DEPARTMENT OF TRADE & INDUSTRY 20 November, CB Araceli B. Requinto, MCA Certified UNESCAP Trainer

Transcription

1 DEPARTMENT OF TRADE & INDUSTRY 20 November, 2013 CB Araceli B. Requinto, MCA Certified UNESCAP Trainer

2 Are the International Chamber of Commerce (ICC) rules for the use of domestics and international trade terms Are key commercial tools developed and maintained by ICC and used in certain contract for the sale of goods all over the world. They define the responsibilities of buyers and sellers for the delivery of goods under sales contracts and determine how costs and risks are allocated.

3 PURPOSE Deals with a number of identified obligations imposed on the parties such as: Seller s obligation to place the goods at the disposal of the buyer or hand over for carriage or deliver them at destination and with the distribution of risk between parties in these cases.

4 PURPOSE Deals with the obligations to clear the goods for export and import, the packing of the goods, the buyer s obligation to take delivery as well as the obligation to provide proof that the respective obligations have been duly fulfilled.

5 Updated 7 times to keep pace with the development of international trade First devised in 1936 (1953, 1967, 1976, 1980) INCOTERMS 1990 was a popular standard INCOTERMS 2000 Currently, INCOTERMS 2010

6 INCOTERMS 2000 R GROUP E Ex-Works ( named place) GROUP F (Main Carriage Unpaid) FAS Free Alongside Ship ( named port of shipment) FCA Free Carrier ( named port of shipment) FOB Free on Board ( named port of shipment) GROUP C (Main Carriage Paid) CFR Cost and Freight ( named port of destination) CIF Cost, Insurance and Freight ( named port of destination CPT Carriage Paid To ( named place of destination) CIP Carriage Insurance Paid To ( named place of destination) GROUP D (Arrival) DAF Delivered at Frontier ( named place) DES Delivered Ex-Ship ( named port of destination) DEQ Delivered Ex-Quay ( named port of destination) DDU Delivered Duty Unpaid ( named place of destination) DDP Delivered Duty Paid ( named place of destination)

7 ADVANTAGES They follow trade practices rather than attempt to direct it. Since they are not law, they can be revised as needed to suit major changes in the way business is done.

8 BENEFITS TO TRADERS Helps to prevent misunderstandings in international trade contracts. Helps the contracting parties to clarify beyond doubt which party to the contract is responsible for goods in transit at particular stages of their journey and who is responsible for important tasks such as: managing export and import clearance and arranging the insurance of the goods.

9 MISCONCEPTIONS Frequently misunderstood as applying to the contract of carriage rather than to the contract of sale They are sometimes wrongly assumed to provide for all the duties which parties may wish to include in a contract of sale.

10 FOUR (4) PILLARS DELIVERY Where and when has the seller fulfilled his obligation to deliver the goods? DOCUMENTS Who has to provide what documents or equivalent EDI messages? RISKS Who bears the risk of loss of, or damage to the goods? COSTS Who pays for what?

11 WHAT DOES INCOTERMS DOES NOT COVER Ownership title/title to the goods Payment obligation (when/how/what security/against what documents) Vessel requirements Force majeure Termination Insolvency

12 Do not constitute a complete contract of sale. PROVIDE convenient, internationally recognized rules for the sale of goods

13 WHY REVISIONS OF INCOTERMS? GLOBAL DEVELOPMENT Customs Free Zones Electronic communications Changes to transport practices Security for movement of goods

14 WHAT ARE THE MAIN CHANGES IN INCOTERMS 2010?

15 1) REMOVAL OF FOUR (4) TERMS FROM INCOTERMS 2000 The following terms were removed DAF, DES, DEQ and DDU Introduction of two (2) new terms DAP Delivered at Place DAT Delivered at Terminal These terms may be used irrespective of the agreed mode of transport

16 2) CREATION OF TWO (2) CLASSES OF INCOTERMS Rules for sea and inland waterway FAS FOB CFR CIF Rules for any modes of transport (sea, road, air, rail) EXW FCA CPT CIP DAP DAT DDP

17 3) ADAPTED RULES For both domestic and international trade 4) ELECTRONIC RECORDS Buyer and Seller s obligations to provide contractual documentation may now be by electronic record if agreed between parties or customary

18 5) INSTITUTE CARGO CLAUSES If an INCOTERM requires one party to obtain insurance Amended to reflect the changes to the Institute Cargo Clauses.

