Contractual terms developed by the International Chamber of Commerce (ICC) in Paris

Incoterms • Delivery of the Goods • Transfer of Risks • Transfer of Costs 　　Chapter 6:　 INCOTERMS Contractual terms developed by the International Chamber of Commerce (ICC) in Paris A standard three-letter abbreviated terminology Translated into various languages Covers thirteen main options The purpose is to clearly describe the key obligations of sellers, buyers and carriers with regard to: Prepared by Leng kimhok

Incoterms: There are 4 groups • The E group: • The carriage is arranged by the buyer • Risks & costs are transferred to the buyer when the goods are made available • The F group: • The carriage is arranged by the buyer • Risks & costs are transferred to the buyer as from just after export clearance • The C group: • The carriage is arranged by the seller • Risks are transferred to the buyer just after export clearance but costs are on the seller up to import clearance at named destination • The D group: • The carriage is arranged by the seller • Risks are transferred just before import clearance but costs are on the seller up to import clearance when duty is unpaid or including import clearance when duty is paid. Prepared by Leng kimhok

Incoterms – Point of delivery of the goods and transfer of risk Upon delivery of goods at the seller’s premises EXW E Ex works (named place) FCA Upon delivery of goods to the carrier Free carrier (named place) Free alongside ship FAS Upon delivery of goods alongside ship (named F port of shipment) FOB When the goods pass the ship’s rail at the named Free on board port of shipment CFR When the goods pass the ship’s rail at the port of Cost and freight shipment Cost, insurance and CIF When the goods pass the ship’s rail at the port of freight shipment C Carriage paid to Upon delivery of goods to the carrier CPT (named place) Carriage and CIP Upon delivery of goods to the carrier insurance paid to (named place)

Incoterms – Point of delivery of the goods and transfer of risk Delivered at frontier DAF Upon delivery of goods at frontier (named place) - not unloaded Delivered ex ship When goods are placed at the disposal of the DES buyer on board the ship (named port of destination) Delivered ex quay When goods are placed at the disposal of the DEQ D buyer at the quay (named port of destination) Upon delivery of goods (at named place of Delivered duty unpaid DDU destination) not cleared for import and not unloaded DDP Upon delivery of goods cleared for import (at Delivered duty paid named place of destination), duty paid but not unloaded Prepared by Leng kimhok

Duties of buyer/seller according to Incoterms 2010 Prepared by Leng kimhok

EXW (+ name of place): • “Work” means factory, or the seller’s place of business. • The seller to make the goods available to the buyer at the seller’s place of business or some other named place, as specified after the “EXW”. • Ex: the contract may say “EXW Battambang,” which would mean the seller’s place of business in Battambang. • It is good for seller, because: • The buyer is responsible for arranging transportation from the seller’s place of business or other named place, export and import clearance. • The buyer bears all the costs of transporting, and the ROL or damage to them following delivery. Prepared by Leng kimhok

Prepared by Leng kimhok

DDP (+ named place of destination): Delivered Duty Paid • Ex: “DDP Shanghai,” which would mean that a foreign seller agreed to arrange for delivery of the goods to Shanghai, China. • It is good for buyer, because: • The seller agrees to arrange for delivery of the goods to a named place in a foreign nation, which may be many kilometers inland, including arranging import clearance into the foreign country. • The seller bears all the costs of transporting the goods and the risk of loss or damage to the goods up until the time they are delivered to the named place in the foreign nation. Prepared by Leng kimhok

Most of the contracts for the international sale of goods use the terms beginning with “F” or “C” under which neither party has so many duties. Two of the most common and important terms used in international sales contracts are FOB and CIF. • FOB (+ named port of shipment) = FOB (+ name of vessel) in U.S, Free on Board. • It means: • The seller delivers when the goods pass the ship’s rail at the named port of shipment. • The buyer has to bear all costs and ROL or damage to the goods from that point. • The FOB term requires the seller to clear the goods for export. Ex: “Seller to supply 1,000 cartons of ping pong balls FOB Kompongsom (INCOTERMS 2000)@ US$ 1.50 per carton.” Prepared by Leng kimhok

CIF (+ named port of destination): Cost, Insurance and Freight • Ex: “ Seller to supply three bulldozers CIF Kompongsom (INCOTERMS 2000) • It means: • The seller to pay for carriage and insurance from her place of business to the port of destination. • The seller must also obtain export clearance. • These costs into the total price of the goods under the contract. • The buyer is responsible for all costs after the goods have been transported to the named port of destination. • The ROL or damage to the goods passes from the seller to the buyer when the goods pass over the ship’s rail at the port of shipment Prepared by Leng kimhok

FCA (+ name of place): Free Carrier • The seller is responsible for delivering the goods, cleared for export, to a named carrier at the place specified after the FCA term in the K. • The buyer is then responsible for the cost of carriage, insurance, and any import clearances or import duties required to get the goods into the buyer’s nation. • The ROL passes from the seller to the buyer when the goods are delivered to the carrier. Prepared by Leng kimhok

FAS (+ named port of shipment): Free Alongside Ship • Under an FAS contract: • The seller is obliged to deliver the goods alongside a ship at thenamed port of shipment (the goods are delivered to the dock, or to a warehouse at the dock). • The seller is responsible for export clearance of the goods. • The buyer is responsible for the cost of transport of the goods from alongside the ship at the port of shipment to the final destination of the goods. Prepared by Leng kimhok

