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Sales management Delivery terms
Case study You are selling for the first time to a new customer in Eastern Europe. The business was brought to you by a broker in London, to whom you send the invoice. The goods have to be shipped to Rumania through the port of Genua. Italy. The broker wants you to deliver DDP (Delivered Duty Paid) Bucarest. What are the issues in terms of risk management ?
DDP Bucarest CIF Genua
Sales – delivery terms • Transport : who pays what ? • Costs : who has the lowest ? • Documents : who produces which • Exporter : who is the exporter? • Risk control : until when/where ? • Problems : can you handle them?
“Incoterms 2000” • Agreement between buyer and seller • No agreement between seller - transporter • Does not substitute sales contracts • Incoterms deal with three issues : • costs of transport • transfer of risks • obligations of seller and buyer
Available at • ICC, Paris • ICC office country • Local Chambers • Approx € 50,=
Incoterms EXW Ex works FCA Free carrier FAS Free alongside ship FOB Free on board CFR Cost and freight CIF Cost, freight, insurance CPT Carriage paid to CIP Carriage, insurance paid DAF Delivered at frontier DES Delivered ex ship DEQ Delivered ex quay DDU Delivered duty unpaid DDP Delivered duty paid DEPARTURE CONTRACTS ARRIVAL CONTRACTS
Case study You have sold goods to a customer in Europe. Delivery terms are FOB Honduras. Payment terms are “documentary collection 30 days after b/l”. Just after transshipment in Miami a hurricane sweeps some containers overboard, including yours. What are the obligations of seller/buyer ? Same situation, but this time the goods are sold CIF Rotterdam.
Incoterms - specifics From seller to buyer
DEPARTURE CONTRACTS EXW FCA FAS FOB CFR/CIF DES DEQ DDU DDP CUSTOMS CUSTOMS ARRIVAL CONTRACTS
EXW – ex works CUSTOMS CUSTOMS RISK COST DOCS Loading costs of truck for account of buyer This is not an export transaction, but a local sale
FCA – free carrier CUSTOMS CUSTOMS RISK COST DOCS Loading costs of airplane for account of buyer
CPT – carriage paid to ….. CUSTOMS CUSTOMS RISK COST DOCS Costs of transport to ………. for account of seller CPT most common; CIP includes insurance
FAS – free alongside ship CUSTOMS CUSTOMS RISK COST DOCS Loading costs of ship for account of buyer
FOB – free on board CUSTOMS CUSTOMS RISK COST DOCS Loading costs of ship for account of seller
CIF – cost, insurance, freight CUSTOMS CUSTOMS RISK COST DOCS Loading costs of ship for account of seller Unloading costs ship for account of buyer CFR for countries where local insurance is mandatory