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INCOTERMS 2000 International Chamber of Commerce HQ : Paris

This presentation is in the form of an orientation. It aims at giving you a fair idea of how cargoes move by Air, Sea and Land. Implication of different INCOTERMS 2000 and responsibilities lies with the Exporter / Importer. Please feel free to ask questions at any time during the presentation.

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INCOTERMS 2000 International Chamber of Commerce HQ : Paris

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  1. This presentation is in the form of an orientation. It aims at giving you a fair idea of how cargoes move by Air, Sea and Land. Implication of different INCOTERMS 2000 and responsibilities lies with the Exporter / Importer.Please feel free to ask questions at any time during the presentation. B S Patel Mar’09

  2. INCOTERMS 2000 International Chamber of Commerce HQ : Paris B S Patel Mar’09

  3. Earlier Versions: • 1936 • 1953 • 1967 • 1976 • 1980 • 1990 • 2000 B S Patel Mar’09

  4. Referencing INCOTERMS in a contract of sale. • In international sales contract the parties are strongly advised to • Include in their contract in conjunction with the trade term the words “INCOTERMS 2000”; and • Check whether a standard contract terms used in their sale contract to avoid the application of any previous version of INCOTERMS. B S Patel Mar’09

  5. What are INCOTERMS, and what can they do for you ? • “INCOTERMS 2000” may be included in a sales contract if the parties desire the following… • To complete a sale of goods. • To indicate each contracting party’s costs, risks, and obligations with regards of the goods as follows., • When is the delivery completed ? • How does a party ensure that the other party has met that standard of performance. B S Patel Mar’09

  6. What are INCOTERMS, and what can they do for you ? • Which party must comply with requisite licenses and government-imposed import and export formalities ? • What are the mode and terms of carriage ? • What are the delivery terms and what is required as proof of delivery. • When is the risk of loss transferred from the seller to the buyer ? • How will transport costs be divided between the parties ? B S Patel Mar’09

  7. What are INCOTERMS, and what can they do for you ? • What notices are the parties required to give to each other regarding the transport and transfer of the goods. • To establish basic terms of transport and delivery in a short format. B S Patel Mar’09

  8. INCOTERMS do not …... • INCOTERMS 2000 are not sufficient on their own to express the full intent of the parties. They do not: • Apply to contracts for services. • Define contractual rights and obligations other than for delivery. • Specify details of the transfer, transport, and delivery of the goods. • Determine how title to the goods will be transferred. • Protect a party from his / her own risk of loss. • Define the remedies for breach of contract. B S Patel Mar’09

  9. INCOTERMS and contracting practice: • INCOTERMS standardize contract practice by enabling the parties to: • Use generally recognized key words. • Agree on the most common understanding of such key words: and • Avoid misunderstandings in the use of them. B S Patel Mar’09

  10. INCOTERMS and contracting practice: • Problems remain because: • Commercial practice inconsistent; • Variations of the basic key word may be not appropriate or sufficiency clear; • The INCOTERMS is not sufficiently precise; and / or • The parties inadvertently choose the wrong term. B S Patel Mar’09

  11. Why are as many as 13 INCOTERMS required ? • The purpose of INCOTERMS is to reflect contemporary commercial practice and to offer the parties the choice among. • The seller’s minimum obligation only to make the goods available for the buyer at the seller’s premises (EXW). • The seller’s extended obligation to hand over the goods for carriage either to a carrier nominated by the buyer (FCA, FAS, FOB), or to a carrier chosen and paid for by the seller (CFR, CPT) together with insurance against risk in transit (CIF, CIP) • The seller’s maximum obligation to deliver the goods at destination (DAF, DES, DEQ, DDU, DDP). B S Patel Mar’09

  12. The duties connected with export and import clearance • INCOTERMS are based on the main principles that the party best positioned to undertake the function to clear the goods and to pay duties costs in connection with export and import should do so. Thus, • Under all F-terms the seller should do what is necessary to clear the goods for export; • Under all C-terms the seller assumes the obligation with respect to export, and the buyer assumes the obligations with respect to import; Contd… B S Patel Mar’09

  13. The duties connected with export and import clearance • Under all D-terms except DDP the buyer should do what is necessary to clear the goods for import; • Under EXW the buyer has to assumes the obligation with respect to export as well as import; • When there are no customs requirements, all INCOTERMS can be used without variations, since the obligations relating to export and import clearance are relevant only “where applicable” B S Patel Mar’09

  14. INCOTERMS 2000 Group (E) Departure EXW Ex-Works (…. named place) B S Patel Mar’09

  15. INCOTERMS 2000 Group – (F) Main carriage Unpaid • FCA Free Carrier (....named place) • FAS Free Alongside Ship (…. named port of shipment) • FOB Free on Board (…. named port of shipment) B S Patel Mar’09

  16. INCOTERMS 2000 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 and Insurance Paid To (.…named place of destination) B S Patel Mar’09

  17. INCOTERMS 2000 Group – (D) Arrival • DAF Delivered At Frontier (….named place) • DES Delivered Ex Ship (….named port 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) B S Patel Mar’09

  18. The abbreviations :E-, F-, C- and D-terms • The different nature of the trade terms can be evidenced by the grouping of the terms in four categories, using the first letter as an indication of the group to which the term belongs. • The first group has only trade term, namely EXW. But, in the other three groups • there are three F-terms (FCA, FSA and FOB), • four C-terms (CFR, CIF, CPT and CIP) and • five D-terms (DAF, DES, DEQ, DDU and DDP) B S Patel Mar’09

  19. INCOTERMS 2000 and activity: B S Patel Mar’09

  20. INCOTERMS and Insurance: • INCOTERMS deal only with the seller’s obligation to take out insurance to the benefit of the buyer under CIF and CIP. Under all other terms, it is for the parties themselves to arrange insurance as they see fit. The seller’s insurance obligation to the benefit of the buyer. • Stems from the nature of the C-term, which requires the seller to contract for carrier – without assuming the risk of loss or damage to the goods in transit; • Requires the seller only to take out insurance on minimum terms; and • Invites the buyer to agree with the seller to arrange additional insurance or to arrange it himself. B S Patel Mar’09

  21. Thank you !!! B S Patel Mar’09

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