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GROUP 3

Name
AVP
TOPIC OUTLINE
Introduction to Incoterms®
Nature, Scope and Purpose
Overview (AVP)
History of the Incoterms Rules
Classification of Incoterms
Incoterms 2010 and its features
Differences between Incoterms 2010 from 2000
Keys to Use Incoterms 2010
Incoterms Illustrations (Table)
Modes of Transportation
METHODOLOGIES

PPT Presentation
AVP
Graphical illustrations
Tabulated illustrations
Q&A
INTRODUCTION

Incoterms® were first established in 1936 by the International Chamber of


Commerce (ICC) in Paris, France.

The goal of the ICC was to establish a standardized set of shipping terms that
importer and exporters could use around the world.

Incoterms® are intended to be used as a set of rules that sellers and buyers of
goods can use to guide them through the shipping process.

Incoterms are updated every ten (10) years since 1980 although it came out in
1936.
NATURE, SCOPE AND PURPOSE
 It stands for “International Commercial Terms”
 It also known as “International Delivery Terms”
 It is a registered trademark of the International Chamber of Commerce.
 The Incoterms® 2010 rules have allocated obligations between the buyer and seller to
obtain or to render assistance in obtaining security-related clearances, such as chain-of-
custody information.
 It includes the cargo insurance.

In the contract between the seller and the buyer, the following is determined:
The duties of the buyer and the seller
Who takes care of the insurances, licences, permissions and all other formalities
Who arranges the transport untill which point and who is responsible for this
The point where the costs and risks pass on from the seller to the buyer.
NATURE, SCOPE AND PURPOSE

 It has traditionally been used in international sale contracts where


goods pass across national borders.
 The subtitle of the Incoterms® 2010 rules formally recognizes that they
are available for application to both international and deomestic sale
contracts.
Two (2) developments have persuaded the ICC that a movement in this
direction is timely;
1. Firstly, traders commonly use Incoterms® rules for purely domestic
sale contracts; and
2. Secondly, the greater willingness in the U.S. to use Incoterms® 2010 in
domestic trade rather than the former Uniform Commercial Code
(UCC) shipment and delivery terms.
NATURE, SCOPE AND PURPOSE

 The purpose of Incoterms is to precisely define three aspects of international trade:


 The allocation of logistics costs between seller an buyer.

 The transmission of risks in transporting the goods.

 The documents and customs formalities necessary for export and import operations.
WHO NEEDS TO UNDERSTAND INCOTERMS?

 The importance of Incoterms is due to its widespread use that makes them
internationally known. Therefore, all professionals involved in foreign trade should
understand Incoterms:
1. exporters and importers
2. carriers and freight forwarders
3. customs brokers
4. insurers
5. international credit professionals
6. sales and purchasing managers
7. consultants
INCOTERMS Defined

By focussing on the seller's delivery obligations within an international


sales contract, Incoterms® govern three (3) critically important
considerations:
1. At what physical point in a supply chain the risk of loss or damage to the goods
shifts from seller to buyer (transfer of risk and not a transfer of title)

2. At what physical point in a supply chain the responsibility for all transporation,
customs clearance, duties and related charges shift from seller to buyer

3. Responsibility between seller and buyer for execution of certain functional


activities
History of the Incoterms Rules
11 OFFICIAL ICC 2010 INCOTERMS

As of January 1, 2011
1. EXW: Ex Works (named place of delivery)
2. FCA: Free Carrier (named place of delivery)
3. FAS: Free Alongside Ship (named port of shipment)
4. FOB: Free on Board (named port of shipment)
5. CFR: Cost & Freight (named port of destination)
6. CIF: Cost, Insurance & Freight (named port of destination)
11 OFFICIAL ICC 2010 INCOTERMS

