Incoterms What are they?

Transcription

1 Incoterms

2 Incoterms What are they? 2

3 Aims and objectives of today s seminar To help improve delegates knowledge of Incoterms in general - and the specific knowledge requirements of Incoterms 2010 To help increase delegates confidence when using Incoterms 2010 To help delegates avoid common Incoterms problems To make delegates aware of the factors influencing the choice of any Incoterms rule(s) they use To offer further help and advice to those that need it

4 For correct use of Incoterms s and s (traders) need to know. What Incoterms 2010 relate to What the terminology used in Incoterms 2010 refers to What the Incoterms 2010 rules do NOT cover What factors can influence the choice of Incoterms 2010 rule selected What factors can over-ride the choice of Incoterms 2010 rule selected Why they are selecting and using specific Incoterms 2010 rules How to avoid possible problems when using Incoterms 2010

5 Incoterms 2000 checking current understanding.. 1/ What does the term Incoterms stand for and who issues them? 2/ Under the term FOB UK port; EXACTLY where does delivery take place? 3/ Under the term CIF Sydney Port; EXACTLY where does delivery take place? 4/ When is packing not required of the under Incoterms 2000? 5/ Who is responsible for off-loading cargo at the delivery point under the term FCA? 6/ Who is responsible for loading the cargo under the term EXW 7/ Which of these is not covered specifically covered by Incoterms 2000 Ownership of the goods Late delivery claims Resolving of any L/C documentary errors Arranging IMPORT clearance Incorrect goods being sent 5

6 Incoterms 2010 what are they? Commonly used by international s and s, they are the terms of delivery or terms of shipment that specifically deal with the despatch and delivery of goods overseas Issued by the ICC, Incoterms stands for International Commercial Terms and have been continuously developed and adapted since 1936 They are an integral part of international contracts of sale They reflect recognised common trading principles used in international trade when despatching goods and give definition and clarity to the benefit of all parties who use them (s and s) or who are affected by them (freight forwarders)

7 Incoterms gives precision and definition to delivery (and destination) requirements specifically with regards to. Which party ( or ) organises the various despatch and delivery elements Which party pays for specific functions in the delivery process (the always pays in the end!) Incoterms determines who initially pays to get things done Where delivery takes place (to avoid problems traders always need to define very precise delivery points) Where the risks and responsibilities pass from the to the Please note that no matter what the language used in the transaction, Incoterms 2010 always uses English abbreviations

8 To understand Incoterms 2010, traders should know how goods move internationally These seven steps apply to international despatches They are the basis of any freight charging system An export is an import in reverse and vice-versa traders need to think accordingly Tip always ask for a freight breakdown when getting quotes from forwarders! Make sure they are like for like quotes when comparing rates from more than one forwarder.

9 The first three steps traditionally known as the FOBs 1/ THE UK LEG 2/ TERMINAL HANDLING 3/ EXPORT CLEARANCE

10 Step four the freight leg of the journey

11 Steps 5 to 7 the overseas steps either delivery or oncarriage 5/ IMPORT CUSTOMS CLEARANCE 6/ IMPORT TERMINAL HANDLING 7 DELIVERY

12 The ELEVEN terms used from January 1 st 2010 From ex-works (EXW) to delivered duty paid (DDP) Incoterms 2010 show a sliding scale of responsibilities, risks and obligations for either the and The Incoterms rule that presents maximum responsibility for one party will represent minimum responsibility for the other party () For example, EXW (ex works) represents minimum responsibility to the BUT maximum responsibility to the. Conversely, DDP means the opposite!

