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INCOTERMS

International business mechanism series

Euromed Marseille Ecole de Management

Ernesto TAPIA MOORE

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INCOTERMS defined

Meaning of INCOTERMS?

Objective?

Utility?

Purpose?

Legal value?

Replaceable?

Modifiable?

Why worry?

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Meaning of INCOTERM ?

IN = international

CO = commerce

TERM = termTerms used in international trade:

By most actors

In most circumstances

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Objective?

Provide universal terms of contract, specificto each transportation mode, pertaining to thephysical point of transfer of costs andobligations of one party to the contract of

international sale of goods to the other. Increase the efficiency of international sales

of goods contract negotiation in terms of: Time

Complexity Comprehension

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Utility?

Accelerate the contract negotiation process.

Avoid errors of interpretation arising fromcomplex delivery clauses.

Provides in a 3-letter term the equivalent ofup to 30 contract clauses.

Is understood universally.

Is the reference used systematically by allinternational business professionals.

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Purpose?

Determine the physical point of transfer ofcontractual obligations EXCLUDING THETRANSFER OF PROPERTY.

Determine obligations regarding the transferof information, documents, goods.

Determine obligations concerning the transferof warehousing, transportation, handling,

freight forwarding, administration, customs,customs clearance costs and liabilities.

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Legal value?

INCOTERMS are used under Lexcontractus principle.

INCOTERMS are not law beyond the contractfor the international sale of goods.

INCOTERMS are produced by theInternational Chamber of Commerce, aprivate body.

Some countries have adopted INCOTERMS

in their national law. Such is the case of theUSA and the UCC INCOTERMS.

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Replaceable?

INCOTERMS may be replaced by:

Newer INCOTERMS (however, older ones do notcease to exists).

Obligatory dispositions stemming from the choiceof applicable law.

Custom delivery clauses.

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Modifiable?

The chosen INCOTERM may be modifiedduring the contract negotiation in order to fitthe needs of the contract.

INCOTERMS are above all models, not aform of supranational law.

As with all contractual clauses, INCOTERMS

cannot be modified after conclusion of thecontract, unless otherwise provided for in thecontract itself.

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Why worry?

INCOTERMS are the worldwide referenceinternational business professionals use.

INCOTERMS provide a common language, allowing

unhindered contract implementation. INCOTERMS are updated regularly in order to better

integrate the evolution of international means oftransportation and communication, as well asadministrative procedures.

INCOTERMS are lex mercatoria.

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The list of INCOTERMS EXW = Ex works

FCA = Free carrier

FAS = Free alongside ship

FOB = Free on board

CFR = Cost and freight

CPT = Cost paid to

CIF = Cost insurance freight

CIP = Cost insurance paid to

DAF = Delivered at frontier

DES = Delivered ex ship

DEQ = Delivered ex quay

DDU = Delivered duty

unpaid DDP = Delivered duty paid.

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Some questions, for a betterunderstanding

Transportation: Who is liable for all or part

of it? Who pays for all or part of

it?

Documents: Who is liable for

establishing or having themestablished?

Who provides theinformation for them?

Who covers the cost of

establishing or having themestablished

Which documents are to beestablished by whom?

Customs: Who is liable? Who covers the cost?

Customs Clearance: Who is liable for all or part

of it? Who pays for all or part of

it?

Insurance: What is covered? What value is covered?

Who is liable for all or partof it? Who pays for all or part of

it?

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Point of transfer: Ocean Freight

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Point of transfer: Land Freight

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Point of transfer: Air Freight

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