Module 2-1: International Delivery Terms...

Module 2-1: International Delivery Terms Facilitator

2-1

Overview

When you start to the first session introduce yourself to the

participants. Inform about your credentials and tell your studies.

Then ask the participants to introduce themselves.

Show the Slide 2-2. Make an overview of Delivery Terms part.

Clarify each topic given in the overview.

Objectives

What are you expecting to learn in the Delivery Terms part?

(Let the participants share their expectations. Give 2 minutes for

answers.)

Show the Slide2-3. Inform the participants about the objectives.

Make sure the participants understand each objective clearly.

Please turn to page 2-2 of your manual.

5 minutes

Overview

Question

Attention

Objective

5 minutes

Slide 2-2

Slide 2-3

New Page


2-2

Scenario

Let the participants read the scenario including the question, and

then discuss it with them.

Introduction

Start the process with the introduction of the part.

Emphasize the purpose of this part as explained in the second

paragraph of the introduction page.


Attention

2 minutes

Facilitator

3 minutes

Scenario

New Page


2-3

The Benefits of Incoterms

Show the Slide 2-4 and explain the benefits of incoterms.

Direct attention of the participants to the post-it box and tell what

incoterms are.

Trade terms are key elements of international contracts. They are

the common language of trade. Explain the importance of these

terms and give examples.

What are the advantages of using incoterms? Could you give

an example from your own experiences?

(Ask several of the participants. Give 2 minutes for answers.)


Slide

Post-it

Question

Facilitator

5 minutes

Slide 2-4

New Page


2-4

Show the Slide 2-5 and explain “What Incoterms can not do”.

Direct attention of the participants to the post-it box. Incoterms are

only rules for the interpretation of terms of delivery and not of other

terms in the contract of sale.


Slide

Post-it

Slide 2-5

New Page


2-5

Referencing Incoterms in a Contract of Sale

Show the Slide 2-6 and explain the incoterms in a contract.

Incoterms and Contracting Practice

Show the Slide 2-7 and explain how incoterms standardize the

contract of practice.

Show the Slide 2-8 and explain the sources of problems.

What problems do you think could arise when using

incoterms?



Question

Slide

Slide

Slide

3 minutes

3 minutes

Slide 2-6

Slide 2-8

Slide 2-7

New Page


2-6

The Need for Interpretation of “Key Words”

Show the Slide 2-9 to continue process.

Explain the need for interpretation of key words in the first

paragraph. Attention that these keywords cannot be understood

unless they are given a specific meaning through rules of

interpretation.

Direct attention of the participants to the post-it box and explain

“Warning about Incoterms”.


Post-it

Slide

Facilitator

6 minutes

Slide 2-9

New Page


2-7

The Features of 13 Incoterms

Show the Slide 2-10 and explain the general features of incoterms.

What are the advantages of using the most appropriate

incoterms for the situation?

(Ask severel of the participants. Give 2 minutes for answers.)


Slide

Question

3 minutes

Slide 2-10

New Page


2-8

Which Incoterm should Be Chosen?�

Explain each item as mentioned in the page.


2 minutes

Facilitator

New Page


2-9

The Abbreviations E-, F-, C- and D- Terms

Show the Slide 2-11 and explain the abbrevations.

The trade terms can be grouped into four categories. The first letter

indicates the group which the term belongs.


Slide

Facilitator

5 minutes

Slide 2-11

New Page


2-10

Show the Slide 2-12 about Incoterms 2000. Breifly explain the all

incoterms shown in the table.

EXM- EX Works (…named place)

Continue process with the first incoterm EXW.


Slide

Facilitator

8 minutes

Slide 2-12

New Page


2-11

Show the Slide 2-13 and explain EXW process.

EXW represents the minimum obligation for the seller, and the

buyer has to bear all costs and risks involved in taking the goods

from the seller's premises. Explain it with examples. Attention that

this term should not be used when the buyer cannot carry out the

export formalities directly or indirectly.


“EXW”.


Post-it

Slide

Facilitator

Slide 2-13

New Page


2-12

Show the Slide 2-14 about EXW.

Explain the primary duties of seller and buyer in EXW. Inform the

participants about required and optional documents.

Emphasize the critical points in EXW as mentioned in the separate

box at the bottom of the Figure 2.

Give a 10 minutes break.


Slide

Facilitator

Attention

Slide 2-14

Break

New Page


2-13

FCA- Free Carrier (....named place)

Show the Slide 2-15 and explain FCA process.

