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©2015 Trade Technologies, Inc. All rights reserved. 1
and Concept of Delivery
Incoterms® 2010 Rules
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THE IMPORTANCE OF ‘DELIVERY’ IN
CONTRACTS OF SALE
Incoterms® 2010 Rules
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Incoterms® 2010 Rules
Sarbanes Oxley IAS 18.14
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Place and date of delivery
Price Calculation
Start Production
Shipping instruction
Packaging Instruction
Revenue recognition
Taxable transaction
Delivery & payment
documents
Insurance
Applicable product
regulations
Checking & protesting conformity
---
Agency commission
Origin calculation Customs Value
Transport documents
Need for Insurance
Consumer packaging
Transport packaging
Invoicing obligation
VAT registration
Customs registration
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R & D
…
Legal
Customer services
Logistics
Finance
Accounting
Production
Corporation Who writes the contract?
Sales Purchase
Insurance
Customs agent
Forwarder
Bank
…
But you told me to go and sell the stuff
What’s a B/L?
I fill in the order form but I never see the
invoice But there is no
VAT if we sell to a foreigner?
What is US-Chile
COO?
How much
does that risk cost?
You’re the tech
guys
Incoterms® 2010 Rules
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THE POSSIBILITIES
AVAILABLE
Incoterms® 2010 Rules
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Incoterms® 2010 Rules – Delivery Possibilities
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CHOOSING THE ‘RIGHT’
LOGISTICAL SOLUTIONS
Incoterms® 2010 Rules
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A buyer doesn’t care about the selling price…. all he cares about is the ‘landed cost’
Indeed: regardless of the choice of the Incoterms ® rule, in the end the buyer/importer always pays: - a seller assuming costs/risks because of the chosen
solution will include these costs (plus a markup for administration and risk) in his final selling price.
- a buyer assuming costs/risks will include these costs in the ‘budget’ required to obtain the goods.
Thus it is in both parties’ interest to allocate costs and risks with the party that can manage them most efficiently (at the lowest cost), thus reducing the ‘total cost of purchase’.
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COST
RISK
Incoterms® 2010 Rules – Logistical Solutions
COST
RISK
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Incoterms® 2010 Rules – Place of Delivery and Incoterms
EXW FCA Seller ‘s
premises FCA freight forwarders terminal
FOB seaport
DAT Antwerp
DAP Lyon DDP Lyon
FCA airport
FAS port
CFR CIF Antwerp
CPT CIP
What is the best rule to use for your transaction?
Understand the tools the Incoterms® 2010 Rules have provided Shipping perspective
Risk and insurance perspective
Cost perspective
Control perspective
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Incoterms® 2010 - Who set the rules?
International Chamber of Commerce (ICC)
o Founded 1919 in Paris o International representatives from over 120 countries o Conforms with WTO, U.N., G20 o Publication ICC no 715 (Incoterms ® 2010) o Publication ICC no 720 (ICC Guide to Incoterms ® 2010) o http://www.iccwbo.org/products-and- services/trade- facilitation/incoterms-2010/
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Using the Incoterms® Rules
Under all Incoterms® 2010 rules the respective obligations of the parties have been grouped under 10 articles (‘headings’) where each article on the seller’s
side “mirrors” the positions of the buyers with respect to the same subject matter.
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Incoterms® 2010 - obligations of Seller and Buyers
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Structure of the Incoterms® 2010 Rules: 10 articles
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A. B.
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Incoterms® 2010 What are they & what do they do?
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3 Letter Acronyms
Standardize
Define Responsibility
Outline costs included in each rule
Reveal Gaps
Determine Delivery Point
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Incoterms® Common Misconceptions. . . . .
Incoterms® do not: Determine Financing (You want how many days to pay?)
Settle Breach of Contract
Determine Carriage Contracts
Provide for intangible goods or services
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Incoterms® 2010 - Quiz
By the use of each specific Incoterm rule, it will define exactly where title or ownership of goods passes. a. True b. False
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Incoterms® Common Misconceptions. . .
Incoterms do not: Transfer legal title or ownership of goods.
Transfer, title, or ownership process begins with exchange of documents
Exchange of money for documents
+ Delivery of goods per Incoterms® = Title Transfer
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Incoterms® 2010 Divided into two (2) distinct Sections
The incoterms® are divided into 2 sets of rules Any mode of Transport or combination
Waterway / Maritime transport
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Incoterms® 2010 – The Basics The Rules of the Game
The purpose of the Incoterms®
How will the goods be shipped?
Who will pay the costs of the transportation and insurance?
Have I included all of the necessary costs into my sales offer bottom line total?
What risks am I taking with rules I am using?
What is the exact location or point I want to provide the goods and risks to?