13 Some considerations when using Incoterms There is NO legal obligation to use Incoterms 2010 the old terms can still be used BUT full reference to them should be made in all correspondence. This is not recommended, however, and all parties should have seen January 1 st 2011 as the ideal opportunity to get it right! Current contracts using the old terms do not need to be amended to the new terms. Use the new terms for new contracts! 13

14 More considerations A major consideration when selecting the correct Incoterms rule is that s and s should NOT to use a term that imposes risks and obligations beyond their control!! It is imperative that precise delivery points are identified especially with regards to port or terminal areas. This is very relevant when using multi-modal terms (air, road or containerised seafreight) 14

15 Incoterms 2010 why they are needed! Proper use of Incoterms 2010 minimises problems!

16 The typical functions and responsibilities identified by Incoterms 2010 Packing and marking of the goods (packing in cases etc. for contract and mode of transport - NOT loading items in, or on containers) Providing and paying for the goods Preparing documentation whether in hard copy or electronically Arranging despatch of the goods to specific delivery points Sorting out (and paying for) export and import clearances Ensuring import and export licencing is in order Ensuring security requirements are met Loading and unloading of cargo at the agreed delivery points Pre-shipment inspection (always the for UK exports) Obtaining documents or their equivalent electronic messages (online documentary considerations) Insuring the goods this is for additional cargo insurance NOT carriers liability insurance Paying duties and taxes - usually at the point of import

17 Incoterms 2010 does NOT cover Other non-delivery terms expressed in the contract of sale Transfer of property rights (ownership) Relief from obligations when something goes wrong Consequences of breach of contract Nb - Most (over 90%) of queries handled by the ICC Incoterms Department about Incoterms are nothing to do with Incoterms!

18 The factors that can affect the choice of Incoterms rule used Customer demands and requirements Company policy Inexperience and ignorance (laziness?) Tradition within the market place The freight purchasing power of the parties (high volume means rate savings) and pricing of freight considerations The need to control the delivery procedure ( just in time ) The legal and financial restrictions of the Countries involved (some Countries demand that payment of freight and insurance etc. is in their own Country)

19 More factors to be considered! The transport infrastructure of the Countries involved in the transaction (delivery to destination port may be the best option when transport infrastructures are suspect) The mode of transport the way goods are shipped (ie road haulage, airfreight and seafreight packed in containers) takes away the need for the traditional seafreight terms such as FOB The type of cargo to be shipped - loose unpacked cargo loaded directly into a ship or packed cargo The value of the goods shipped - low value goods are covered by carriers liability so there is no need for further cargo insurance

20 Loose or Pre-loaded Loose cargo is packed directly into a ship or inland waterway vessel oil, coal, cargo that cannot be put into containers Pre-loaded cargo is loaded elsewhere into containers at the customer s premises or at an ICD 20

21 Why problems occur! Most problems occur simply because parties do not understand what Incoterms 2010 relates to Problems also occur because there is no specific reference to Incoterms in documentation Most queries about are more to do with other contractual and trading agreements (e.g. precedence of UCP600 and local port procedures over Incoterms )

22 Why problems occur (cont d) The parties do not use recognised Incoterms (FOT, Frei Haus and Franco Domicile) The parties use an unsuitable Incoterms rule for the cargo or mode of transport (such as using FOB instead of FCA - both of which still appear in Incoterms 2010) The parties do not identify very specific delivery points when negotiating contracts

23 Why problems occur (cont d) The parties use imprecise variations of Incoterms (Ex works plus Freight) The Incoterms rule chosen conflicts with contracts of carriage operated by freight providers or differs from local port regulations and customary procedures (different charging points etc.)

24 Out with the old and in with the new! The old Incoterms (2000) EXW ex works FAS free alongside ship FCA free carrier FOB free on board CFR cost and freight CIF cost insurance and freight CPT carriage paid to CIP carriage and insurance paid to DAF delivered at frontier DES delivered ex ship DEQ delivered ex-quay DDU delivered duty unpaid DDP delivered duty paid The new Incoterms (2010) EXW FCA CPT CIP DAT delivered at terminal DAP delivered at place DDP FAS FOB CFR CIF 24

25 Why the need for change to Incoterms 2010? Transport procedures are changing - including shorter delivery timescales and the growth of containerisation, road haulage and airfreight Improved documentary procedures (on-line) Improved communication procedures Changing political situations - the breaking down of borders and frontiers and the growth of free trade areas Security and terrorism concerns Simplified Customs procedures 25

