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Free Powerpoint Templates

INCOTERMS

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Page 2

INCOTERMS 2000

y Published by International chamber of Commerce in 1936.

y Used in International commercial transactions.

y Purpose is to provide a set of international rules for the

interpretation of the most commonly used trade terms.y Used to divide transaction cost and responsibilities between

buyer and seller

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Page 3

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Page 4

Incoterms Purpose and Scope

y Pricing terms, shipping terms, sales terms.

y Apply to international trade.

y Define the rights and obligation of the parties to the

contract of sale with respect to the delivery of goodssold.

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Four Groups of Incoterms

1) E group

2) F

group

3) C group

4) D group

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Page 6

EXW

EX WORKS (named place)

y The E-term is the term in which the sellersobligation is at its minimum.

y The seller makes the goods available at hispremises.

y The buyer is responsible for all charges.

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EXWEx Works (named place)

SELLER BUYER

Seller/Exporter

Premises

ExportDocuments

Formalities

Deliveredat named

place of:

Frontier/

Terminal/

Quay

LoadingPort of

Shipment

OnboardShip

Rail

Plane

Ships Ships

Rail Rail

DischargingPort of

Arrival

Delivery atnamed place of

destination:

Frontier/

Terminal/Quay

ImportDocuments

Formalities

Buyer/Importer

Premises

Sellers

Risks

Buyers Risks

Sellers

Cost

Buyers Cost

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Free Powerpoint Templates Page 8

Incoterms

y The F terms require the seller to deliver goodsfor carriage as instructed by the buyer.

y FCA

y FAS

y FOB

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FCAFREE CARRIER (named place)

y Seller delivers when goods, cleared for export, tothe carrier nominated by the buyer at a named

place.y Term may be used irrespective of the mode of

transport.

y Seller obligated to load goods on arriving vehicle

if it arrives at the sellers premises.y Seller not obliged to unload goods from his vehicle.

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FCAFree Carrier(named place)

SELLER BUYER

Seller/

ExporterPremises

Export

DocumentsFormalities

Delivered

at namedplace of:

Frontier/

Terminal/

Quay

Loading

Port ofShipment

Onboard

ShipRail

Plane

Ships Ships

Rail Rail

Discharging

Port ofArrival

Delivery at

named place ofdestination:

Frontier/

Terminal/Quay

Import


Buyer/

ImporterPremises

Sellers Risks Buyers

Risks

SellersCost Buyers Cost

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FAS -FREE ALONGSIDE SHIP

(named port of shipment)

y The seller must place the goods alongside the

ship at the named porty Seller obliged to clear goods for export.

y The buyer bears all costs and risks of loss ordamage to the goods from that moment.

y Terms can be used for sea or inland waterwaytransport only.

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FASFree Alongside(named place)

SELLER BUYER

Seller/

Exporter

Premises

Export

Documents

Formalities

Delivered

at named

place of:

Frontier/

Terminal/

Quay

Loading

Port of

Shipment

Onboard

Ship

Rail

Plane

Ships Ships

Rail Rail

Discharging

Port of

Arrival

Delivery at

named place of

destination:

Frontier/

Terminal/Quay

Import

Documents

Formalities

Buyer/

Importer

Premises


Risks


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FOB FREE ON BOARD(named port of shipment)

y The seller must load the goods on board the shipnominated by the buyer, cost and risk being

divided at ship's rail.y The buyer bears all costs and risks of loss or

damage to the goods from that point.

y Term can be used for sea or inland waterway

transport only.

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FOBFree On Board(named port of shipment)

SELLER BUYER

Seller/

Exporter

Premises

Export

Documents

Formalities

Delivered

at named

place of:

Frontier/

Terminal/

Quay

Loading

Port of

Shipment

Onboard

Ship

Rail

Plane

Ships Ships

Rail Rail

Discharging

Port of

Arrival

Delivery at

named place of

destination:

Frontier/

Terminal/Quay

Import

Documents

Formalities

Buyer/

Importer

Premises


Risks


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Incoterms 2000

y The C terms require the seller to contract forcarriage at his expense to a specified point.

y CFR

y CIF

y CPT

y CIP

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CFR COST AND FREIGHT(named port of destination)

y Seller must pay the costs and freight to bring thegoods to the port of destinationbut the buyer

bears the risk of loss and additional costs occurringafter delivery.

y Term can be used for sea or inland waterwaytransport.

y

If intent is not to deliver goods across the shipsrail, use CPT

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CFRCost and Freight (named port of destination)

