CERTIFIED EXPORT SPECIALIST (CES) Case Study #005 Incoterms 2010 Study Material & Quiz

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1 CERTIFIED EXPORT SPECIALIST (CES) Case Study #005 Incoterms 2010 Study Material & Quiz

2 Incoterms 2010 Study Material Incoterms 2010 Rules International Commercial Terms (Incoterms ) are terms designed to communicate the commercial sale of goods. Mostly, Incoterms have been used in international trade on a world-wide basis. After the 2010 update they have become good tool for domestic trade, as well. Incoterms are terms used to provide instructions to the Seller, Buyer, Freight Forwarder, Customs Broker and other parties involved in an international transaction. The use of the terms helps each party involved understand how to facilitate the export clearance, international documentation, transportation, loading and unloading, compliance and import clearance processes. The proper use of Incoterms reduces many questions in the transaction and reduces delays. In this power point, we will go through a little bit of the history, changes, the meaning of Incoterms. The most common Incoterms will be discussed in this case. Background Incoterms were first created in 1936 by the International Chamber of Commerce (ICC), and they are in their eighth version since their inception. In recent decades, Incoterms have been reviewed and published with updates every ten years. The most recent updates have been in 1990, 2000, and The Incoterms 2010 drafting committee at the ICC began in redrafting in There were 9 drafting meetings, 4 drafts and 2000 comments from 92 ICC sub committees prior to approval in May 6, The current Incoterms are published in the Incoterms 2010 Book. o Refer to the online bookstore: o INCOTERMS is an abbreviation for International Commercial Terms. Incoterms and the Incoterms logo are trademarks of the International Chamber of Commerce. It is important to know that Incoterms is not a generic name for international trade terms, but is a trademark used to designate the rules devised by the ICC. Proper citing of Incoterms: Incoterms 2010 Incoterms are business terms. They are not recognized by U.S. Government Regulations They help traders avoid costly misunderstandings by clarifying tasks, costs and risks involved in delivery of goods from buyers and sellers. Page 2 of 22

3 Incoterms 2010 Book If you want to learn about Incoterms, a good start is to read the book. The Incoterms book is insightful and offers examples to explain the terms. Review Incoterms 2010 Book Layout The book offers graphics added to illustrate risk and obligation related to each Incoterm Incoterms 2010 now defines itself as rules Old Incoterm versions can be used even though the Incoterms 2010 are in effect, but they must be cited with the year. Written in 30 language translations They were effective as of January 1, 2011 Summary of Major Changes from the 2000 version Many people refer to the 2010 version as the new Incoterms. In 2010 there were many changes that updated the terms to be more progressive to today s way of doing business. New layout - divided into two distinct sections. There are 7 Multimodal terms: DDP, DAP, DAT, CIP, CPT, FCA, EXW, and 4 Waterway/Maritime terms: FOB, FAS, CFR, CIF 11 terms (down from 13) DAF, DES, DDU and DEQ were removed and replaced by DAP and DAT respectively Incoterms Domestic U.S. Sellers / Exporters (aka Shippers) have historically been confused over Incoterms versus their local state Uniform Commercial Code (UCC) business terms. As companies start selling outside the United States, their company domestic UCC terms do not translate to international commerce transactions. The current Incoterms 2010 allow for domestic trade as well as international. As the new 2010 terms have been rolled out over the past five years, states are beginning to replace their local UCC with the Incoterms. This has allowed U.S. corporations to adopt Incoterms for domestic and international use. Page 3 of 22

4 What do Incoterms do? Incoterms divide costs, risks and responsibilities between sellers and buyers. Carrier responsibility is not mentioned Incoterms guide the seller or buyer into additional contracts required to fulfill designated tasks such as carriage and insurance. Example: CPT Incoterms reduce the potential for buyer and seller misunderstanding. Incoterms define a delivery point. Delivering to a carrier somewhere on the seller s side (Shipment Terms) Delivery to a destination somewhere on the buyer s side (Destination Terms) What Incoterms are NOT Incoterms are not law. They are guidelines provided to develop an international understanding for business trade. They are not all inclusive. Incoterms do not address issues of customary operations of carriers, ports, or government regulations. They are not used in the sale of services or intangible products. They are not used by the U.S. Federal Government to communicate trade. You cannot call Customs & Border Protection and discuss the INCOTERM of a shipment. They will quickly respond that they do not use INCOTERMS as they are not regulatory, they are business terms only. What Incoterms do NOT do Incoterms do not address the passage of title or ownership. Ownership should be addressed in the selling or buying contract or agreement. If it is not, then the transaction may become subject to applicable law. Page 4 of 22