26 Format of the latest issue The new publication has a similar layout to Incoterms 2000 Each entry is split between the s and s obligations The numbering system for each obligation remains the same (A1-A10 and B1-B10) Specific seafreight terms are moved behind the multi modal terms the new publication now follows this sequence All modes of transport (place to place)= EXW, FCA, CPT, CIP, DAT, DAP, DDP, Seafreight specific (port to port) = FAS, FOB,CFR, CIF 26

27 Format of the latest issue (cont d) There is a better introduction to each Incoterm in the form of guidance notes There is better clarity and simplicity of information in some areas - unification of the mention of electronic messages for instance There is some new content e.g. security issues There is some amendment to previous content ( loaded as opposed to ship s rail, insurance amendments) There is some necessary vagueness (see next slide) 27

28 The vague content of Incoterms 2010! One of the main considerations of the new Incoterms is that it is necessarily vague in certain areas Such examples (just from FCA alone although often repeated throughout the publication) include A2 and B2 official authorisation A3 information that the needs A6 and B6 duties, taxes and other charges A8 usual proof, transport document B8 proof of delivery A10 and B10 security related information B10 in a timely manner In such instances normal industry practise would dictate such requirements being met. HOWEVER, where there is a doubt about any interpretation of the new Incoterms, it is recommended that amendment to and inclusion in the contract should be made prior to signing! 28

29 Warning!! A good knowledge of industry procedures is also important do you know the precise route your goods will take once they leave your premises? Would you want responsibility for this as part of your delivery agreement??? 29

30 The specific Incoterms rules Guidance Chart for obligations, costs and risks for the and The following chart give details of the individual Incoterms rules The chart is to be used as a guideline because The accurate selection of an Incoterms rule and its associated obligations, risks and costs Must ALWAYS be defined in any export sales contract, especially with regards to the delivery point Can be affected by carriers terms and conditions and port procedures Code = (red) (blue) either (purple) 30

31 EXW (named place of delivery), risks and costs when using Ex Works Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to and risks to Delivery point At premises NOT loaded - to load. Risk passes at the same point. Costs All to the. 31

32 EXW further clarification EX WORKS (EXW) Is one of the Incoterms rules which may be used irrespective of the mode of transport and may also be used where more than one mode of transport is employed. It is suitable for domestic trade as well as for international trade. Under Ex Works the critical point of delivery occurs when the places the goods at the disposal of the at the s premises or at another named place such as a works, factory or an agreed warehouse. The primary duties of the : The delivers when the goods are placed at the disposal of the, typically at the s premises. This means that the has no obligation to the in respect of the contract of carriage. The risk transfers from the to the when the goods are placed at the s disposal at the named place of delivery. The bears the cost until the goods until placed at the disposal of the a the named place of delivery. All further costs have to be borne by the including any costs incurred for export or security clearance. Once the goods are delivered to the named place of delivery in accordance with Ex Works then all obligations that may arise in respect of the any contract of carriage, all risks and any related costs are for the account of the. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. The must provide the, at the s request, risk and expense assistance in obtaining any export licence, or other official authorization necessary for the export of the goods. Ex Works may be used for domestic trade and international trade. If used for international trade then all formalities in respect of export clearance are also for account of the. 32

33 FCA (named place of delivery), risks and costs when using Free Carrier Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE and risks to Import Customs and legal demands Import terminal or port handling Final delivery to Delivery point If at s premises - LOADED into s collecting transport or, if at Buyer s first carrier NOT unloaded from the transport used to get them to the arrival point. Risks pass at the same point. Costs split at same point. 33