7. CPT: Carriage Paid To (named place of destination)


8. CIP: Carriage & Insurance Paid To (named place of destination)
9. DAT: Delivered At Terminal (named terminal at port or place of
destination)
10. DAP: Delivered At Place (named place of destination)
11. DDP: Delivered Duty Paid (named place of destination)
CLASSIFICATIONS AS TO THE MODE OF TRANSPORT
Rules for Any Mode or Rules for Sea and Inland
Modes of Transport Waterway Transport
 EXW  FAS
 FCA  FOB
 CPT  CFR
 CIP  CIF
 DAT
 DAP
 DDP
CLASSIFICATIONS AS TO PAYMENT OF MAIN TRANSPORT
BUYER (FREIGHT  SELLER (FREIGHT
COLLECT) PREPAID)
 EXW  CPT
 FCA  CIP
 FAS  DAT
 FOB  DAP
 DPP
 CFR
 CIF
CLASSIFICATIONS AS TO TRANSFER OF RISKS IN TRANSPORT
ORIGIN  DESTINATION
 EXW  DAT
 FCA  DAP
 FAS  DPP
 FOB
 CPT
 CIP
 CFR
 CIF
What to know about Incoterms®

The thing that will only change every ten (10) years.

Incoterms® are Rules, not Laws


 It were established as a standard set of rules for determininga seller's
delivery obligations
 Incoterms® have the force of law when they are referenced in a valid
and binding sales contract
 As a part of a valid and binding contract, any questions on the seller's
delivery obligations are answered pursuant to the Incoterms® 2010
publication
Examples
Some examples of correct use of Incoterms 2010:

FCA Port of New Orleans, United States, Incoterms 2010

CIP Tianjin airport, China, Incoterms 2010

DDP Hampton & Stevens Ltd. Warehouse, Sidney, Australia, Incoterms


2010.
Delivery: Definition under Incoterms®
Caveat: Sellers and buyers should never assume they understand the
Incoterms® definition of the term “delivery”
Within the context of Incoterms®, delivery does NOT necessarily
mean up to the final destination
Under Incoterms® 2010, delivery can occur in either ORIGIN or
DESTINATION

KEY POINT: Under Incoterms rules, delivery is synonymous with


transfer of risk
Incoterms® 2010 and its features

Legends:
E- Ex Works
C- Carriage (Main carriage paid by seller)
D- Delivered
F- Free (Main carriage not paid by seller)
Incoterms® 2010 and its features:

EXW: Ex Works
Is intended to be used when the buyer is going to take responsibility for
loading the goods onto a carrier selected by the buyer without assistance
from the seller. If the seller is going to load the goods on the carriers
selected and contracted by the buyer, the FCA LOADED should be used.
Mode of Transportation:
Ex-Works can be used for any transportation mode.
Incoterms® 2010 and its features:
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.,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. All costs and
export risks are borne by the buyer.
Incoterms® 2010 and its features:
EXW: Ex Works
Incoterms® 2010 and its features:
EXW: Ex Works
EXW is the Incoterm that represents the minimum obligations, costs and risks for the
seller as he delivers the goods at his own premises (factory or warehouse) in his country.
Not even the seller is responsible for loading the goods onto the first carrier (usually
truck) that sends the buyer to pick them up. It is the only Incoterm in which the seller
does not clear the goods for export, when such clearance is applicable.
On the contrary, with EXW, the seller offers the lowest service of all Incoterms and
represents a loss of competitiveness in comparison with other companies that assume
part of international logistics.
This term is suitable for exporting firms with little international experience and who
make groupage operations (boxes, pallets) in which the buyer sends a truck to collect
the goods at the seller's premises. When sending full containers, it is better to use FCA
as usually the seller makes the loading of the container on the truck sent by the buyer to
the seller's premises.It is not advisable to use EXW regularly because when the seller
delivers the goods in its own country, normally it is preferable to use FCA.
Incoterms® 2010 and its features:

FCA: Free Carrier (Loaded)