5 If an Incoterm is not specified, the transaction defaults subject to the UCC of the State. Though many UCC have aligned themselves, each state has their own UCC to consider. The UCC may contradict foreign business law Incoterms do not remedy breach of contract or address more than one contract. Example: When a buyer sells the product and ships to the new sold party. This is commonly called a drop shipment or triangle shipment. These shipments require more than one contract and therefore different Incoterms and commercial documents. Incoterms do not automatically apply. They must be specified and cannot be assumed. Incoterms do not Define Customary as in Customary Customs Regulations in a specific country. Some countries, such as Brazil, use Incoterms to assist in calculating the total value of goods for Customs Clearance. U.S. Regulations, however, do not consider Incoterms. Instead, the customs value is defined by Customs based on the Price Actually Paid or Payable. Refer to: The informed compliance manual regarding Customs Value An example regarding Brazil, where Incoterms are mentioned on the calculation of the value of goods for import into Brazil Incoterms do not address payment methods. A payment method may be: payments made by wire, draft, or cash for example. Incoterms do not address payment terms. The terms are unique to the buyer and seller s agreement on when to make payment. Payment terms may be: payments made cash in advance of shipping. 30 days after sailing, 30 days after arrival, 60 days after invoice date. Incoterms do not address stowage obligations. Container Stowage or loading Vessel loading (i.e. oversize shipments) Incoterms will only define the delivery point if disclaimed after the term and should be based on what has been defined in the contract or sales agreement. Incoterms do not address recognition of revenue directly. However, Incoterms can assist in the recognition when used correctly. Page 5 of 22

6 By defining delivery, Incoterms provide a way to resolve revenue recognition questions. GAAP and IFRS (International Financial Reporting Standards) do discuss issues dealt with by Incoterms, such as control, delivery and risk transfer. Revenue Recognition Considerations When does the sale become a receivable under GAAP, IFRS rules? Sarbanes-Oxley has made strict adherence to accounting regulations more important Delivery as defined in the Incoterms rules, is a factor in revenue recognition Important to use the terms correctly and understand their implication D-Group terms delay Revenue Recognition An exporter / importer should discuss their options with an accountant that is knowledgeable in the recognition of inventory in international trade. Definitions Incoterms 2010 The Incoterms Book has clear definitions in order to create an equal understanding across cultures and languages. Shipper: the party that contracts with the carrier Carrier: the party with whom the carriage is contracted (Incoterms 2010) includes NVOCCs Delivery: point where the risk of loss or damage to the goods passes from the seller to the buyer (Incoterms 2010) Pre-Carriage: transportation on the exporter/seller s side to the place, port or point of departure before main carriage Main Carriage: the main transportation moving the goods from the exporter / seller s side to the importer/buyer s side ocean or air portion of an international shipment, for example On-Carriage: transportation from the point or place of arrival on the side of the buyer, to the buyer s location, or another location on the side of the buyer Packaging: packaging of the goods is to be defined in the sales contract or agreement. Page 6 of 22

7 Incoterm Syntax Proper Usage of Incoterms Shipment and Delivery Terms section on quotes, Pro-forma invoices and commercial invoices. (Incoterm Geographic Location Incoterm 2010 CIP Charles De Gaul Airport, France, (Incoterm 2010) FCA 123 W Main Street, Palatine IL (Incoterm 2010) Be Specific with your geographic location in order to reduce questions upon arrival. The more specific the less questions. Omit the word Total on invoices/quotes: CIP Charles De Gaul Airport CIP Paris France General Incoterm Layout Commonly, the parties involved want to relate the Incoterms to the party financially responsible for each part of the move. The basic question is: Is the shipment collect or prepaid? Collect = the buyer will be paying for transportation of the shipment Prepaid = the seller will be paying for the transportation of the shipment. If you are knowledgeable about international transportation you will know that this question needs more definition in order to know who is really paying for each part of the transportation move. We can break down the Incoterms by E, F, C, & D. Overview of the Incoterms A simplification of Incoterms breaks down as follows. While this is a good start, it still does not offer us the detail we need to know when we are deciding who will be paying for each part of the move. Thus is why we have 11 Incoterms. E terms (collect from door) F terms (collect from port or terminal) C terms (prepaid to port or terminal) D terms (prepaid to door) Page 7 of 22

