY (PIER)
• SELLER MUST COVER UNLOADING
CHARGES AND CHARGES AT PORT
• SELLER COVERS COST OF MAIN CARRIAGE
• USED FOR SEA OR INLAND WATERWAY
SHIPMENTS ONLY
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DDU “DELIVERED DUTY UNPAID”
• SELLER MAKES GOODS AVAILABLE TO A
NAMED PLACE IN DESTINATION COUNTRY
• FREIGHT PREPAID
• DUTIES AND TAXES AT DESTINATION ARE
PAID BY IMPORTER
• SELLER IS RESPONSIBLE FOR CUSTOMS
CLEARANCE
• SELLER COVERS COSTS OF MAIN CARRIAGE
• USED FOR ANY MODE OF TRANSPORT
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DDP “DELIVERED DUTY PAID”
• SELLER MAKES GOODS AVAILABLE AT
NAMED PLACE IN DESTINATION COUNTRY
• ALL CHARGES PAID BY SELLER
• SELLER CLEARS GOODS THRU CUSTOMS
AND PAYS ALL DUTIES AND TAXES
• ENTAILS FOREIGN EXCHANGE RISK
• DDP ENCOMPASSES THE GREATEST RISK
AND RESPONSIBILITY FOR THE SELLER
• USED FOR ANY MODE OF TRANSPORT
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REVENUE RECOGNITION
• Delivery
• Ownership
• Incoterms
• Shipment contracts (E, F and C Groups)
• Destination contracts (D Group)
• SEC Link: www.sec.com
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Helpful Links:
•
Main Page:
http://www.iccwbo.org/incoterms/id3045/index.html
•
Preambles:
http://www.iccwbo.org/incoterms/id3042/index.html
•
Understanding Incoterms:
http://www.iccwbo.org/incoterms/id3040/index.html
•
FAQ:
http://www.iccwbo.org/incoterms/id3038/index.html
•
Wall Chart:
http://www.iccwbo.org/incoterms/wallchart/wallcha
rt.pdf
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Thank You!
Dennis Krier
Advisor - Trade & Customs Advisory Services
(TCAS)
Mobile: 1.650.714.3554
Office: 1.415.591.6695
E-mail: dennis.krier@fedex.com
TCAS Website:
http://www.fedex.com/us/services/ftn/advisory.html
Check out our “demo”
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