SELLER BUYER

Seller/

ExporterPremises

Export


Delivered

at namedplace of:Frontier/

Terminal/Quay

Loading

Port ofShipment

Onboard

ShipRail

Plane

Ships ShipsRail Rail

Discharging

Port ofArrival

Delivery at


Frontier/

Terminal/Quay

Import


Buyer/

ImporterPremises

Sellers Risks Buyers Risks

Sellers Cost Buyers Cost

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CIF COST, INSURANCE AND FREIGHT(named port of destination)

y The seller pays the costs and freight necessary to bringgoods to port of destination, but the buyer bears the risk ofloss and additional costs occurring after delivery.

y The seller procures marine insurance, against buyers riskof loss.

y Term can be used for sea or inland waterway transport.

y If intent is not to deliver goods across the ships rail, useCIP.

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CIFCost, Insurance and Freight (named port of destination)

SELLER BUYER

Seller/

ExporterPremises

Export


Delivered

at namedplace of:Frontier/

Terminal/Quay

Loading

Port ofShipment

Onboard

ShipRail

Plane

Ships ShipsRail Rail

Discharging

Port ofArrival

Delivery at


Frontier/

Terminal/Quay

Import


Buyer/

ImporterPremises

SellersRisks

Buyers Risks

SellersCosts

Buyers Cost

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CPT CARRIAGE PAID TO (named place ofdestination)

y Seller delivers the goods, cleared for export, to thecarrier.

y The seller pays the costs of carriage necessary tobring goods to named destination, but the buyerbears the risk of loss and additional costs occurringafter delivery.

y Term may be used irrespective of mode oftransport.

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CPTCarriage Paid To (named port of destination)

SELLER BUYER

Seller/

Exporter

Premises

Export

Documents

Formalities

Delivered

at named

place of:

Frontier/

Terminal/

Quay

Loading

Port of

Shipment

Onboard

Ship

Rail

Plane

Ships Ships

Rail Rail

Discharging

Port of

Arrival

Delivery at

named place of

destination:

Frontier/

Terminal/Quay

Import

Documents

Formalities

Buyer/

Importer

Premises


Risks

Sellers Cost BuyersCosts

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CIP CARRIAGE AND INSURANCE PAID TO(named place of destination)

y Seller delivers the goods, cleared for export, to the carrier.

y The seller pays the costs of carriage to named destination,

but the buyer bears the risk of loss and additional costsoccurring after delivery.

y The seller procures insurance against buyers risk of loss.

y Term may be used irrespective of mode of transport.

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CIPCarriage and Insurance Paid To (named port of destination)

SELLER BUYER

Seller/Exporter

Premises

ExportDocuments

Formalities

Deliveredat named

place of:

Frontier/

Terminal/

Quay

LoadingPort of

Shipment

OnboardShip

Rail

Plane

Ships Ships

Rail Rail

DischargingPort of

Arrival


destination:

Frontier/

Terminal/Quay

ImportDocuments

Formalities

Buyer/Importer

Premises

Sellers Risks Buyers Risks

Sellers Cost Buyers Cost

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Inco terms 2000

y The D terms require the seller to take the goodsall the way to destination at the border or withinthe country of import.

y DAFy DES

y DEQ

y

DDUy DDP

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DAF DELIVERED AT FRONTIER (namedplace)

y This term can be used when the goods are transported by

rail and road.

y The seller pays for transportation to the named place ofdelivery at the frontier.

y The buyer arranges for customs clearance and pays for

transportation from the frontier to his factory.

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DAFDelivered At Frontier(named place)

SELLER BUYER

Seller/

Exporter

Premises

Export

Documents

Formalities

Delivered

at named

place of:Frontier/

Terminal/

Quay

Loading

Port of

Shipment

Onboard

Ship

RailPlane

Ships Ships

Rail Rail

Discharging

Port of

Arrival

Delivery at

named place of

destination:Frontier/

Terminal/Quay

Import

Documents

Formalities

Buyer/

Importer

Premises


Risks


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DES DELIVERED EX SHIP (named port ofdestination)

y Where goods are delivered ex ship, the passing of riskdoes not occur until the ship has arrived at the namedport of destination and the goods made available forunloading to the buyer.

y The seller pays the same freight and insurance costs as hewould under a CIF arrangement.

y The seller has agreed to bear not just cost, but also Riskand Title up to the arrival of the vessel at the named port.

y Costs for unloading the goods and any duties, taxes, etcare for the Buyer.

y Term used only for delivery by sea.