8 General Transport / Multimodal Incoterms These terms are designed to be used with Multimodal transportation: EXW Ex Works FCA Free Carrier CPT Carriage Paid To CIP Carriage and Insurance Paid To DAT - Delivered at Terminal DAP Delivered at Place DDP Delivered Duty Paid Sea and Inland Waterway Transport Incoterms These terms are designed to be used strictly with Sea and Inland waterway transport: FAS Free Alongside Ship FOB Free on Board CFR Cost and Freight CIF Cost, Insurance and Freight Mode of Transportation The next consideration is how is the shipment is moving. Some of the Incoterms are designed mainly for Sea. Sea Air Road Rail Multimodal (a mix of any of the four) Marine Cargo Insurance Insurance is only specified in two Incoterms: CIP = Carriage & Insurance Paid To (named destination port) CIF = Carriage, Insurance Freight (named port of entry) Page 8 of 22

9 In all other Incoterms Cargo Insurance for any mode of transportation must be defined in a contract or agreement apart from the Incoterm. U.S. Export Customs Clearance The party responsible to declare an Electronic Export Invoice (EEI) via the Automated Export System (AES) will change if the cargo is ROUTED or NOT ROUTED: ROUTED = the buyer is taking responsibility to hire the freight forwarder and select the exporting carrier to export the cargo. NOT ROUTED = the seller is taking responsibility to hire the freight forwarder and select the exporting carrier to export the cargo. Many time Incoterms are used as a tool to assist to know who will take on this responsibility. While the consideration works most of the time it is not a complete correlation and requires an agreement between the buyer and seller on who will decide to select the carriers. Routing of a Shipment Commonly, the Incoterm can be correlated to routed or not routed. However, there are scenarios that a shipment can be an F - term and Collect; however, the Seller is selecting the freight forwarder and carrier. Or the buyer is selecting the freight forwarder and carrier and the shipment is a C Term. As said previously, the Incoterms can t be directly correlated to the U.S regulations. E Term - Collect - Routed (if buyer is in control) F Term - Collect - Routed (if buyer is in control) C Term - Prepaid - Not Routed (if seller is in control) D Term - Prepaid - Not Routed (if seller is in control) You may read more about a routed shipment on the Census website. https://aesdirect.census.gov/support/routed_transactions.html Page 9 of 22

10 E Terms There is only one E Incoterm: EXW Ex Works (named place of delivery) EXW - Ex Works (named place of delivery) EXW is a Multimodal Term Thus it can be used for Air / Sea / Road / Rail Contract Type: Shipment (departure) Insurance: Not specified Risk passes: At time of loading onto the carrier at origin Place where the shipment begins: The EXW starts at the seller designated loading premises. The buyer has agreed to purchase the product and pick it up at the agreed door location of the seller. An EXW shipment would be considered a collect shipment. The buyer will be making the decisions on the mode of transportation, method of transportation, and the carriers to use. An EXW shipment would also be considered routed. As we have discussed the U.S. Federal Government does not recognized Incoterms; however, they do recognize a routed shipment. An EXW shipment gives the most control to the buyer An EXW shipment gives the least control to the seller (who may also be considered the exporter) The Exporter/Seller has agreed to make the goods available for pickup (including agreed packaging) Buyer responsible for loading goods at EXW place Loading of the goods means that the buyer will bring their own labor to actually load the truck. The seller does not provide this labor. A good example would be loading Limestone at a quarry. The trucker drives up and fills the truck by loading from the top from a hopper. Then the drivers weighs his vehicle for a weight certificate to know how much was loaded. Another example: would be cargo required to be loaded by crane onto a flatbed truck then brought to the port to be loaded by crane to the vessel This Incoterm is most useful for oversize or bulk cargo. Compliance: The buyer is responsible to assume the risk and expense to apply for any licenses, authorization or security clearances. The seller is responsible to provide export license or export authorizations assistance to the buyer at the request, risk and expense of the buyer. Page 10 of 22