34 FCA (named place of delivery) further clarification FREE CARRIER (FCA) Is one of the Incoterms rules which may be used irrespective of the mode of transport and may also be used where more than one mode of transport is employed. Under FREE CARRIER the critical point of delivery occurs when the delivers the goods to the carrier or another person nominated by the at the s premises or another named place. The primary duties of the : The delivers when the goods are either: placed at the disposal of the carrier or another person nominated by the on the s means of transport ready for unloading. Or If the named place is the s premises, when the goods have been loaded on the means of transport provided by the. In either case the has no obligation to the in respect of the contract of carriage. The risk transfers from the to the when the goods have been delivered to the carrier or other nominated person at the named place of delivery. Alternatively, if the means of transport is provided by the then when delivered loaded on the s means of transport. The bears the cost until the goods have been delivered at the named place of delivery including any costs incurred for export or security clearance. Once the goods are delivered to the named place of delivery in accordance with FREE CARRIER including costs for export and security clearance then all obligations that may arise in respect of any contract of carriage, all risks and any subsequent costs are for the account of the. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 34

35 FAS (named port of shipment), risks and cost when using Free Alongside Ship Delivery into an export port facility or to first carrier Export terminal or port handling but loading on vessel to but loading on vessel to Export Customs and legal demands and risks to MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to Delivery point alongside the vessel at the named port of shipment. Risks pass at the same point. Costs split at same point. 35

36 FAS (named port of shipment) further clarification FREE ALONGSIDE SHIP (FAS) Is one of the Incoterms rules used for sea and inland waterway transport. FAS means that the delivers when the goods are placed alongside the vessel nominated by the at the named port of shipment/loading or procures the goods already so delivered. The risk of loss or damage to the goods passes from to when the goods are placed alongside the ship and the bears all costs and risk from this point. The primary duties of the : The is responsible for the costs and carriage of the goods only until they are placed alongside the vessel nominated by the at the named port of shipment/loading. The also bears the risk until the goods are delivered alongside the vessel at the port of shipment/loading. The has no obligation to the to make a contract of insurance and the has no obligation to the to make a contract of insurance. The also bears the cost incurred for export or security clearance in country of export. The will provide the with the usual proof that the goods the goods delivered alongside the vessel at the port of shipment/loading. If a transport document is required by the then the must provide the at the s risk and expense with assistance in obtaining the transport document. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 36

37 FOB (named port of shipment), risks and costs when using Free on Board Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to BUYER BUYER BUYER BUYER Delivery point ON BOARD the vessel at the named port of shipment. Risks pass at the same point. Costs split at the same point. 37

38 FOB (named port of shipment) further clarification FREE ON BOARD (FOB) Is one of the Incoterms rules used for sea and inland waterway transport. FOB involves one critical point when the delivers the goods on board the vessel nominated by the at the named port of shipment/loading or procures the goods already so delivered. The risk of loss or damage to the goods passes from to at this critical point and the bears all costs and risk from this point. The primary duties of the : The is responsible for the costs and carriage of the goods only until they are delivered on board the nominated vessel at the port of shipment/loading. The bears the risk until the goods are delivered on board the vessel at the port of loading. The has no obligation to the to make a contract of insurance and the has no obligation to the to make a contract of insurance. The also bears the cost incurred for export or security clearance in country of export. The will provide the with the usual proof that the goods have been delivered on board the vessel at the port of shipment. If a transport document is required by the then the must provide the at the s risk and expense with assistance in obtaining the transport document. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 38

39 CFR (named port of destination), risks and costs when using Cost and Freight Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to and risks to Delivery point ON BOARD the vessel at the named port of shipment. Risks pass at the same point. Costs - The contracts for the carriage and pays the freight charges to the destination port 39

40 CFR (named port of destination) further clarification COST AND FREIGHT (CFR) Is one of the Incoterms rules used for sea and inland waterway transport. CFR involves two critical points, one being the delivery point and the other being the destination port. Under CFR the delivers the goods when the goods are on board the vessel at the port of loading but the must also contract, or procure a contract, for the carriage of the goods to the named destination port. The primary duties of the : The must contract for the carriage of the goods to the named port of destination The bears the risk until the goods are delivered on board the vessel at the port of loading. The bears the costs of carriage including loading (and unloading if included in contract of carriage) to the named port of destination. The has no obligation to the to make a contract of insurance and the has no obligation to the to make a contract of insurance. The also bears the cost incurred for export or security clearance in country of export. The will provide the with the usual transport document to enable the claim the goods from the carrier at the port of destination and, if sale of goods in transit is intended with a negotiable transport document, such as a bill of lading. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 40