Goods loaded on the Buyer's Carrier by the Seller, at the Seller's premises
or other place of Origin. Buyer is responsible for Inland Transport from the
named place. When associated with a place of origin,should only be used
when the responsibilities of the seller are limited to loading a carrier
provided by thebuyer, at the seller's dock. Also,that the buyer is going to
take responsibility for transportation once thegoods are loaded at the
seller's dock.
Mode of Transportation:
Any Mode of Transport
Incoterms® 2010 and its features:
FCA: Free Carrier
The seller delivers the goods at the agreed place to the carrier nominated by the
buyer. The place of delivery determines the obligations of loading and unloading in
the first transport: if delivery is made on the premises of the seller he is liable for the
load; if delivery occurs elsewhere (usually a facility or transport infrastructure), the
buyer is responsible for the unload. The export customs clearance is done by the
seller.
Incoterms® 2010 and its features:
FCA: Free Carrier
Incoterms® 2010 and its features:
FCA: Free Carrier
FCA is a very flexible Incoterm because it allows the delivery of the goods, both on the
premises of the seller and at various points such as transports centers, ports, airports,
container terminals, etc., which are located in the country of the seller. Therefore, when
using this Incoterm, it is very important to specify clearly the place of delivery.
FCA can be used for any type of cargo (general cargo, full load, groupage) and with different
means of payment (open account, bank transfer, letter of credit, etc.).
In the Incoterms FCA, the seller must complete and bear the costs of export clearance and,
therefore, is responsible for obtaining the necessary documents for it. The import clearance
formalities are performed by the buyer.
When the goods are transported in containers and the place of delivery is the port of
shipment, Incoterms 2010 rules advised to use FCA instead of FOB, because the containers
are delivered regularly in the port's container terminal and not loaded onto the ship.
FCA is one of the most used Incoterms in international trade and will probably replace EXW
for the majority of sales where the seller delivers the goods in its own country and do not
want to manage international logistics.
Incoterms® 2010 and its features:
FAS: Free Alongside Ship
Seller is responsible for Inland Transport from the place of origen to the Named Port of
Export.Seller makes goods available to the buyer, once the goods are placed within the
reach of theship's tackle. Requires the buyer to notify the seller of the arrangements for
international transportationand the date and place of delivery. This requires the buyer to
have established a relationship with a carrier,forwarder or agent at the ocean port of
loading.The seller is responsible for all costs and transport, untilgoods are placed
alongside the vessel. The term FAS should only be used when the buyer is going to
takeresponsibility for international transportation once the goods have been received by
the carrier and areplaced within the reach of the ship's tackle.
Mode of Transportation:
It is intended to be used only for ocean freight shipments.(Port to Port)
Incoterms® 2010 and its features:
FAS: Free Alongside Ship
The seller delivers the goods, alongside the vessel at the port of shipment.
From this point all costs and risks are borne by the buyer. The export
customs clearance is done by the seller.
Incoterms® 2010 and its features:
FAS: Free Alongside Ship
Incoterms® 2010 and its features:
FAS: Free Alongside Ship
Incoterms FAS is used only for sea transport. The seller delivers the goods placing them alongside
the ship named by the buyer at the agreed port of shipment. The export clearance is done by the
seller.
This Incoterm is only used for certain commodities and materials that are not packed and cannot
be individualized, such as grain, timber, minerals, steel products, etc.; delivery is done in those
ports that have specialized terminals for this type of products. If the goods are carried in
containers, Incoterm FCA should be used as containers are delivered at port terminals and not
alongside ships.
The export clearance must be done by the seller. Usually, it is necessary to clear the goods before
placing them alongside the ship.
When using FAS, the buyer is responsible for loading the goods on the ship. For this reason, the
buyer must know very well the practices in the port of shipment because in the case of problems
arise there.
Incoterms® 2010 and its features:
FOB: Free on Board (Ocean Vessel)
Seller is responsible for Inland Transport from the place of origin to the
Named Port of Export.Seller makes goods available to the buyer when goods
are loaded on board the vessel.Is intendedfor use when it is important that
the goods pass the ship's rail to evidence delivery. This term ismost
commonly used for bulk cargo and port to port shipments of goods not
loaded in an oceancontainer.
Mode of Transportation:
It is intended to be used only for ocean freight shipments where it is importantthat the
goods pass the ship's rail. Goods shipped in an ocean container are more appropriately
shippedunder FCA terms.
Incoterms® 2010 and its features:
FOB: Free on Board (Ocean Vessel)
The seller delivers the goods on board the ship at the port of shipment. The
buyer chooses the ship and pays the freight. The transportation risk passes
from the seller to the buyer when the goods are delivered on board the
ship. The export customs clearance is done by the seller.
Incoterms® 2010 and its features:
FOB: Free on Board (Ocean Vessel)
Incoterms® 2010 and its features:
FOB: Free on Board (Ocean Vessel)
Incoterms FOB is the oldest Incoterm and together with CIF the most widely used with sea
transport. The seller delivers the goods by placing them on board the ship named by the buyer in
the port of shipment. The terminal costs and export clearance are borne by the seller.
This Incoterm should be used preferably with bulk, heavy loads and general cargo. Also, in the
case of complex goods (e.g. machinery) whose loading on board the ship may involve some risk so
it is better that the seller assumes this risk till the loading has been completed and the goods
delivered.
When the goods are transported in containers and the place of delivery is the port of shipment,
Incoterms 2010 rules advised to use FCA instead of FOB, because the containers are delivered
regularly in the port's container terminal and not loaded on board the ship.
Although FOB has traditionally been one of the most commonly used Incoterms the evolution of
sea transport and the importance of logistics as a sales strategy have diminished the use of this
Incoterm that is being gradually replaced by other terms like CFR or CIF.
Incoterms® 2010 and its features:
CFR: Cost and Freight