11 F-Terms FCA Free Carrier FOB Free on Board FAS Free Alongside Ship Place where the shipment begins: The F-Terms starts at the agreed location between the seller and buyer. The agreement may be at the seller s door, or it may be at the port of export. These terms are considered to be collect and the buyer will be routing the cargo (refer to the census website discussed in the EXW slide). While the EXW, is from the loading point at the seller s pick up location the F term may be anywhere that has been agreed upon in the origin country of the shipment. The buyer has agreed to purchase the product and pick it up at the agreed door location of the seller. FCA - Free Carrier (named place of delivery) Multimode Term Contract Type: Shipment (departure) Insurance: Not specified Risk passes: At the time the buyer receives the goods with their chosen carrier Place: Seller must deliver the goods, cleared for export, to the carrier provided by the importer/buyer at a named point on the exporter/seller s side If no point is named the seller can choose a point best suited for them The named point can be the seller s facility Seller is responsible for: Packaging Loading Pre-carriage (if any) Compliance documentation Buyer responsible for everything beyond loading The seller not responsible for unloading on the side of the buyer FCA should be considered as an alternative to EXW. Since EXW includes bringing labor to load the shipment. FCA is very flexible and can be used from door up to port. FCA door Madison, Wisconsin FCA CFS station Chicago FCA Ramp Chicago FCA Port of Houston Page 11 of 22

12 Compliance: The seller is responsible to assume the risk and expense to apply for any export licenses, authorization or security clearances. The buyer is responsible to assume the risk and expense to apply for any import licenses or import authorizations. FOB - Free on Board (named origin or port of departure) Sea and Inland waterway term Contract Type: Shipment (departure) Insurance: Not specified Risk passes: At the time the cargo is loaded on board a vessel Place: Seller must deliver the goods to the vessel including loading provided by the buyer at the named point in the origin country. The seller must arrange for customs clearance. If no point is named the seller can choose a point best suited for them The named point can be the seller s facility Seller is responsible for: Packaging Loading Pre-carriage (if any) Compliance documentation FAS - Free Alongside Ship (named place) Sea and Waterway Term Contract Type: Shipment Insurance: Not specified Place: Seller delivers goods, packaged for shipment, to named port at buyer s side alongside vessel. Usually used for charter party transactions (not containerized shipments) Seller responsible for export clearance and export compliance requirements Buyer responsible for: Loading the vessel Main carriage Clearance through customs On-carriage Compliance: The seller is responsible to assume the risk and expense to apply for any export licenses, authorization or security clearances. The buyer is responsible to assume the risk and expense to apply for any import licenses or import authorizations. Page 12 of 22

13 C-Terms CPT Carriage Paid To + (named place of destination) CIP Carriage and Insurance Paid To + (named place of destination) CFR Cost and Freight + (named port of destination) CIF Cost, Insurance and Freight + (named port of destination) C Terms allow for the most control by the seller Main carriage contracted by seller Most control over documents Under C rules, buyers are responsible for the goods during the main carriage even though the seller has made the arrangements for main carriage U.S. importer relies on their supplier s forwarder to submit ISF (Importer Security Filing) documentation Best term to use to comply with the EAR (Export Administration Regulations) CPT - Carriage Paid To (named place of destination) Multimode Term Contract Type: Shipment (departure) Place: Seller delivers goods, packaged for shipment, to the first carrier for transportation Risk passes: Once the cargo is loaded on the first carrier to the final destination country. Insurance: Not specified Risks and costs transfer at different places. Contracts should clearly state where risk passes vs contract of carriage is paid to. The buyer responsible for unloading at place of destination The buyer is responsible for the Import customs clearance process is CPT is a very flexible term to the said final destination terminal. It can be a Port, Airport, Terminal, Rail Ramp etc. Compliance: The seller is responsible to assume the risk and expense to apply for any export licenses, authorization or security clearances. Furthermore, the seller is responsible for any security or export customs regulations in transit prior to arrival to the final named place. The buyer is responsible to assume the risk and expense to apply for any import licenses or import authorizations. CIP - Carriage and Insurance Paid To (named place of destination) Multimode Term Contract Type: Shipment (departure) Page 13 of 22

14 Place: Seller delivers goods, packaged for shipment, to main carriage carrier for transportation Insurance: Is required as part of the Incoterm Risks and costs transfer at different places. Transportation Costs are covered to the Named Place. Transportation Risks will transfer to the seller at the point of first contact Contracts should clearly state where risk passes vs. contract of carriage is paid to. Buyer typically responsible for unloading at place of destination Seller must clear the goods for export including export compliance documentation Insurance is seller s obligation (minimum coverage exact insurance coverage should be agreed upon in a contract or agreement.) Make sure your insurance coverage is up to date! The CIP Incoterm is regularly used for Letters of Credit CIP Insurance Requirements Minimum Cover: Clause C or FPA (Free of Particular Average) Additional Cover can be purchased as agreed between buyer and seller Clause A All Risk Clause B With Average Insurance shall cover the goods for a price provided in the contract +10% Seller to provide evidence of cover to buyer. CFR Cost and Freight & CIF Cost, Insurance and Freight (named port of destination) CFR Sea and inland water way term. Responsibilities and risks are similar to CPT Seller must pay freight charges to the agreed port of destination. CIF Sea and inland water way term. Responsibilities, risks and insurance requirements are similar to CIP Seller must pay freight charges to the agreed port of destination. CFR & CIF Compliance: The seller is responsible to assume the risk and expense to apply for any export licenses, authorization or security clearances. The buyer is responsible to assume the risk and expense to apply for any import licenses or import authorizations. Page 14 of 22