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DESDelivered exShip(named port of destination)

SELLER BUYER

Seller/

Exporter

Premises

Export

Documents

Formalities

Delivered

at named

place of:Frontier/

Terminal/

Quay

Loading

Port of

Shipment

Onboard

Ship

RailPlane

Ships Ships

Rail Rail

Discharging

Port of

Arrival

Delivery at

named place of


Terminal/Quay

Import

Documents

Formalities

Buyer/

Importer

Premises


Risks


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DEQ DELIVERED EX QUAY (named port ofdestination)

y This is similar to DES.

y The passing of risk does not occur until the goods have

been unloaded at the port of destination.y Seller bears all costs and risks to bring goods to the named

port of destination and discharging the goods on the quay.

y Term used only for delivery by sea.

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DEQDelivered Ex Quay(named port of destination)

SELLER BUYER

Seller/

Exporter

Premises

Export

Documents

Formalities

Delivered

at named

place of:Frontier/

Terminal/

Quay

Loading

Port of

Shipment

Onboard

Ship

RailPlane

Ships Ships

Rail Rail

Discharging

Port of

Arrival

Delivery at

named place of


Terminal/Quay

Import

Documents

Formalities

Buyer/

Importer

Premises


Risks


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DDU DELIVERED DUTY UNPAID (namedplace of destination)

y Seller delivers the goods to the buyer to the named place ofdestination in the contract of sale

y

Seller bears all costs and risks (except duty) to bring goodsto the named place of destination.

y Term may be used irrespective of mode of transport.

y If delivery is to take place at the port, quay or on board avessel, DES or DEQ should be used.

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DDUDelivered Duty Unpaid(named place of destination)

SELLER BUYER

Seller/Exporter

Premises

ExportDocuments

Formalities

Deliveredat named

place of:

Frontier/

Terminal/

Quay

LoadingPort of

Shipment

OnboardShip

Rail

Plane

Ships Ships

Rail Rail

DischargingPort of

Arrival


destination:

Frontier/

Terminal/Quay

ImportDocuments

Formalities

Buyer/Importer

Premises


Risks


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DDP DELIVERED DUTY PAID (namedplace of destination)

y Seller delivers goods to the buyer, cleared for import, andnot unloaded, at the named place of destination.

y Seller bears all costs and risks, including import duty, tobring goods to the named place of destination.

y

Term may be used irrespective of mode of transport. Ifdelivery is to take place at the port, quay or on board avessel, DES or DEQ should be used.

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DDPDelivered Duty Paid(named place of destination)

SELLER BUYER

Seller/Exporter

Premises

ExportDocuments

Formalities

Deliveredat named

place of:

Frontier/

Terminal/

Quay

LoadingPort of

Shipment

OnboardShip

Rail

Plane

Ships Ships

Rail Rail

DischargingPort of

Arrival


destination:

Frontier/

Terminal/Quay

ImportDocuments

Formalities

Buyer/Importer

Premises


Risks


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Letter of Credit

y The letter of credit can also be source of payment for atransaction, meaning that redeeming the letter of credit

will pay an exporter.

y Letters of credit are used primarily in international trade

transactions of significant value, for deals between asupplier in one country and a customer in another. Insuch cases the International Chamber of CommerceUniform Customs and Practice for Documentary Creditsapplies.

y The parties to a letter of credit are usuallyabeneficiarywho is to receive the money, the issuingbankof whom the applicant is a client, and the advisingbankof whom the beneficiary is a client.

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Document against Payment

The exporter ships the goods, and then gives the documents

(including the bill of lading necessary to claim the goods at theforeign port) to his bank, which will forward them to a bank inthe buyer's country, along with instructions on how to collectthe money from the buyer.

y Document against Acceptance

Instructions given by an exporter to a bank that the documentsattached to the draft for collection are deliverable to the

drawee only against his or her acceptance of the draft.y

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In Summary

y Buyers Objective: maximize control of supply chain, useFOB, FCA, or FAS

y INCOTERMS are negotiable!

y INCOTERMS should appear on all commercial documents.

y The five terms-DAF,DES,DEQ,DDU and DDP have beendeclared obsolete and would be replaced by three newterms DAT (Delivered at Terminal), DAP (Delivered atPlace), and DDP (Delivered Duty Paid) by Jan 01,2011.

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THANKS FOR YOURATTENTION

Date post:	06-Apr-2018
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