Seller is resposible for placing the goods on board an ocean vessel and paying for
internationaltransport to the port of destination.Is intended for use in shipping ocean
freight pier to pier cargothat is not containerized, when it is important that the goods
pass the ship's rail to evidencedelivery, and the seller is contracting and paying for
international carriage.Specifically, it wouldnot be an appropriate term to use when the
goods have been loaded into an ocean container.As a result, this term is usually limited to
oversized goods that cannot be loaded into a container,overweight shipments that would
exceed the weight limitations of shipping in a container, or lessthan container load
shipments.
Mode of Transportation:
It is intended to be use only for ocean freight shipments that are not loadedin an ocean
container.
Incoterms® 2010 and its features:
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.
Incoterms® 2010 and its features:
CFR: Cost and Freight
Incoterms® 2010 and its features:
CFR: Cost and Freight
In Incoterms CFR the seller delivers the goods on board of a ship in the port of
shipment, but he also manages and pays the cost of freight to the port of destination.
Therefore, the point where the risk of transport is transmitted (port of shipment) is
different from the point to which the seller bears the costs of transport (port of
destination). The terminal costs and export clearance in the port of shipment are
borne by the seller.
The only difference between Incoterms CFR and CIF is that in CFR the seller is not
obliged to hire an insurance transport from the port of shipment to the port of
destination.
Incoterms CFR is a sea transport Incoterm used mainly for general cargo and large
volumes of goods. When the goods are transported in containers and the place of
delivery is the port of destination, Incoterms 2010 rules advised to use CPT instead of
CFR, because the containers are usually delivered at the terminals of the ports, that is,
before being placed on board of the ships.
Incoterms® 2010 and its features:
CIF: Cost, Insurance and Freight
The seller is responsible for placing the goods on board an ocean vessel. Seller must pay
forinternational transport and insurance to the port of destination.Is intended for use in
shippingPier to Pier Ocean cargo that is not containerized, when it is important that the
goods pass theship's rail to evidence delivery, and the seller is contracting for insurance
and carriage.The insurance purchased is to be for a minimun amount of coverage, once
the goods are loadedon the ocean vessel, and is to include insurance coverage to cover
the buyer's insurable intereststo the port of destination stated on the bill of lading.The
insurance is to cover 110% of the CFRvalue of the goods.
Mode of Transportation:
It is intended to be used only for ocean freight shipments that are not loaded in an
ocean container.
Incoterms® 2010 and its features:
CIF: Cost, Insurance and Freight
“Cost, Insurance 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.
‘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
insurance only on minimum cover. Should the buyer wish to have more insurance protection, it
will need either to agree as much expressly with the seller or to make its own extra insurance
arrangements.”
Incoterms® 2010 and its features:
CIF: Cost, Insurance and Freight
Incoterms® 2010 and its features:
CIF: Cost, Insurance and Freight
Incoterms CIF has historically been a widely used Incoterm because, in addition to placing the
goods at the port of destination in the buyer's country, the CIF value is used in most of the
customs to apply tariffs and import taxes, so using this Incoterm facilitates to clear the goods for
import.
In Incoterms CIF the seller delivers the goods on board of a ship in the port of shipment, but he
also manages and pays the cost of freight to the port of destination. Therefore, the point where
the risk of transport is transferred (port of shipment) is different from the point to which the seller
bears the costs of transport (port of destination).
The costs of terminal in the port of shipment are borne by the seller. Unlike Incoterm CFR, the
seller is obliged to hire insurance transport covering at least the way from the port of shipping to
the port of destination. The insurance shall cover the price of the contract plus 10% (i.e., 110%). The
beneficiary of this insurance and, therefore, the one that must apply to the insurer for
compensation in case of disaster is the buyer.
Incoterms CIF is used only for sea transport and usually for general cargo of both consumer
products and industrial products of high value. If the goods travel in containers Incoterms 2010
rules recommends the use of Incoterms CIP.
Incoterms® 2010 and its features:
CPT: Carriage Paid To
Seller is responsible for placing the goods on an Air or Ocean Carrier (Containerized, Roll-
On,Roll Off)at the port of export. Seller must pay for international transport to the named
place of destination.Is intended for use in shipping by air freight, and ocean shipments that
are containerized or can berolled on and off the vessel. this term is also used for multimodal
ocean shipments. The philosophy in theuse of this term is that it is not important that the
goods pass the ship's rail to evidence delivery, andthe seller is contracting and paying for
international carriage to a named place in a foreign country.Also, the term CPT allows for the
seller to arrange and pay for transportation from a named place atorigin (which could be the
seller's dock) to a named place or destination in a foreign country.
Mode of Transportation:
It is intended to be use for air freight, containerized ocean freight androll-on-roll-off
ocean freight shipments.
Incoterms® 2010 and its features:
CPT: Carriage Paid To
“Carriage Paid To” means 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 between
parties) and that the seller must contract for and pay the costs of carriage necessary to
bring the goods to the named place of destination.
Incoterms® 2010 and its features:
CPT: Carriage Paid To
Incoterms® 2010 and its features:
CPT: Carriage Paid To
In Incoterms CPT the delivery of goods occurs when the seller makes them available to
the carrier that he has hired to perform international transport, although the seller also
manages and assumes the costs of international transport to the place of destination.
Therefore, the point where the risk of transport is transferred (when the goods are
delivered to the carrier in the seller's country) is different from the point till the seller
bears the costs of transport (named place of destination in the buyer's country).
In the event that there are several successive carriers, such as multimodal transport or
truck-air or truck-ship, the transport risk passes from the seller to the buyer when the