19 CIF: SELLER S COST AND OBLIGATIONS INSURANCE Obligations to obtain cargo insurance have been updated, to reflect changes to the Institute Cargo Clauses since Incoterms New rules clarify: under CIF terms, seller must obtain cover complying with at least the minimum cover provided by Clause C of the Institute Cargo Clauses, or any similar clauses. Where required by the buyer, the seller must also procure additional cover, such as that provided by Institute Cargo Clauses A or B, or Institute War or Strike Clauses.

20 INSTITUTE CARGO CLAUSES Set of terms for cargo insurance policies voluntarily adopted as standard terms by many international marine insurance organizations, including the Institute of London Underwriters and the American Institute of Marine Underwriters.

21 INSTITUTE CARGO CLAUSES Institute Cargo Clause A widest insurance coverage Institute Cargo Clause B more restrictive coverage Institute Cargo Clause C most restrictive coverage

22 INSTITUTE CARGO CLAUSES Not an exact replacement of the old clauses Some companies may still use the old clauses Counter parts of the new cargo clauses NEW Institute Cargo Clauses A B C OLD Cargo Clauses All Risks (A.R.) With Average (W.A.) Free of Particular Average (F.P.A.)

23 OLD INSTITUTE CARGO CLAUSES ALL RISKS Covers all risks of physical loss or damage from any external causes irrespective of percentage. If the assured wishes to be covered against the risks of war, strikes, riots and civil commotions the insurer deletes the exclusions WITH AVERAGE (WITH PARTICULAR AVERAGE) Covers against total loss and partial loss caused by the perils of the sea (i.e. the vessel has been stranded, sunk, burnt or been in collision with other vessels or external substances other than water, such as ice. FREE OF PARTICULAR AVERAGE Covers against total loss. When partial loss is specifically covered in the policy, it is reasonable from the insurer only if the loss is the result of the carrying vessel being stranded, sunk or burnt, on fire or in collision.

24 NEW INSTITUTE CARGO CLAUSES Risks covered and the Exclusions Risks covered Risks not covered (or exclusions) Institute Cargo Clauses A B C Loss or damage to the subject matter insured proximately caused by [in Clauses (A)] and reasonably attributable to [in Clauses (B) and (C)] Fire or explosion... Vessel or craft stranded, sunk, burnt or capsized... Land conveyance overturned or derailed... Collision or contact of vessel, craft or conveyance with any external object except water... Discharge of cargo at port of distress...

25 6) SECURITY Issues of security of goods/vessels Many countries now require heightened security checks Incoterms Rules now require that both parties are obliged to provide all necessary information (i.e. chain of custody information) in order to obtain import/export clearance.

26 7) TERMINAL HANDLING CHARGES When Seller is required to arrange and pay for the carriage of the goods to an agreed destination (CIP, CPT, CFR, CIF, DAT, DAP and DDP) It may be the case that terminal handling charges are passed on to the buyer as part of the contractual price of the goods?

27 8) STRING SALES Refers to multiple sales of goods during transit down a string. INCOTERMS rule was modified to provide that: the seller in the middle of a string has an obligation to procure goods shipped and not to ship the goods. Under rules: FCA, CPT, CIP, FAS, FOB, CFR and CIF the Seller s obligation to contract for the carriage of goods has been amended to allow the seller to procure a contract of carriage.

28 CARRIER For the purposes of the Incoterms 2010 rules, it means the party with whom carriage is contracted.

29 RULES FOR ANY MODE of TRANSPORT

30 Ex- Works Means the seller delivers when it places the goods at the disposal of the buyer at the seller s premises or at another named place (i.e. works, factory, warehouse, etc.) Seller does not need to load the goods to any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable. May be use irrespective of the mode of transport selected and may be used where more than one mode of transport is employed. It is suitable for domestic trade, while FCA is usually more appropriate for international trade

31 FCA Means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. If delivery occurs at the seller s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading. If the buyer nominates a person other than a carrier to receive the goods, the seller is deemed to have fulfilled his obligation to deliver when goods are delivered to that person.

32 FCA Buyer s Designated/ Carrier Place Means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. If delivery occurs at the seller s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading. If the buyer nominates a person other than a carrier to receive the goods, the seller is deemed to have fulfilled his obligation to deliver when goods are delivered to that person.

33 CPT/CIP: SELLER S COSTS AND OBLIGATIONS Seller s Factory/ Whse First Carrier s Premises Means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage (and insurance under CIP term) necessary to bring the goods to the named destination. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. Seller is required to clear goods for export.