41 CIF (named port of destination), risks and costs when using Cost Insurance and Freight Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to and risks to Delivery point ON BOARD the vessel at the named port of shipment. Risks pass at the same point. Costs - The contracts for the carriage and pay the freight to the destination port and INSURANCE costs on behalf of the. 41

42 CIF (named port of destination) further clarification COST INSURANCE AND FREIGHT (CIF) Is one of the Incoterms rules used for sea and inland waterway transport. CIF involves two critical points, one being the delivery point and the other being the destination port. Under CIF the delivers the goods when the goods are on board the vessel at the port of loading but the must also contract, or procure a contract, for the carriage of the goods to the named destination port. The primary duties of the : The must contract for the carriage of the goods to the named port of destination. The bears the risk until the goods are delivered on board the vessel at the port of loading. The bears the costs of carriage including loading (and unloading if included in contract of carriage) to the port of destination. The will also pay the cost of insurance of the goods with minimum cover up to the port of destination. The insurance shall cover at a minimum, the price provided in the contract plus 10%, that is 110%, and shall be in the currency of the contract. This insurance shall entitle the or any other party with an insurable interest in the goods to claim directly from the insurer. The will provide the with the usual transport document to enable the claim the goods from the carrier at the port of destination and, if sale of goods in transit is intended with a negotiable transport document, such as a bill of lading. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 42

43 CPT (named place of destination), risks and responsibilities when using Carriage Paid To Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to and risks to but depend upon the delivery point defined in the contract and risks to but depend upon destination point defined in contract but depend upon destination point defined in contract but depend upon destination point defined in contract Delivery point When goods are handed over to the carrier at the agreed point of delivery. Risks pass at the same point. Costs - The must contract for the carriage of the goods and pay the freight to named place of destination. 43

44 CPT (named place of destination) further clarification CARRIAGE PAID TO (CPT) Is one of the Incoterms rules which may be used irrespective of the mode of transport and may also be used where more than one mode of transport is employed. CPT involves two critical points, one being the delivery point and the other being the named place of destination. Under CPT the delivers the goods when the goods are delivered to the carrier or another person nominated by the at an agreed place or point of delivery. If the parties do not agree on a specific place or point of delivery, then the risk passes when the goods have been delivered to the first carrier at a point entirely of the s choosing. The must also contract for, or procure a contract of carriage and pay the cost of the carriage of the goods to the named place of destination. Under CPT the fulfils its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination. The primary duties of the : The must contract for the carriage of the goods to the named place of destination. The bears the risk until the goods are delivered to the carrier or another person nominated by the at an agreed place or point. The bears the costs of carriage including loading (and unloading if included in contract of carriage) to the named place of destination together with any costs incurred for export or security clearance. The will provide the with the usual transport document to enable the claim the goods from the carrier at the named place of destination and enable the to sell the goods in transit by the transfer of the document to a subsequent or by notification to the carrier. When such a transport document is issued in negotiable form and in several originals, a full set of originals must be presented to the. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract 44

45 CIP(named place of destination), risks and costs when using Carriage and Insurance Paid To Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to and risks to but depend upon delivery point defined in the contract and risks to but depend upon destination point defined in the contract but depend upon destination point defined in the contract but depend upon destination point defined in the contract Delivery point When goods are handed over to the carrier at the agreed point of delivery. Risks pass at the same point. Costs - The contracts for the carriage of the goods to the named place of destination and pay the freight and insurance charges on behalf of the. 45

