Incoterms 2000 Enterprise Europe Network London August 2010

Incoterms 2000 Enterprise Europe Network London August 2010

CONTENTS 1. What are Incoterms?... 3 2. How to incorporate Incoterms into your contract?... 3 3. Who chooses the applicable Incoterm rule?... 3 4. Groups of Incoterms... 4 5. Types of Incoterms... 4 6. Useful contacts... 5 2

1. What are Incoterms? This factsheet provides an overview of the system of Incoterms 2000. Incoterms, or international commercial terms, are a set of thirteen different terms used in the international sale of goods. Incoterms are used by buyers and sellers to apportion the transportation costs, responsibilities and risks and to account for new developments in international trading practices. Incoterms are developed by the International Chamber of Commerce and endorsed by the United Nations Commission on International Trade Law. The latest revision and simplification of the content of Incoterms was done in 2000 to account for the changes in world trading practices (especially electronic processes). Incoterms are a very useful tool in international trade because they provide a set of standard rules recognised and used throughout the world. This helps to avoid potentially costly consequences when a supplier and a buyer face a misunderstanding by applying their differing local trade terms. 2. How to incorporate Incoterms into your contract? In order to incorporate Incoterms into your sales contract, the document has to clearly state that the current version of Incoterms is to be used. For example, a quote CIF London Incoterms 2000 should be used. Failure to do so can result in legal disputes as to which edition was intended to be used or if Incoterms were meant to be used at all. You should also stipulate in your contract which country s legal system will be used in case of a dispute. If both parties countries are signatories to the UN Convention on Contracts for the International Sale of Goods, this will provide the legal framework and Incoterms will become the legal backbone when settling the dispute. 3. Who chooses the applicable Incoterm rule? It is often the customer who specifies which one of the 13 Incoterm rules will be used. It is important to also bear in mind that some countries place certain restrictions on which terms may be used and by whom (for example, in some countries import licences can be obtained by buyers located in that territory and therefore the term DDP cannot be used). Similarly, when delivering to remote areas it might not be economically viable for a foreign seller to be responsible for all transportation costs. In case of long-term contracts it is important to revise the terms used on average once a year to ensure that both the seller and the buyer are still capable of complying with the terms and that they are still applicable for the type of transport used. 3

4. Groups of Incoterms There are thirteen Incoterms 2000 rules, which are divided into four categories: Group E Goods are available to the buyer at the seller s premises Group F Seller delivers goods to a carrier appointed by the buyer Group C Seller contracts the carrier without assuming the risks occurring after the shipment Group D Seller bears all costs and risk up to the delivery to the destination 5. Types of Incoterms EXW (Ex-Works) The seller is not responsible for any transportation or insurance costs. The buyer takes the goods at the seller s premises. FCA (Free Carrier) The seller is responsible for delivering the goods to a carrier nominated by the buyer. FAS (Free Alongside Ship) The seller is responsible for delivering the goods alongside a ship. The buyer is charged the loading fees. FOB (Free on Board) The seller is responsible for delivering the goods on the vessel by which they are to be carried. CFR or C&F (Cost and Freight) The seller pays for all charges up to the arrival of the goods at the point of unloading from the vessel. The buyer is responsible for insuring the goods while in transit to that point. CIF (Cost, Insurance and Freight) The seller pays for all charges up to the arrival of the goods at the point of unloading from the vessel including the insurance while in transit to that point. CPT (Carriage Paid To) The seller is responsible for the cost of freight up to the point of delivery to a specified destination. The buyer is responsible for the insurance of the goods while in transit to that point. 4

CIP (Carriage and Insurance Paid To) The seller pays for all costs of freight up to the point of delivery to a specified destination including the insurance against loss or damage during transit. DAF (Delivered at Frontier) The seller delivers the goods to the frontier and is responsible for all costs to that point. DES (Delivered ex Ship) The seller is responsible for making the goods available to the buyer on board the ship at the port of discharge. The seller pays all charges except unloading or clearance charges. DEQ (Delivered ex Quay) The seller is responsible for making the goods available to the buyer on the wharf at the port of discharge, cleared for import. The seller pays all charges to this point. DDU (Delivered Duty Unpaid) The seller delivers the goods to a specified point in the destination country. The buyer is responsible for the duties and taxes payable when goods are cleared through customs. DDP (Delivered Duty Paid) The seller delivers the goods to a specified point in the destination country and is also responsible for all costs associated with import such as licences, import duty and taxes) 6. Useful contacts Enterprise Europe Network London, London Chamber of Commerce and Industry 33 Queen Street, EC4R 1AP London T: +44 (0)20 7489 1992 E: europe@londonchamber.co.uk W: www.een-london.co.uk The Enterprise Europe Network London team are able to assist with any enquiries regarding international trade rules including Incoterms. International Chamber of Commerce UK Bookshop 12 Grosvenor Place, SW1X 7HH London T: 020 7838 9363 E: publications@iccorg.co.uk W: www.iccbookshop.com/page.php?p=incoterms International Chamber of Commerce publishes an official reference book with the description of all 13 Incoterms (product code 560). 5

Department for Business, Innovation and Skills 1 Victoria Street SW1H 0ET London T: +44 (0)20 7215 6554 F: +44 (0)20 7215 2234 E: ruth.french@bis.gsi.gov.uk W: www.bis.gov.uk/policies/trade-policy-unit In July 2010 the International Market Access Unit took over the responsibilities of SITPRO, UK s international trade facilitation body. It helps British companies doing business abroad, including advice to exporters on procedures and documents related to international trade and Incoterms 2000. This factsheet was produced by the Enterprise Europe Network London team at London Chamber of Commerce. The Enterprise Europe Network London brings together GLE, London Chamber of Commerce and London Technology Network. The Enterprise Europe Network London is funded by the European Commission and the London Development Agency. We provide practical, hands-on support and information for London s small and medium businesses seeking funding, hoping to expand their business into Europe, or wishing to develop (technology) partnerships with other European businesses. For more information please go to: www.een-london.co.uk Disclaimers Whilst every effort has been made to ensure the accuracy of the information contained in this guide, London Chamber of Commerce and Industry does not guarantee the accuracy of the information contained therein and does not accept responsibility for errors, omissions or their consequences. Neither the European Commission nor the Executive Agency for Competitiveness and Innovation nor any person acting on behalf of them is responsible for the use which might be made of the information contained herein. The views in this publication are those of the author and do not necessarily reflect the policies of the European Commission. 6