34 Seller s Factory/ Whse NAMED PLACE OR PORT OF DESTINATION DELIVERED AT PLACE (DAP) Delivery occurs at the named place of destination, ready for unloading (not unloaded). Similar to the former DAF, DES and DDU terms. Can be used for any, multimodal or maritime transport, as the arriving vehicle can be a ship The named destination can be a port. Goods are delivered with the seller bearing all risks and costs (other than import costs where applicable) to the named destination.

35 Seller s Factory/ Whse DELIVERED AT TERMINAL (DAT) Delivery occurs at the named place of destination, at the buyer s disposal unloaded from the arriving vehicle. Similar to DEQ Terms. Can be used for any multimodal transport Named place of delivery can be a port Goods are delivered with the seller bearing all risks and costs (other than import costs where applicable) to the named destination.

36 RULES FOR SEA AND INLAND WATERWAY

37 Seller s Factory/ Whse. SELLER S COSTS & OBLIGATIONS Clears the goods for export Pays all the costs till cargo is placed alongside ship at quay or lighter Port of Loading F A S

38 FOB/CFR/CIF Seller s Factory/ Whse INCOTERMS 2000 Seller delivers when goods passed the ship s rail of the carrying vessel at the named port of shipment cleared for export. INCOTERMS 2010 Seller delivers when goods are delivered on board the carrying vessel at the named port of shipment, cleared for export.

39 FOB/CFR/CIF FOB/CFR/CIF may not be appropriate where goods are handed over to the carrier before they are on board the vessel, for example goods in containers, which atypically delivered at a terminal. In such circumstances, the FCA or CPT or CIP rule should be used.

40 Comparison Between CPT& CFR/CIP&CIF SELLER S COSTS and OBLIGATIONS CPT/CIP SELLER Manufacturing Packing for Export Handling and loading (LCL cargo) or stuffing into the container van (FCL cargo) CFR/CIF SELLER Manufacturing Packing for Export Handling and loading (LCL cargo) or stuffing into the container van (FCL cargo)

41 Comparison Between CPT& CFR/CIP&CIF SELLER S COSTS and OBLIGATIONS CPT/CIP SELLER Pays the freight charges necessary to bring the goods to the named place of destination. CFR/CIF SELLER Pays the freight charges necessary to bring the goods to the named port of destination.

42 Comparison Between CPT& CFR/CIP&CIF SELLER S COSTS and OBLIGATIONS CPT/CIP BUYER Responsible for the payment of duties, taxes and other charges due to the government. CFR/CIF BUYER Responsible for the payment of duties, taxes and other charges due to the government.

43 Comparison Between CPT& CFR/CIP&CIF SELLER S COSTS and OBLIGATIONS CPT/CIP BUYER Bears the risk and costs in carrying out customs formalities. CFR/CIF BUYER Bears the risk and costs in carrying out customs formalities.

44 COSTS/DUTIES OF SELLER UNDER INCOTERMS 2010 Loading on truck (carrier) Export- Customs declaration Carriage to port of export Unloading of truck in port of export Loading charges in port of export Carriage to port of import Unloading charges in port of import Loading on truck in port of import Carriage to place of destination Insurance Import customs clearance Import taxes EXW No No No No No No No No No No No No FCA Yes Yes Yes No No No No No No No No No FAS Yes Yes Yes Yes No No No No No No No No FOB Yes Yes Yes Yes Yes No No No No No No No CFR Yes Yes Yes Yes Yes Yes No No No No No No CIF Yes Yes Yes Yes Yes Yes No No No Yes No No DAT Yes Yes Yes Yes Yes Yes Yes No No No No No DAP Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No CPT Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No CIP Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes

45 COSTS/DUTIES OF BUYER UNDER INCOTERMS 2010 Loading on truck (carrier) Export- Customs declaration Carriage to port of export Unloading of truck in port of export Loading charges in port of export Carriage to port of import Unloading charges in port of import Loading on truck in port of import Carriage to place of destination Insurance Import customs clearance Import taxes EXW YES YES YES YES YES YES YES YES YES YES YES YES FCA NO NO NO YES YES YES YES YES YES YES YES YES FAS NO NO NO NO YES YES YES YES YES YES YES YES FOB NO NO NO NO NO YES YES YES YES YES YES YES CFR NO NO NO NO NO NO YES YES YES No YES YES CIF NO NO NO NO NO NO YES YES YES NO YES YES DAT NO NO NO NO NO NO NO YES YES YES YES YES DAP NO NO NO NO NO NO NO NO NO YES YES YES CPT NO NO NO NO NO NO NO NO NO YES YES YES CIP NO NO NO NO NO NO NO NO NO NO YES YES DDP NO NO NO NO NO NO NO NO NO YES NO NO

