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Vincent GIMET France Alimentaire. INCOTERMS 2010 International Commercial Terms. Content. Definition of Incoterms The various steps from delivery to reception of the goods The 4 groups of Incoterms 2000 and 2010
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Vincent GIMET France Alimentaire INCOTERMS 2010International Commercial Terms
Content • Definition of Incoterms • The various steps from delivery to reception of the goods • The 4 groups of Incoterms 2000 and 2010 • Distribution of costs, transfer of risks and compulsory documents related to each incoterm • Differences between sale at departure (VD) and sale at destination (VA) • Special case of incoterms CIP et CIF • Incoterms use in European Union • American FOB
A. Definition of Incoterms Created by the ICC in Paris (130 member countries in 2010), they are used since 1936 and have been revised in 1953, 1980, 1990, 2000, 2010. Incoterms do not : Dictate the contract of carriage, Include all of the duties of the Buyer & the Seller in a transaction, Deal with a breach in contracts, Deal with the ownership transfer Speak about payments between Buyer & Seller Incoterms do : Provide an Internationally accepted definition of : the responsibility of the Buyer & the Seller, the allocation of costs, the assumption and transfer of risks, Have been created to adapt to the most contemporary commercial practices.
B. The variousstepsfromdelivery to reception of the goods • Packing • Loading + Pre-transport • Export customs formalities • Port crossing, groupage and consolidation platform • International transport (main) • Transport insurance • Port crossing, unloading on platform • Import customs formalities, duties and taxes • Post-transport + unloading
C. The 4 groups and Incoterms 2000 and 2010 INCOTERMS 2000 The 4 families of Incoterms (beginning with the letter) : E for EX F for FREE : for incoterms beginning with the letter F, the seller takes charge of pre-transport and deliver to an agreed place in his country or zone. He does not pay and organize the main transport (international). C for COST :the seller takes charge of the main transport until the border ( entrance point) of the country of destination (port, airport, platform…). D for DELIVERED : the seller takes care of the delivery to a place specified by the buyer in the country of destination. Customs clearance of the goods will be done either by seller or buyer, depending on the incoterm.
APPLICATIONS OF INCOTERMS 2010 All modes : EXW FCA CPT CIP DAP and DAT DDP Seafreightonly: FAS FOB CFR CIF
D. Distribution of costs, transfer of risks and compulsory documents related to each incoterm 2010 GROUP E EXW / Ex Works All modes of transport The only responsibility for seller is to put the goods to buyer’s availability at his factory. Seller is not supposed to take charge of loading on the vehicle provided by buyer. (Incoterms 2000) This is why EXWL (loaded) variant has been introduced. Buyer bears every cost and risk inherent to the transport of the goods from this place to the final place of destination. This term represents the minimum obligation for seller.
GROUPE F FCA / Free Carrier All mode of transport The buyer chooses the mode of transport and the forwarder. He pays the main transport. The seller’s obligation is fulfilled when he delivers the goods on the carrier platform chosen by the buyer at an agreed place. If this issue is not specified, the seller can choose the place that suits him best. Transfer of costs and risks is effective when the forwarder takes the goods in charge. In case of a full truck, full wagon or full container, the seller takes care of loading and the buyer of unloading, at their own costs and risks. Export customs clearance is paid by seller. The carrier may be a forwarding agent. FAS / Free Alongside Ship Sea freight With this term, seller’s obligations are fulfilled when the goods have been placed alongside ship on the pier or in banks or barges. This means that, from this moment, the seller has to take all costs and risks of loss or damage in charge. Unlike the FOB, the FAS makes the buyer responsible of export customs clearance. The buyer chooses the vessel and pays the international transport.
FOB / Free On Board Sea freight only The goods must be loaded in the ship by the seller at the port of shipment specified in the contract. The buyer chooses the ship and pays the sea freight.Transfer of costs and risks between seller and buyer is efective when the goods go over ship’s rail for the non containerized goods ( for containers : transfer of costs and risks is the same than for FCA term ie when the goods are on board). The seller is responsible for export formalities. The 2010 version has also clarified the distribution of loading and unloading costs (Terminal Handling Charges or THC) generally paid twice by seller and buyer. GROUPE C CFR / Cost and Freight Sea freight only The seller chooses the ship and pays for sea freight up to port of destination. Loading on the ship and export formalities are at seller’s charge. Risks of loss or damage of goods, as well as any costs increase, are transferred from seller to buyer when the goods are on board (not when they go over the ship’s rail at port of shipment).
CIF / Cost, Insurance and Freight Sea freight only Same term as CFR with an additional obligation for the seller to provide an insurance against risks of loss or damages of the goods during transport. The insurance is calculated on 110% of the value of the goods. The premium is paid by the seller, but the transfer of risks to the buyer is effective when the goods are on board (not when the goods go over the ship’s rail). CPT / Carriage Paid To All modes Seller chooses the carrier and pays the transport of the goods to the agreed place of delivery. Transfer of risks + costs increase during transport are transferred from seller to buyer from receipt by the first carrier. For loading, unloading and customs clearance, same as FCA. The carrier may be a forwarding agent. From 2011, it is obligatory to specify a place of delivery. The obligation of the seller is to provide a transport contract, not to deliver at place of destination.
CIP / Carriage and Insurance Paid to All modes Same term as CPT with an additional obligation for the seller to provide an insurance against risks of loss or damages of the goods during transport. It is preferable for buyer and seller to agree on the terms of this insurance. The seller has to provide a transport contract, to pay for transport and insurance. The carrier may be a forwarding agent. The obligation of the seller is to provide a transport contract, not to deliver at place of destination. GROUPE D DAP / Delivered At Place (goods not unloaded at place specified by buyer) DAT / Delivered At Terminal (goods unloaded delivered on platform terminal) All modes The seller has fulfilled in obligation of delivery when the goods have been made available at the agreed place in the country of importation, including unloading (for DAT).The seller has to insure the goods and will be responsible of any damage or loss. But the import customs formalities + payment of taxes and duties are at buyer’s charge.
DDP / Delivered Duty Paid All modes Exact opposite of EXW – maximum obligation for seller who pays for everything including import customs clearance + taxes and duties. Transfer of risks and costs is done when the goods are delivered at buyer’s warehouse (without being unloaded). Unless otherwise specified in the transport agreement, unloading is at buyer’s charge.
E. Differences between sale at departure (VD) and sale at destination (VA) Incoterms of sale at departure : the buyer bears the risks during main transport (international). Incoterms of sale at destination : the seller bears the risks during main transport (international). Sales at destination are commercially more coherent but concern incoterms from group D only. Incoterms from group C can be a problem in case of dispute during international transport. Anyway, in case of payment via documentary credit based on an incoterm from group E, F or C (sale at departure), the seller can be paid as soon as the goods are on board upon presentation of the required documents to the bank, as he’s supposed to have fulfilled his part of the agreement, even if the international transport is at his charge.
F. Special case of Incoterms CIP and CIF The value at customs is the reference for calculation of duties and taxes. It is always based on the incoterm CIF or CIP (except in case of air shipment with application of an “airport coefficient”). It is the value at the entrance of the import country. It is also a basis for calculation of customs statistics. Transport insurance is applied on 110% of CIF value.
