INCOterms R U L E S F O R I N T E R N A T I O N A L T R A D E by Laura B. Miller The Incoterms rules are standardized terminology used by the international trading community to ensure a clear understanding of the terms used in a sales contract. The International Commercial Terms, or Incoterms, is a privately developed trademark of the International Chamber of Commerce (ICC). The terms were originally established in 1936 to provide a set of international rules for the interpretation of the most commonly used terms in foreign trade. They have since been updated several times to keep pace with developments in international trade, with Incoterms 2010 serving as the most recent publication of the rules. In the steel industry, these terms are used for both international and domestic transactions, helping to clearly convey the responsibilities, costs and risks of the buyer and seller related to the transportation and delivery of steel products. The most commonly used terms in the iron and steel industry include EXW, DDP, FAS, FOB, CFR and CIF. RULES FOR ALL MODES OF TRANSPORT EXW: EX WORKS Ex Works means that 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., steel works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable. FCA: FREE CARRIER Free Carrier means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point. CPT: CARRIAGE PAID TO Carriage Paid To indicates that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed upon between parties), and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named destination. AIST.org December 2014 19
Greenland Fi nl and Iceland Sweden Norway Estonia Canada Latvia Denmark Lithuania Ireland Germany U. K. Belarus Poland Neth. Belgium Ukraine Czech Rep. Lux. Kaz akh st Slovakia Austria Mold. Hungary Switz. France I t al y Slovenia Romania Croatia Bosnia & Herz. Serbia Mont. Portugal United States Albania Spain Bulgaria Georgia Mace. Armenia Greece Azerb. Tu Turkey Azores Malta Cyprus Syria Lebanon Tunisia Atlantic Jordan Iran Iraq Israel Kuwait Canary Islands Morocco Major Steel Trade by Countries Mexico Libya Gulf of Mexico Bahamas Bahrain E g yp t Al geri a Western Sahara Qatar U.A.E. Saudi Arabia Cuba Haiti Pacific El Salvador Puerto Rico M auri t ani a Antigua & Barbuda Jamaica Belize Guatemala Dom. Rep. St Vincent & the Grenadines Nicaragua Cape Verde Dominica Grenada Senegal St Lucia Gambia Venezuela Dijbouti Guinea Ghana Sierra Leone Colombia Chad Burkina Faso GuineaBissau Panama Liberia Cote d'ivoire Sudan Benin Togo Somalia Eth io p ia Nigeria C e n tra l A fric a R e p u b lic Guyana Suriname Yemen Eritrea Barbados Trinidad & Tobago Costa Rica Oman Niger Mali St Kitts & Nevis Caribbean Sea Honduras Cameroon French Guiana Equatorial Guinea Uganda Gabon Ecuador Congo Kenya Rwanda Dem. Republic of Congo Ukraine Romania Peru Burundi Tanzania Mold. Russia Comoros Angola Brazil Malawi Zambia Bulgaria Mozambique Zi mbabwe Bolivia Mauritius Turkey Paraguay Namibia I ran I raq Swaziland South Africa Lesotho Uruguay Argentina Chile Falkland Islands South Georgia C I P : C A R R I A G E A N D I N S U R A N C E PA I D T O D AT: D E L I V E R E D AT T E R M I N A L Carriage and Insurance Paid To has the same initial defi- Delivered at Terminal means that the seller delivers nition as Carriage Paid To, but the seller also contracts when the goods, once unloaded from the arriving for insurance coverage against the buyer s risk of loss of means of transport, are placed at the disposal of the or damage to the goods during the carriage. The buyer buyer at a named terminal at the named port or desti- should note that, under CIP, the seller is required to nation. Terminal includes a place, whether covered obtain only minimum insurance coverage. Should the or not, such as a quay, warehouse, container yard, or buyer wish to have more insurance protection, it will road, rail or air cargo terminal. The seller bears all need either to come to an agreement with the seller or risks involved in bringing the goods to and unloading to make its own extra insurance arrangements. them at the terminal at the named port or destination. 20 Iron & Steel Technology Madagascar Reunion Botswana A Publication of the Association for Iron & Steel Technology