46 R Transfer of Risk from Seller to Buyer INCOTERMS 2010 CIF Transport & Insurance Paid SELLER On Board CFR FOB Loading Port Transport Paid Destination Port Ready for unloading, but not unloaded from the carrying vehicle BUYER FAS DAP EXW FCA CPT Seller s Place/Buyer s Designated/Carrier s Place Transport Paid DAT Unloaded from the carrying vehicle DDP CIP Transport & Insurance Paid

47 EX-WORKS FOB CFR/CIF Manufacturing cost Packing Marking Labeling Administrative Expenses + Port of Loading Inland Freight Forwarding Costs Arrastre Charges Wharfage Dues Export Clearance Charges Internal Insurance (if applicable) + Port of Destination Ocean Freight Insurance Manufacturer s Profit Miscellaneous Charges

48 DDP EX-WORKS Manufacturing cost Packing Marking Labeling + Manufacturer s Profit FCA Buyer s designated place/ Carrier s Premises Place of Loading Container stuffing Inland Freight Forwarding Costs Arrastre Charges Wharfage Dues Terminal Handling Charges Export Clearance Charges Internal Insurance (if applicable) + CPT/CIP Place of + Destination Transport Cost Insurance BUYER Import Duties & Taxes Terminal handling Charges Brokerage Fee Arrastre Charges Wharfage Dues Storage/Demurr age Charges (if applicable) Inland Transport Cost Insurance (If applicable) Miscellaneous Charges Miscellaneous Charges

49 HOW ARE INCOTERMS 2010 RULES USED? Commercial Invoice should state: e.g. CFR New York, USA Incoterms R 2010, rather than just CFR USA The registered trademark symbol should be used when referring to Incoterms 2010

50 TIPS ON USING INCOTERMS 2010 REMEMBER: INCOTERMS are not your prime contract of sale. Consider terms appropriate to the goods. Consider terms appropriate to the transportation. Decide who will organize the transport? Decide who will organize the insurance (if required)

51 TIPS ON USING INCOTERMS 2010 Consider local customs or practices at the port or place. Consult the guidance note. Choose the appropriate Rule. Specify place as precisely as possible Incorporate INCOTERMS into your contract.

52 CB ARACELI B. REQUINTO, MCA Certified UNESCAP Trainer A practicing Licensed Customs Broker since 1992 with sixteen (16) years experience in a Trading Firm handling Mining and Construction Equipment as Product Consultant, Administrative and Technical Assistant to the President which includes Purchasing, Marketing, and Inventory and experience in customs brokerage industry dates back in Former Dean of the College of Customs Administration and Review Director for Customs Brokers Licensure Examinations of Asian Institute of Maritime Studies (AIMS), PMI Colleges and Lyceum of Subic Bay, Part-time Faculty Member at DLSU-College of St. Benilde for the Export Management Program in Currently, a Special Lecturer for Tariff and Customs subjects at the Lyceum of the Philippines University under the Customs Administration Department, College of Business Administration and a Faculty Member of the Graduate School of Asian Institute of Maritime Studies (AIMS), Pasay City and Reviewer for Customs Brokers Licensure Examination. Former member of the Board of Directors of the Port Users Confederation, Inc. (PUC) and the Chamber of Customs Brokers, Inc. (CCBI), Training Director of PUC and for Special Projects of the Philippine Chamber of Commerce and Industry, Inc. (PCCI). A regular lecturer of various training institutions such as: the Philippine Trade Training Center (PTTC) under the Department of Trade and Industry (DTI), Philippine International Seafreight Forwarders Association (PISFA), Aircargo Forwarders of the Philippines, Inc. (AFPI) and the Purchasing Institute for Supply Management (PISM). A Faculty Member of De La Salle-College of St. Benilde School of Professional and Continuing Education (SPACE) and a Certified Trainer on Logistics, Freight Forwarding and Multimodal Transport Operation by the United Nations Economic and Social Commission for Asia and Pacific (UNESCAP). Conducted lectures on INCOTERMS and Export Documentation and Procedures for the Department of Trade and Industry (DTI)-Small Medium Enterprise (SME) Caravan held in various Regions of the country and a Certified Trainer for DTI s Information Campaign on Doing Business in Free Trade Areas.