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Incoterms® 2010 - Here are the Rules
Rules For Any Mode of Transport o Ex Works (EXW) o Free Carrier (FCA) o Carriage Paid To (CPT) o Carriage and Insurance Paid To (CIP) o Delivered at Terminal (DAT) o Delivered at Place (DAP) o Delivered Duty Paid (DDP)
Maritime (Waterways) Rules
o Free Alongside Ship (FAS) o Free On Board (FOB) o Cost and Freight (CFR) o Cost Insurance and Freight (CIF)
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Incoterms® 2010 - Quiz
The Ex-Works (EXW) rule indicates that the seller has no responsibilities for loading the goods at his facility. a. True b. False
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Rules for Any Mode of Transport EXW ( Ex-Works)
o Seller places goods at loading dock for ‘pick up’ by the buyer o Seller supplies all needed documentation for export of goods
to the buyer o Best used only for domestic transactions
• Can only be applied to the sellers factory • Domestic or International application • Designed for domestic use only • Insurance coverage not required
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Rules for Any Mode of Transport EXW ( Ex-Works)
• Seller:
– Informs the Buyer when and where the goods will be available – Provides Commercial Invoice, Packing List & Certificate of
Origin
• Buyer: – Obtains the Export License – Arranges all carriers – Loads goods onto the carrier at the point of departure – Obtains Import Licenses and arranges import formalities
• Risk of loss or damage passes to the buyer from the seller's door
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Incoterms® 2010 - “F” Rules
FCA: Free Carrier FOB: Free on Board FAS: Free Alongside
o Main carriage is contracted by the buyer which will generally include the contracting of the forwarder
o Although less work for the seller, it also offers less
control over documentation, bank presentations and ultimately payment. The forwarder will be hired to represent the buyer.
• FOB, FAS for waterway only, • FCA for any mode of transport • Insurance coverage not specified
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FCA – Free Carrier (named place)
Any Mode of Transport Seller must deliver the goods to the carrier provided by the buyer at a named point on the seller’s side
Seller is responsible for:
• All costs to place the goods with the carrier • Export clearance, Compliance, and documentation.
Buyer is responsible for all other functions and costs beyond arrival at carrier. Buyer is responsible for payment of main carriage (freight collect).
Insurance coverage is not specified.
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Incoterms® 2010 - FCA - Free Carrier
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Waterways only Seller:
• Obtains the Export License and documentaton • Arranges delivery of goods to & loads the buyer’s carrier • Places goods on board the ocean vessel at the port of export
designated by the Buyer Buyer:
• Gives sufficient notice to the Seller of the carrier & delivery point • Arranges the main carriage and the on-carriage • Obtains import licenses and arranges import formalities
Risk & responsibility passes to the buyer when the goods are loaded on board the vessel. Insurance coverage not necessarily specified.
FOB – Free on Board
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Incoterms® 2010 - FOB, Free on board
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Incoterms® 2010 - FOB, Free on board
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FAS - Free Along side Waterways Designed for loading on quay, barge or charter party vessel (not conference line containerized shipments) Seller delivers the goods, commodity, or product, packaged
or prepared for export alongside a vessel designated by the buyer at a named place/port on the seller’s side • Seller responsible for export clearance, compliance & documentation.
Buyer bears all costs and risks of loss or damage to the goods once the goods are placed alongside the vessel.
Insurance coverage is not necessarily specified.
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Incoterms® 2010 FAS - Free alongside
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Waterway Term– Not for Containers???? Use “FCA” Instead Conflict: - Mixed costs and liability - Multimodal transportation required Risk: - Stowage and manipulation of container - Vessel delays - Fire, theft, acts of God coverage - Insufficient or lack of insurance coverage and the party responsible - Accounts receivable time extended
FAS, FOB – Not Suitable for Containers?
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Incoterms® 2010 – Ship’s Rail Takenaway for Containers Why use FCA instead of FOB for containers?