Nepal Bhutan Bangladesh East Timor Palau Solomon Islands Vanuatu Fiji Tonga Somoa Russia Platts World Steel & Raw Materials Trade Map 2012 depicts global steel trade flows. Image used with permission of Platts. an Mongolia Uzbekistan Kyrgyzstan North rkmenistan Tajikistan Afghanistan Pakistan China South Japan Taiwan India Myanmar H.K. North Thailand Laos Cambodia China South Vietnam Philippines Japan Sri Lanka Malaysia Brunei Singapore Indonesia Papua New Guinea Indian Australia All trade flows are in million metric tonnes and refer to trade in 2011 Percentages represent change from 2010 EU27 only refers to EU external trade Trade Region Net Exports Inter-regional steel exports (> 1mmt) Net Exporter Volume 2011 2010 Change CIS 41.56 45.17-3.61 Single country steel exports (> 0.5mmt) Asia 29.81 15.41 14.40 New Zealand Non-EU Europe 5.06 3.73 1.32 Major steel scrap exports (> 0.5mmt) EU27 2.14 6.15-4.01 ia -0.39-0.37-0.02 Major iron ore exports (> 3mmt) Sth, Cent America -2.73-6.25 3.53 Africa -15.34-14.23-1.08 0 750 1,500 miles NAFTA -16.76-12.37-4.39 Copyright 2012 by ISSB and Platts, The McGraw-Hill Companies, Inc. 0 750 1,500 km Net Importer Middle East -32.12-32.52 0.38 DAP: DELIVERED AT PLACE Delivered at Place signifies that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named destination. The seller bears all risks involved in bringing the goods to the named place. DDP: DELIVERED DUTY PAID Delivered Duty Paid means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named destination. The seller bears all the costs and risks involved in bringing the goods to the destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities. AIST.org December 2014 21
All transport types Sea and inland water transport EXW FCA CPT CIP DAT DAP DDP FAS FOB CFR CIF EX WORKS FREE CARRIER CARRIAGE PAID TO CARRIAGE AND INSURANCE PAID TO DELIVERED AT TERMINAL DELIVERED AT PLACE DELIVERED DUTY PAID FREE ALONGSIDE SHIP FREE ON BOARD SELLER CARRIER PORT SHIP PO COST AND FREIGHT COST, INSURANCE AND FREIGHT RULES FOR SEA AND INLAND WATERWAY TRANSPORT FAS: FREE ALONGSIDE SHIP Free Alongside Ship means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onward. FOB: FREE ON BOARD Free On Board is a term used when the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onward. CFR: COST AND FREIGHT Cost and Freight means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. 22 Iron & Steel Technology A Publication of the Association for Iron & Steel Technology
PORT CARRIER NAMED PLACE BUYER Seller bears cost Buyer bears cost Seller bears risk Buyer bears risk Seller must obtain transport insurance CIF: COST, INSURANCE AND FREIGHT Cost, Insurance and Freight carries the same definition as Cost and Freight, but the seller also contracts for insurance cover against the buyer s risk of loss of or damage to the goods during the carriage. The buyer should note that, under CIF, the seller is required to obtain only minimum insurance coverage. Should the buyer wish to have more insurance protection, it will need either to discuss this and agree on terms with the seller or to make its own extra insurance arrangements. According to the World Steel Association, there were more than 1.4 billion metric tons of iron ore and more than 370 million metric tons of steel products traded internationally in 2013. Universal terminology such as Incoterms rules are necessary to reduce logistical miscommunications and to ensure smooth transactions. For more information about the Incoterms rules, visit the International Chamber of Commerce s website: http://store.iccwbo.org. F The Incoterms rules have been reprinted with the permission of the International Chamber of Commerce. AIST.org December 2014 23