46 CIP (named place of destination) further clarification CARRIAGE AND INSURANCE PAID (CIP) Is one of the Incoterms rules which may be used irrespective of the mode of transport and may also be used where more than one mode of transport is employed. CIP involves two critical points, one being the delivery point and the other being the named place of destination. Under CIP the delivers the goods when the goods are delivered to the carrier or another person nominated by the at an agreed place or point of delivery. The primary duties of the : The must contract for the carriage of the goods to the named place of destination. The bears the risk until the goods are delivered to the carrier or another person nominated by the at an agreed place or point. The bears the costs of carriage including loading (and unloading if included in contract of carriage) to the named place of destination. The will also pay the cost of insurance of the goods with minimum cover during carriage. The insurance shall cover at a minimum, the price provided in the contract plus 10%, that is 110%, and shall be in the currency of the contract. This insurance shall entitle the or any other party with an insurable interest in the goods to claim directly from the insurer. The will provide the with the usual transport document to enable the claim the goods from the carrier at the named place of destination and enable the to sell the goods in transit by the transfer of the document to a subsequent or by notification to the carrier. When such a transport document is issued in negotiable form and in several originals, a full set of originals must be presented to the. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 46

47 DAP (named place of destination), risks and costs when using Delivered at Place Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE Import Customs and legal demands Import terminal or port handling Final delivery to and risks to the but depend upon destination point defined in contract the but depend upon destination point defined in contract but depend upon destination point defined in contract but depend upon destination point defined in contract Delivery point once the goods are placed at the disposal of the at the agreed place of destination NOT unloaded. Risks pass at the same point. Costs split at the same point. 47

48 DAP (named place of destination) further clarification DELIVERED AT PLACE (DAP) Is one of the Incoterms rules which may be used irrespective of the mode of transport and may also be used where more than one mode of transport is employed. DAP means that the delivers the goods, once they are placed at the disposal of the on the arriving means of transport ready for unloading at a named place of destination. The must contract for the carriage and pay the cost of the carriage of the goods to the named place of destination. If a specific place or point is not agreed at the named place of destination or is not determined by practice, the may select the point at the agreed place of destination that best suits the s purpose. The primary duties of the : The must contract for the carriage of the goods to the named place of destination. The bears the risk until the goods are delivered ready for unloading at the agreed point at the named place of destination The bears the cost of carriage including loading for carriage plus the costs for the transport of the goods through any country, prior to delivery at the named place of destination. The does not bear the costs of unloading at the destination point unless such unloading costs are included in the s contract of carriage. The will provide the with a document to enable the to take delivery of the goods at the named place of destination. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 48

49 DAT (named place of destination), risks and costs when using Delivered at Terminal Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE and risks to Import Customs and legal demands Import port or TERMINAL handling but depend on point defined in the contract but depend upon destination point defined in contract Delivery point once the goods are placed at the disposal of the at the agreed place of destination UNLOADED. Risks pass at this point. Costs split at this point. Final delivery to depend on point defined in the contract but depend upon point defined in contract 49

50 DAT(named place of destination) further clarification DELIVERED AT TERMINAL (DAT) Is one of the Incoterms rules which may be used irrespective of the mode of transport and may also be used where more than one mode of transport is employed. DAT means that the delivers the goods, once they are unloaded from the arriving means of transport and placed at the disposal of the at a named terminal located at the named port or place of destination. The must contract for the carriage and pay the cost of the carriage of the goods to the named terminal at the agreed port or place of destination. If a specific terminal is not agreed or is not determined by practice, the may select the terminal at the agreed port or place of destination that best suits the s purpose. The primary duties of the : The must contract for the carriage of the goods to the named terminal at the agreed port or place of destination. The bears the risk until the goods are delivered unloaded and placed at the disposal of the at the named terminal at the agreed port or place of destination. The bears the cost of carriage including loading for carriage plus the costs for the transport of the goods through any country, prior to delivery at the named destination terminal. The also bears the cost of unloading at the destination terminal together with any costs incurred for export or security clearance in country of export. The will provide the with a document to enable the to take delivery of the goods at the named place of destination. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. In the context of the of the Incoterms rules Terminal includes any place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. 50