15 D-Terms DAT Delivered at Terminal DAP Delivered at Place DDP Delivered Duty Paid D Terms are considered Arrival Terms The main carriage is contracted by the Seller Seller is responsible for goods until delivered ( Arrived ) to Specified locations on the buyer s side. With a D Term the Revenue Recognition is delayed Exporter: More responsibility than other terms Seller agrees to Deliver at the named location on the buyer s side Potential for demurrage charges D- Terms are not recommended for Letters of Credit (L/C) since B/L and AWB s do not show actual arrival. DAT - Delivered at Terminal (named terminal at port or place of destination) Multimode Term Contract Type: Arrival Insurance: Not specified Place: Seller delivers goods, packaged for shipment, to named destination terminal Seller obtains export clearance and handles appropriate export compliance documentation Seller pays for unloading at the named destination terminal on importer/buyer s side Terminals include Quay Warehouse Container Yard Road, Rail or Air Cargo Terminal Compliance: The seller is responsible to assume the risk and expense to apply for any export licenses, authorization or security clearances. Furthermore, the seller is responsible for any security or export customs regulations in transit prior to arrival to the final named place. The buyer is responsible to assume the risk and expense to apply for any import licenses or import authorizations. Page 15 of 22

16 DAP - Delivered at Place (named place of destination) Multimode Term Contract Type: Arrival Insurance: Not specified Risk Passes: At point of delivery to at foreign destination Place: Seller delivers goods, packaged for shipment, to named destination at buyer s side. Customs clearance is the responsibility of the seller, and should be defined clearly in the contract. Buyer is responsible for import duties and taxes. Typically DAP refers to a door delivery at final destination without Customs Clearance, duties and taxes. Seller must provide appropriate documentation for release of goods on importer/buyer side Suitable for Domestic use. (Duty Neutral) DDP - Delivered Duty Paid (named place of destination) Multimode Term Contract Type: Arrival Insurance: Not specified Risk passes: At final destination, when unloaded Not suitable for domestic shipments (duty doesn t apply) Place: Seller delivers goods, packaged for shipment, to named destination at buyers side Seller pays for: Transportation Foreign duties Export and import licenses Export compliance documentation Seller clears goods through customs in foreign country for delivery to a named place on the importer/buyer s side VAT or other taxes are for the sellers account Recommended to avoid VAT and other taxes. Must be written separately in the contract May be foreign exchange risk Risky for exporter Dealing directly with foreign customs and government agencies Buyer typically responsible for unloading at the point of delivery A buyer under DDP is not the importer of record, since they are not clearing the goods through customs Duty Drawback considerations? Page 16 of 22

17 Compliance: The seller is responsible to assume the risk and expense to apply for any export licenses, authorization or security clearances. Furthermore, the seller is responsible for any security or export customs regulations in transit prior to arrival to the final named place and assume the risk and expense to apply for any import licenses, import authorizations and Customs Clearance. Incoterm Tidbits Incoterms are agreed upon between two private parties, they have no legal standing on their own. If they are included in a contract the Incoterms become legally binding. At times one party does not understand the Incoterms or the agreed upon destination which causes difficulty for one part and potential additional expenses. Many agreements are negotiated by using a purchase of a product and the Incoterms only. The use of Incoterms does not replace a contract or agreement. Incoterms cannot be used to determine ownership. Once a shipment is in movement, Incoterms are recommended not be changed. Changing Incoterms midstream can cause additional costs and delays if not followed through correctly. Conclusion Choose Incoterms most suitable to your firm. Implement them throughout your organization. Update your systems to handle the new revisions. This case study was written by: Lisa V Waller Vice President BDG International, Inc. (USA) Page 17 of 22