goods are delivered to the first carrier in the chain.
In CPT, unlike Incoterms CIP, the seller has no obligation to hire insurance transport to
cover the goods from the place of delivery to destination.
In this Incoterms, the seller has to complete the formalities and bear the costs of
customs clearance for export, not the import clearance that corresponds to the buyer.
Incoterms® 2010 and its features:
CIP: Carriage and Insurance Paid To
Seller is responsible for placing the goods on an Air or Ocean Carrier
(Containerized Roll-On,Roll Off cargo)at the port of export. Seller must pay
for international transport and insurance to the named place ofdestination.
Mode of Transportation:
It is intended to be used for air freight, containerized ocean freight androll-on-roll-off
ocean freight shipments.
Incoterms® 2010 and its features:
CIP: Carriage and Insurance Paid To
“Carriage and Insurance Paid to” means 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 between parties)
and that the seller must contract for and pay the costs of carriage necessary to bring the goods to
the named place of destination.
‘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 CIP the seller is required to obtain
insurance only on minimum cover. Should the buyer wish to have more insurance protection, it
will need either to agree as much expressly with the seller or to make its own extra insurance
arrangements.”
Incoterms® 2010 and its features:
CIP: Carriage and Insurance Paid To
Incoterms® 2010 and its features:
CIP: Carriage and Insurance Paid To
In the Incoterms CIP, the seller delivers the goods in their own country when loading them in
the first carrier hire by himself, but the seller also pays for costs of international transport to
bring the goods to their destination in the buyer織s country.
The buyer assumes all the risks once the goods have been delivered to the carrier in the
country of the seller. If subsequent carriers are used to bring the goods to the place of
destination, the risks are transferred from seller to buyer when the goods have been delivered
to the first carrier.
Under Incoterms CIP the seller must hire insurance to cover the risk borne by the buyer for
loss or damage of goods during international transport. Consequently, the seller contracts for
insurance and pays the premium, although the beneficiary of the insurance is the buyer.
However, the buyer has to take into account that Incoterms CIP requires the seller only an
insurance with minimum coverage (Clause C of the Institute Cargo Clauses). If the buyer wants
a larger coverage, he needs to agree with the seller to hire additional insurance.
In this Incoterm, the seller has to complete the formalities and bear the costs of customs
clearance for export, not the import clearance that corresponds to the buyer.
Incoterms® 2010 and its features:
DAT: Delivered At Terminal
“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the
arriving means of transport, are placed at the disposal of the buyer at a named terminal at the
named port or place of destination. “Terminal” includes a place, whether covered or not, such as
a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks
involved in bringing the goods to and unloading them at the terminal at the named port or place
of destination.
Incoterms® 2010 and its features:
DAT: Delivered At Terminal
Incoterms® 2010 and its features:
DAT: Delivered At Terminal
In Incoterms DAT the seller delivers the goods unloaded at a port terminal or another
place of destination in the buyer's country. The terminal concept is quite broad and
includes both terminals of transportation (land, air, sea) and logistics infrastructure
(ports, airports, railway stations) or similar facilities as docks, warehouses and free
zones.
Due to the different places of delivery that allows this Incoterm is important to clearly
mention the specific point that seller and buyer have chosen for delivery so the contract
for international transport made by the seller conforms to that choice.
When the seller carries the goods from the delivery terminal to another point in the
buyer's country such as buyer's premises (factory or warehouse) Incoterm DAT should
not be used. The Incoterms suitable for that situation are DAP or DDP.
In Incoterms DAT, the seller has to complete the formalities and bear the costs of
customs clearance for export, not the import clearance that corresponds to the buyer.
Incoterms® 2010 and its features:
DAP: Delivered At Terminal
“Delivered at Place” means 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 place of destination. The seller bears all risks involved in bringing the goods to
the named place.
Incoterms® 2010 and its features:
DAP: Delivered At Terminal
Incoterms® 2010 and its features:
DAP: Delivered At Terminal
In Incoterms DAP the seller delivers the goods, without unloading, at the place of
destination in the buyer's country. The transport risk is transferred from buyer to
seller in the same place where the goods are delivered.
The place of delivery may be the buyer's premises or a place nearby, other than a
transport terminal, in the country of destination. If delivery occurs at a transport
terminal or transport infrastructure (port, airport, etc.) in the country of destination
Incoterms DAT should be used.
In this Incoterms the seller has to complete the formalities and bear the costs of
customs clearance of export, not the import clearance that corresponds to the buyer.
In the event that the seller also clear goods for import Incoterms DDP should be used.
This is a very useful Incoterms for sales between countries of the same economic area
(e.g. European Union) in which the seller wants to deliver the goods at buyer's
premises but is not necessary to clear goods for import as there are no customs.
Incoterms® 2010 and its features:
DPP: Carriage and Insurance Paid To
Is intended for use in shipping goods by any means of transport to a named place. The term is
most typicallyused when the point of delivery is a place other than the port or airport of
unloading for the internationaltransportation of the goods. The further transportation from the
destination port can be included under theinternational bill of landing or a separate bill of lading
issued upon arrival of the goods at the air or ocean port.The seller is responsible for all
transportation costs, customs formalities, duties, taxes and any other expensesnormally incurred
in the course of transportation and customs clearance of goods entering the foreing country.
The seller is also responsible for obtaining any import permit or import license that may be
required to satisfygovernmental or industry regulation for entering goods into the foreing
country.
Mode of Transportation:
It is intended to be used for any mode of transportation.
Incoterms® 2010 and its features:
DPP: Carriage and Insurance Paid To