Passing over “ship’s rail” divides the cost and risk $$ Carrier insurance grossly insufficient $$ Basic Insurance may not cover some losses Transfer from container drop off point to vessel staging
point Terminal handling fees Special equipment Loading Charges (Cranes, bracing,
protecting) Vessel Loading delays Damages Pilferage Acts of God Fire Breach of security
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X
Incoterms® 2010 – Maritime Rules not suitable for Containers
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“On Board” Vessel
Container Packing Depot
Container Terminal/Dock
LCL Shipment FCL Shipment
Incoterms® 2010 - Container shipment terms
• FCA – Free Carrier FAS – Free Alongside Ship
• FCA – Free Carrier FOB – Free On Board
• CPT – Carriage Paid To CFR – Cost and Freight
• CIP – Carriage and Insurance Paid To
CIF – Cost, Insurance, and Freight
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For container shipments:
Don’t use these rules Use these rules
Incoterms® 2010 “C” Rules
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CFR: Cost of goods and main freight CIF: Cost of goods, main freight and insurance CPT: Carriage paid to named point CIP: Cost of goods, carriage and insurance paid to named
point Main carriage contracted and controlled by the seller and paid by the seller. These terms provide the best method of control of the entire carriage of the goods by the seller. CFR, CIF for WATERWAY ONLY CPT, CIP ANY MODE OF TRANSPORT
CFR, CIF
• Waterway rule only to named destination
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CFR – Cost & Freight (named port)
Waterway Seller delivers goods, packaged for shipment, to carrier for
transportation to a named destination port on the buyer’s side • Risk passes to buyer when goods delivered to carrier due to the absence of insurance specifications. The Incoterm® terminates the goods at the destination port. Claims may be complicated to determine cause and point of occurrence. • Chooses vessel • Pays costs for main carriage • Handles export clearance, compliance, and document requirements
Buyer responsible for: Vessel unloading Import clearance On-carriage
Freight Prepaid and Insurance not specified
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CIF – Cost, Insurance & Freight (named port)
Waterway
Seller delivers goods, packaged for shipment, to carrier for transportation to a named destination port on the buyer’s side • Chooses vessel • Pays costs for main carriage • Handles export clearance ,compliance & documentation
requirements
Buyer responsible for: • Vessel unloading • Import clearance • On-carriage
Freight Prepaid and Goods are insured
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Incoterms® Quiz
A company wants to be in charge of contracting with their freight company for the main carriage but they want responsibility to transfer at their dock for earlier revenue recognition. What Incoterm rule should they use? a. FCA Factory b. Ex-Works c. CPT foreign airport d. Can’t be done – no rule fits
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CPT, CIP
• Any mode of transport to named point
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CPT – Carriage Paid to (named port)
Any Mode of Transport Seller delivers the goods, cleared for export, to the
carrier and provide all documentation • pays the costs of carriage necessary to bring
goods to named destination, including main carriage.
Buyer is responsible for all costs and risks after named point at destination.
Freight Prepaid Insurance not specified
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CIP- Carriage and Insurance to (named port)
Any Mode of Transport Seller must prepare the goods for export and issue all
documentation • Pay for all costs to get the cargo loaded on vessel or
aircraft • Pay for main carriage transportation costs up to destination • Secure insurance Buyer will take all responsibility once the goods are
delivered to the named point
Freight Prepaid to named point
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Incoterms® 2010 - “D” Rules
DAT: Delivered at terminal DAP: Delivered at named place DDP: Delivered at named place, duty paid o Multimodal Rule o The “D” rules define delivery of goods by the seller o The revisions of the “D” rules pinpoint the delivery place and the transfer of risk/damage • Insurance coverage not specified
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Incoterms® 2010 - DAT
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DAT - Delivered at Terminal (…named terminal at port or place of destination)
Terminal
Sellers unloads from arriving means of transport and places goods at the disposal of buyer
Buyer takes delivery from place where Seller delivers to.
Incoterms® 2010 - DAP
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DAP - Delivered at Place
Place
Sellers places goods at disposal of Buyer ready for unloading
Buyer unloads from arriving means of transport.
Incoterms® 2010 – DDP
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DDP – Delivered Duty Paid
Place
Sellers pays costs of customs formalities,
duties, taxes, and other import charges
Buyer unloads from arriving means of transport.
Incoterms® 2010 - Quiz
The DDP (Delivered Duty Paid) rule is a good Incoterm rule for importers to use because the seller will be responsible for all costs and risks. a. True b. False
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Incoterms® 2010 Rules – Place of Delivery and Transport Documents
EXW FCA Seller ‘s
premises FCA freight forwarders terminal
FOB seaport
DAT Antwerp
DAP Lyon DDP Lyon
FCA airport
- Ready for Collection
- CMR – FCR … freight prepaid
- CMR – FCR …freight collect
AWB
B/L… freight collect
Multimodal BL… freight prepaid Goods Receipt
- D/O - Release
notice
FAS port
- Inland BL - Truck BL
CFR CIF Antwerp
CPT CIP
Ocean port to port B/L full set freight prepaid
B/L – AWB – CMR - … freight prepaid
Incoterms 2010 - Quiz
A plane carrying goods under CPT Beijing Incoterms has a fire and loses all of the cargo in the ocean. Who is responsible for the lost freight under this Incoterms? a. The Seller b. The Buyer c. The Freight Company d. The Insurance Company
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CFR – CPT Adequate insurance from buyer?
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CFR - CPT Adequate insurance from buyer How old is the vessel carrying your cargo?
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Questions/ Contact Information
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Nadir Tayyab, CICP Director of Operations ntayyab@tradetechnologies.com +281.890.9194
and, YOUR OWN PROFESSIONAL STAFF AND OFFICE