18 1. What does "INCOTERMS" stand for? o International Commercial Terms o International Commerce Trade o Internal Company Terms o Internal Customs Trade 2. What organization created the Incoterms? o WTO (World Trade Organization) o ICC (International Chamber of Commerce) o WCC (World Chamber of Commerce) o UCC (Universal Chamber of Commerce) 3. Where can you purchase the Incoterms 2010 Book? o o o o 4. How many languages are the Incoterms written in? o 1 English o 5 major languages o 30 languages o 52 languages 5. What is the purpose of Incoterms? o Divide costs and responsibilities between sellers and buyers. Carrier responsibility is not mentioned. o Divide costs, risks and responsibilities between sellers and buyers. Carrier responsibility is mentioned. o Divide costs between sellers and buyers. o Divide costs, risks and responsibilities between sellers and buyers. Carrier responsibility is not mentioned. Page 18 of 22

19 6. What other purposes can the Incoterms have? Guide the buyer into additional contracts required to fulfill designated tasks such as carriage and insurance. Guide the seller into additional contracts required to fulfill designated tasks such as carriage and insurance. Guide the seller or buyer into additional contracts required to fulfill designated tasks such as carriage and insurance. Guide the bank to fulfill designated tasks such as carriage and insurance. 7. Incoterms, if used correctly, can guide the seller or buyer into additional contracts required to fulfill designated tasks such as carriage and insurance. True False 8. Incoterms are listed in the Code of Federal Regulations 19. True False 9. All of the following are true regarding Incoterms except: They are not law They are not all inclusive They do not address issues of customary operations of carriers, ports, government regulations They are used in the sale of services or intangible products 10. What are the first letters of the Incoterms? E, F, C, D A, B, C, D E, F, A B G, A, C, D Page 19 of 22

20 11. What are the Sea and Inland Waterway terms? EXW, FAS, FCA, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DDP EXW, FAS, FCA, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DDP, DEQ EXW, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DDP EXW, FCA, CFR, CPT, CIP, DAT, DAP, DDP 12. When using the Incoterm EXW, who will be responsible to arrange and pay for the loading? The seller The buyer The bank The carrier 13. When using the Incoterm DDP, what are the insurance requirements from the Incoterm? The seller is responsible to insure the cargo The buyer is responsible to insure the cargo The carrier is responsible to insure the cargo Insurance is not required and not considered in this Incoterm. 14. When using the Incoterm FOB, what is the best way to describe an airfreight shipment? FOB Chicago O Hare Airport FOB Airport FOB Amsterdam Airport FOB is not an airfreight Incoterm. 15. Which of the following Incoterms is correctly written? EXW Port of Houston, TX FCA Door Des Moines, IA CPT New York, NY Airport DDP CFS Station Milano, Italy Page 20 of 22

21 16. Who is responsible to make payment for duties and taxes in the DDP Incoterm, as long there are no other requirements? The seller The buyer The bank The carrier 17. Who is responsible to pay for loading at origin with an FCA Incoterm? The seller The buyer The bank The carrier 18. Which of the following Incoterms does the buyer pay for main carriage? DDP DAP CIP FCA 19. At what point does the risk pass to the buyer in the CPT, CIP, CFR or CIF Incoterm? o At the origin door o At the destination place or port that has been declared o Once loaded on the main carriage that will arrive into the final destination country o Once loaded on truck at point of destination prior to delivery 20. If there is an E-Term or F-Term, is the buyer always responsible for the export customs clearance? Yes, these are collect terms and the buyer is responsible. No, the seller is responsible because the seller is responsible at country of origin. No, the buyer is not automatically responsible for export customs clearance. The Incoterms actually itemize who is recommended to complete the export customs clearance; however, it is the origin country regulations that will dictate who is responsible for export customs clearance. Export customs clearance is not required for these Incoterms. Page 21 of 22

22 21. Which of the following does not apply to an FCA Incoterm? Multimode Term Contract Type: Shipment (departure) Insurance: Not specified Seller is NOT responsible for: Packaging, Loading, Pre-carriage (if any), Compliance documentation 22. Which of the following does not apply to a CPT Incoterm? Sea and Inland Waterway term only Contract Type: Shipment (departure) Place: Seller delivers goods, packaged for shipment, to the first carrier for transportation Risk passes: Once the cargo is loaded on the first carrier to the final destination country 23. What type of insurance does the CIP Incoterm require? Minimum Cover: Clause C or FPA (Free of Particular Average) Insurance Clause A - All Risk Insurance Clause B - With Average Insurance is not specified in this Incoterm. 24. Which of the following Incoterms is not suitable for domestic cargo? CPT FCA DDP EXW 25. Can Incoterms be used to determine ownership without any assistance from a contract or agreement? Yes No Page 22 of 22

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