“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 place of destination. The seller bears
all the costs and risks involved in bringing the goods to the place of 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.
Incoterms® 2010 and its features:
DPP: Carriage and Insurance Paid To
Incoterms® 2010 and its features:
DPP: Carriage and Insurance Paid To
In Incoterms DDP the seller delivers the goods, without unloading, at buyer's premises or a nearby place
in the country of destination. The transport risk is transferred from buyer to seller in the same place
where the goods are delivered.
DDP is somewhat the reverse of Incoterms EXW; it represents the greatest obligation for the seller
because he assumes all costs and risks of the operation, including import procedures, to deliver the
goods at the agreed place in buyer's country. The only cost do not assume by the seller is the unloading
of goods at delivery place.
Any import tax and specifically VAT, are paid by the seller, unless the parties agree in the contract of sale
that VAT or other taxes are paid by the buyer. In that case a variant of DDP, known as "DDP VAT unpaid",
should be used.
The only difference between Incoterms DDP and DAP is that in DDP all costs and taxes of import
clearance are paid by the seller while in DAP are paid by the buyer. In the event that the seller has no
capacity by himself or through his representatives for doing import clearance, Incoterm DDP should not
be used.
If between the country of origin and the country of destination there is no customs (e.g. European Union)
and the goods are delivered at buyer's premises, Incoterm DAP must be used instead of DDP, because
will not be necessary to clear goods for import.
Differences between Incoterms 2000 and 2010