51 DDP (named place of destination), risks and costs when using Delivered Duty Paid Delivery into an export port facility or to first carrier Export terminal or port handling Export Customs and legal demands MAIN CARRIAGE and risks to Import Customs and legal demands Import terminal or port handling Final delivery to but depend on point defined in the contract but depend upon destination point defined in the contract Delivery point once the goods are placed at the disposal of the at the agreed place of destination NOT unloaded. Risks pass at this point. Costs normally to the to this point 51

52 DDP (named place of destination) further clarification DELIVERED DUTY PAID (DDP) Is one of the Incoterms rules which may be used irrespective of the mode of transport and may also be used where more than one mode of transport is employed. DDP means that the delivers the goods, once the good are placed at the disposal of the, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The must contract for the carriage and pay the cost of the carriage of the goods to the named place of destination. If a specific place or point is not agreed at the named place of destination or is not determined by practice, the may select the point at the agreed place of destination that best suits the s purpose. The bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to carry out all customs formalities to clear the goods for export and import and to pay any duty for both export and import up to the named place of destination. The primary duties of the : The must contract for the carriage of the goods to the named place of destination. The bears the risk until the goods are delivered cleared for import and ready for unloading at the agreed point at the named place of destination. The bears the cost of carriage including loading for carriage plus the costs for the transport of the goods through any country, prior to delivery at the named place of destination. The does not bear the costs of unloading at the destination point unless such unloading costs are included in the s contract of carriage. The bears the cost of all customs formalities and payments of duties on export and import up to the named place of destination. The will provide the with a document to enable the to take delivery of the goods at the named place of destination. The must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract. 52

53 How to avoid problems RULE 1 ALWAYS quote the specific three letter abbreviation ALWAYS mention a PRECISE place of delivery and ALWAYS add the phrase as per Incoterms 2010 in the contract, the quotation, order, order confirmation - and on the invoice

54 How to avoid problems Ensure that all parties understand that they are working to the terms qualified in Incoterms 2010 and not a perception of what they think a term means Ensure any contractual issues that may cause deviation from Incoterms 2010 are clarified and resolved before the contract is agreed and signed

55 More tips and hints to ensure successful application of Incoterms 2010 Communications Ensure that ALL of the staff (sales, admin, purchasing and accounts) are aware of the changes you will be making in your use of Incoterms Advise your customers, suppliers, agents and distributors of your Incoterms 2010 changes Advise your forwarder of the changed Incoterms 2010 rules and check their compliance and understanding Advise any banks involved in your L/Cs about the changes you intend to initiate - and seek inclusion of the new terms in future L/Cs 55

56 Tips and hints to ensure successful application of Incoterms 2010 (cont d) Administration and Documentation Make sure all staff have access to a copy of the new Incoterms 2010 publication (c 45-50) Make sure your customer/supplier has access to copy especially given the importance that ICC are giving to copyright and use of registered trade marks Check the routes and delivery procedures your despatches will follow do they differ from your expected obligations, risks and costs? Advise s of any returns procedure you have in place and the affect of Incoterms 2010 on them Confirm everything in writing (e.g. full written instructions to freight forwarders) Documents should be provided at the earliest possible time 56

57 More tips and hints to ensure successful application of Incoterms 2010 Legal Considerations Although Incoterms 2010 are a set of RULES, they are NOT the law! They can help (when specifically included and agreed to in the contract) reduce any legal problems that arise They only refer to delivery requirements not other non-delivery items identified in the contract Check licensing requirements for your goods Check your carriers terms and trading conditions (could they have a lien on your goods?) Check your Retention of Title status when does ownership pass? 57

58 Incoterms 2010 checking understanding 1. What factors can affect the decision of any party to cargo insure the goods or not? 2. Under the term DAT - EXACTLY what is a terminal? 3. Where are the two possible delivery points under the Incoterms rule FCA 4. Why could the Incoterms FOB rule not really be suitable for a seafreight consignment loaded into a container? 5. Where does delivery take place under the CIF Incoterms rule? 6. Whose risk and responsibility for the cargo is this under the term DAT? 58