CFR (+ named port of destination): Cost and Freight • It is similar to the CIF term discussed above, but it differs in that: • The seller is not obliged to insure the goods being carried. • As with a CIF contract: • the seller must clear the goods for export & pay for the cost of the transportation to the named port of destination. • ROL or damage to the goods passes from the seller to the buyer when the goods cross the ship’s rail at the port of shipment. Prepared by Leng kimhok

DELIVERY • CPT (+ named place of destination): Carriage Paid To • It is similar to the CIF and CFR terms. • The main difference is that • the ROL or damage to the goods passes when the seller delivers the goods to the first carrier. • This first carrier could be a trucking company in the seller’s nation that takes the goods from the seller at his place of business. • Then the containers are transported to ports, where they are loaded or driven onto ships. • After the sea journey, the containers are unloaded & often transported to a freight depot inland in the buyer’s nation. • Although delivery occurs when the goods are delivered to the first carrier, the seller must still pay the cost of carriage to the named place of destination, which may be inland in the buyer’s nation. • The seller must obtain export clearance from her nation. Prepared by Leng kimhok

DELIVERY • CIP (+ named place of destination): Carriage and Insurance Paid • The same as the CPT term, except that the seller must pay for the cost of carriage and insurance to the named place of destination. The insurance for the time after delivery is made out in favor of the buyer. The seller need not pay for insurance past the point where she delivers the goods to the first carrier. Prepared by Leng kimhok

DAF (+ named place): Delivered At Frontier • Contracts involving cross-border road or rail transport. • The seller must pay the transport costs to the named frontier, which may be at the border of the seller’s own nation. • Delivery occurs when the goods are placed at the buyer’s disposal at the frontier. • The seller must clear the goods for export from the nation in which delivery occurs. • The ROL passes at delivery, and the buyer is then responsible for the cost of onward transportation of the goods, and for any import clearances that are required. Prepared by Leng kimhok

DES (+ named port of destination): Delivered Ex-Ship • The seller is responsible for transport costs to the named port of destination. • The seller bears the ROL or damage to the goods until the goods are placed at the buyer’s disposal on board the ship at this port, at which point delivery occurs. Therefore, the seller should insure the goods to this point. • The buyer is then responsible for the costs of removing the goods from the ship and transporting them elsewhere, and for obtaining import clearance. Prepared by Leng kimhok

DEQ (+ named port of destination): Delivered Ex-Quay • The seller must pay for the transport costs to the wharf at this port, including the costs of unloading the goods from the ship onto the quay. Delivery occurs when the goods are placed at the buyer’s disposal on the quay, • So the seller bears the ROL or damage to the goods up to that point and should insure the goods up to that point. • The DEQ term is similar to DES, except that with DEQ delivery occurs on the wharf (rather than on the ship) at the port of destination. • The buyer must obtain import clearance. Prepared by Leng kimhok

DAT - DELIVERED AT TERMINAL (... named terminal at port or place of destination) The Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the Buyer's disposal at a named terminal at the named port or place of destination. • DAP - DELIVERED AT PLACE (... named place of destination) The Seller delivers when the goods are placed at the Buyer's disposal on the arriving means of transport ready for unloading at the names place of destination. The Seller bears all risks involved in bringing the goods to the named place.

DDU (+ named place of destination): Delivered Duty Unpaid to the named final point of destination. (This might be the buyer’s place of business, a freight depot in the buyer’s nation, or some other place specified in the sales contract. ) • The seller is responsible for the cost of carriage of the goods to the named point, bears the ROL until the goods are delivered to that place. • The buyer is responsible for import clearance. • The DDU term is very similar to the DDP term discussed above, except that with DDP the seller must obtain import clearance. Prepared by Leng kimhok

Point of delivery & transfer of risk for maritime “F” and “C” terms Over the ship’s rail: FOB, CFR & CIF PORT OF ORIGIN Customs Douane Prepared by Leng kimhok Alongside the ship: FAS

Point of delivery & transfer of risk for “D” terms (except DAF) Delivered at destination point: DDU(*) & DDP PORT OF DESTINATION Customs Douane On board the ship: DES Unloaded from the ship: DEQ(*) (*) Pending customs clearance Prepared by Leng kimhok

Cus- toms Cus- toms Cus- toms Cus- toms DELIVERY and TRANSFER OF RISK can take place at many points between the seller’s premises and the buyer’s premises Seller Buyer EXW FCA DDU FAS FOB DES DEQ CPT DDP CFR CIP CIF Waterborne transport only Transport by land DAF

Cus- toms Cus- toms Cus- toms Cus- toms TRANSFER OF COSTS takes place at points that are sometimes different Seller Buyer EXW FCA DDU FAS FOB DES DEQ DDP CFR Export clearance costs on account of the seller * CPT CIF * CIP Waterborne transport only Import clearance costs on account of the buyer Transport by land * Transport insurance costs on account of the seller Unloading costs on account of the seller only if in its contract of carriage DAF

Contractual terms developed by the International Chamber of Commerce (ICC) in Paris