 Two changes for the FOB incoterm:


 the seller’s reponsibility extends until the goods are “on board the vessel” rather
than “past the ship rail” (a small technical difference), and
 the seller must package the goods rather than provide the packaging (it’s nice to
get this clarified, even though in practice it was usually already the case).

 1. The revised version that has been in force since 1 January 2011 contains only
eleven instead of the original 13 clauses.
 2.These were divided into two categories:
• a. The EXW, FCA, CPT, CIP and DDP clauses that apply to all types of
transportation.
• b. FAS, FOB, CFR, CIF – exclusively for sea and inland navigation.
Differences between Incoterms 2000 and 2010

 3. Under CIF, the seller is required to pay for more insurance than previously.
 4. The DEQ incoterm is replaced by DAT (with a slightly different meaning).
 5. The DAF, DES, and DDU incoterms are replaced by DAP.
 6. If you need to receive hard copies (as opposed to electronic versions) of your
shipping documents, make this point clear in your contract.
 7. With CIF, CFR and FOB, the risk is no longer transferred at the ship’s railing
(“suspended”) to the buyer, but instead when the goods are deposited on the
ship’s deck.
 8. With the C-clauses there is a new obligation for the buyer to provide insurance-
related information.
Differences between Incoterms 2000 and 2010

Reduction from 13 to 11 terms

In relation to the Incoterms 2000, the 2010 version eliminated four


terms: DES (Delivered Ex Ship), DEQ (Delivered Ex Quay), DAF
(Delivered At Frontier) and DDU (Delivered Duty Unpaid).
Incoterms 2010 created two new Incoterms:
DAT (Delivered At Terminal) and DAP (Delivered At Place).