59 So which of the new Incoterms Rules should I use? If you are sending goods loaded loose directly into a vessel (including inland waterway) then the following terms can be used (depending on level of obligations agreed) FAS, FOB, CFR, CIF The term DAT could be used where you may have used DES, DEQ in the past If you are sending goods in a multi-modal manner (i.e. Airfreight, Road Haulage and Seafreight cargo in containers) then the above Incoterms 2010 rules (apart from DAT) are unsuitable 59

60 Choosing the right Incoterms rule (cont d) When EXW is not a suitable term (i.e. where the cannot control loading or export regulations and where the needs proof of export but would find it difficult to obtain) then the FCA Incoterms rule would be preferable. The need for exporters to obtain proofs of export is paramount when despatching goods from the UK DDP may not be a suitable term for shipments when the cannot control import clearances and duty payments it may be preferable to use DAT or DAP instead Where insurance of the goods would not be allowed or is not necessary; the terms CIF and CIP are unsuitable 60

61 Incoterms a personal choice (depending upon the agreed level of risk and responsibility) TRAILERS BY ROAD INTO EUROPE = FCA, CPT, CIP, DAT, DAP AIRFREIGHT WORLDWIDE = FCA, CPT, CIP, DAT, DAP SEAFREIGHT (IN CONTAINERS) = FCA, CPT, CIP, DAT (lcl), DAP (fcl) HOME TRADE IN THE UK = CPT, DAT, DAP, DDP 61

62 EXW OR FCA ADVANTAGES OF EACH EX WORKS Is a simple, traditional and universally understood term by s and s. Identifies minimum risks, responsibilities, and costs to the. Is easier for revenue recognition purposes usually upon packing of goods and notification of availability to the. FCA SELLER S PREMISES Gives the control over transport steps they should take control over including safe loading of cargo and ensuring all HMRC and legal requirements are met. With reference to the above s can avoid major problems with HMRC and VAT administration and liability.

63 EXW OR FCA DISDAVANTAGES OF EACH EX WORKS The has no control over the export formalities but is legally responsible for them. The (normally their haulier) is responsible for loading but this is not usually allowed to do so under most s insurance cover for their premises. It is often very difficult to get proof of export as demanded by HMRC this can create major VAT administration and liability problems. FCA (SELLER S PREMISES) Is not generally considered a traditional Incoterm and therefore is not always understood by the parties involved. Seller s may find difficulties with revenue recognition is it at loading? This could be some time after notification of availability of the goods to the. Using FCA usually requires the to charge the for Customs clearance on the export invoice. Although the charge should be the same as what the is already paying directly to their carrier (and thus a reduction should be made to them on their freight invoice) - they (the ) might see this as an additional cost imposed by the.

64 UNDERLINING THE FACTORS THAT CAN IMPACT ON THE CHOICE OF EXW OR FCA INCOTERM EXW may be easier for s to use but involves taking on responsibilities and risks beyond their control - obtaining proof of export, meeting official and HMRC requirements. Subjective evidence and experience indicates that HMRC are not keen on the use of EXW by exporters. EXW means the (their carrier) is responsible for loading the cargo not always acceptable in today s H&S climate. FCA may present revenue recognition problems. FCA means an alteration to export invoices apart from a procedural change for the ; s may not relate this to the decrease that should take place on their carrier s freight invoice. Given the above most traders are opting for FCA ( s premises) for reasons of control, legal compliance at export and minimising of unnecessary risks.

65 Aims and objectives of today s seminar To help improve delegates knowledge of Incoterms in general - and the specific knowledge requirements of Incoterms 2010 To help increase delegates confidence when using Incoterms 2010 To help delegates avoid common Incoterms problems To make delegates aware of the factors influencing the choice of any Incoterms rule(s) they use To offer further help and advice to those that need it

66 If you need further help!!!! Contact me at 66