DAT replaces DES, DEQ y DAF


DAP replaces DDU
Differences between Incoterms 2000 and 2010
Priority for Incoterms used with any mode of transport in comparison
with sea Incoterms
The new classification of Incoterms 2010 do not take into account the main criterion of the
distribution of costs between seller and buyer, but the mode of transport used: Incoterms
for any mode of transport against sea. The Incoterms 2010 rules give priority to those
Incoterms for any mode of transport because they fit better with the reality of
international logistics.
Goods in containers only for Incoterms for any mode of transport but
not for sea Incoterms.
If the cargo is loaded into a container, the Incoterms 2010 clearly state that sea terms
should not be used, even if the delivery takes place in a port. The reason is that containers
are delivered to the port terminals, before being placed on board of the ships. When the
goods are transport in containers should not be used FOB, CFR or CIF, but their equivalents
for multimodal transport, which are respectively FCA, CPT and CIP.
Differences between Incoterms 2000 and 2010

Transfer of risks "on board" in Incoterms FOB, CFR and CIF


In Incoterms 2010, when using the sea terms FOB, CFR and CIF, the transfer of risks occurs
when the goods are "placed "on board" in the port of shipment. However, in the
Incoterms 2000, the risk passes when the goods "pass the ship's rail".

Security-related information
Incoterms 2010 establishes the obligation of the seller to assist the buyer to obtain all
information concerning the safety of the goods or their transportation to their final
destination. However, Incoterm 2010 states that any costs resulting from obtaining such
information will be borne by the buyer.
Keys to Use Incoterms® 2010

Specify precisely the place of delivery

The first function of Incoterms is to define exactly the place of delivery of the goods. To
do so, following the Incoterm should be included as accurately as possible the place of
delivery (seller's or buyer's premises, transportation hub, port, airport, etc.), the city,
province and country where goods are delivered. It is important to mention the city and
country where delivery takes place as the world's geography is vast and is not always
easy to locate a city in a country.

CIP Tianjin Airport, China, Incoterms 2010


Keys to Use Incoterms® 2010

Avoid using EXW


EXW really does not reflect the conditions of surrender of an international operation and
that all steps, except the packaging, are borne by the buyer, which sends a transport
vehicle (usually truck) to collect the goods from the seller's premises.

FCA when goods are delivered in the country of origin


The Incoterm FCA is very flexible and has many advantages if the seller and buyer agree
to deliver the goods at the seller's country. Among others: different places of delivery,
different types of cargo, adaptation to the multimodal transport, documents justifying
the export and compatibility with letters of credit.
Keys to Use Incoterms® 2010

With containers use only Incoterms for any mode of transport


The rules of the Incoterms 2010 clearly specifies that when the goods travel in containers
should not be used sea Incoterms because containers are not delivered loaded on ships
but in port terminals, in these cases in instead of using FOB, CFR or CIF should use FCA,
CPT or CIP, respectively.

Control international transport: export in "C" and import en "F"


The most experienced companies in international trade, as a rule, try to control
international transport. They have developed logistics expertise or use the services of
forwarding agents from different geographical areas that allow them to manage
international logistics, placing the goods exported to the countries of their customers
and buying goods imported from the countries of their suppliers; i.e. this companies
export in terms of "C" and import in terms of "F".
Keys to Use Incoterms® 2010

Use Incoterms in "D" only for countries of low risk

Incoterms of delivery in the country of destination (Incoterms in "D") should only be used
in low-risk countries in which the seller has the means to control logistics. The concept of
risk is broad and covers both the political risk (war, social conflicts), commercial
(customer default), logistic (deficiencies in transport infrastructure) or administrative
(complex customs procedures). Any of these risks can jeopardize international sale when
seller and buyer agree to deliver the goods in the country of destination, under "D"
terms.
Keys to Use Incoterms® 2010
Reference to Incoterms 2010 version

As mentioned at the beginning of this publication, the importance of Incoterms is based


on a widespread use made of them in international trade. Therefore, whenever
Incoterms are used in certain documents - offers, purchase orders, sales contracts,
proforma invoices, etc.- it is worth mentioning that it refers to the latest version of
Incoterms published by International Chamber of Commerce. For that, it is sufficient to
include after the three acronym letters of the Incoterm and the place of delivery the
expression "Incoterms 2010".
INCOTERMS® 2010 CHART
MODES OF TRANSPORTATION
MODES OF TRANSPORTATION
MODES OF TRANSPORTATION
ADDITIONAL CONTRACTS

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