The seller delivers the goods, cleared for export, to a carrier

nominated by the buyer. Attention that the choosen place of delivery

has an impact on the obligations of loading and unloading the

goods at that place. Explain with an example.


“Loading in FCA”.

Give examples of the advantages of FCA’s for the seller and

the buyer.


Direct attention of the participants to the post-it box about “FCA”.


Post-it

Post-it

Slide

Facilitator

Question

8 minutes

Slide 2-15

New Page


2-14

Show the Slide 2-16 about FCA.

Explain the primary duties of seller and buyer in FCA. Inform the


Emphasize the critical points in FCA as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-16

New Page


2-15

FAS – Free Along Side Ship (...named port of shipment)

Show the Slide 2-17 and explain FAS process.

The seller has delivered when the goods have been placed

alongside the vessel at the named port of shipment. Attention that

buyer has to bear all costs and risks of loss of or damage to the

goods from the vessel at the named port of shipment. Explain with

an example.

What are the differences between FCA and FAS terms?



“FAS”.


Question

Facilitator

Slide

Post-it

8 minutes

Slide 2-17

New Page


2-16

Show the Slide 2-18 about FAS.

Explain the primary duties of seller and buyer in FAS. Inform the


Emphasize the critical points in FAS as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-18

New Page


2-17

FOB – Free On Board (...named port of shipment)

Show the Slide 2-19 and explain FOB process.

The seller delivers the goods past the ship's rail at the named port

of shipment. Attention that the buyer has to bear all costs and risks

of loss of or damage to the goods from that point on. Explain with an

example.


“FOB”.

What are the advantages of this term for the seller and the

buyer?



Question

Slide

Facilitator

Post-it Post-it

8 minutes

Slide 2-19

New Page


2-18

Show the Slide 2-20 about FOB.

Explain the primary duties of seller and buyer in FOB. Inform the


Emphasize the critical points in FOB as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-20

New Page


2-19

CFR – Cost and Freight (...named port of destination)

Show the Slide 2-21 and explain CFR process.

The seller delivers the goods past the ship's rail in the port of

destination. Attention that the seller must pay the costs and freight

necessary to bring the goods to the named port of destination but

the risk of loss of or damage to the goods, as well as any additional

costs due to events occurring after the time of delivery, are

transferred from the seller to the buyer. Explain with an example.


“CFR”.


Slide

Facilitator

Post-it

8 minutes

Slide 2-21

New Page


2-20

Show the Slide 2-22 about CFR.

Explain the primary duties of seller and buyer in CFR. Inform the


Emphasize the critical points in CFR as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-22

New Page


2-21

CIF – Cost, Insurance and Freight

Show the Slide 2-23 and explain CIF process.

The seller delivers when the goods pass the ship's rail at the port of

shipment. The seller must pay the costs and freight necessary to

bring the goods to the named port of destination but the risk of loss

of or damage to the goods, as well as any additional costs due to

events occurring after the time of delivery, are transferred from the

seller to the buyer. Attention that the buyer should note that the CIF

term the seller is required to obtain insurance only on minimum

cover. Explain with an example.

In which cases is the CIF term the most useful?



“CIF”.


Question

Slide

Facilitator

Post-it

9 minutes

Slide 2-23

New Page


2-22

Show the Slide 2-24 about CIF.

Explain the primary duties of seller and buyer in CIF. Inform


Emphasize the critical points in CIF as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-24

New Page


2-23

CPT – Carriage Paid To (…named place of destination)

Show the Slide 2-25 and explain CPT process.

The seller delivers the goods to the carrier of his/her choice but the

seller must in addition pay the cost of carriage necessary to

transport the goods to the named destination. Attention that the

buyer bears all risks and any other costs occurring after the goods

have been delivered. Explain with an example.


“Paying CPT”.


Slide

Facilitator

Post-it

9 minutes

Slide 2-25

New Page


2-24

Show the Slide 2-26 about CPT.

Explain the primary duties of seller and buyer in CPT. Inform the


Emphasize the critical points in CPT as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-26

New Page


2-25


“CPT”.


CIP – Carriage and Insurance Paid to

Show the Slide 2-27 and explain CIP process.

The seller delivers the goods to the carrier nominated by him/her

but the seller must in addition pay the cost of carriage necessary to

bring the goods to the named destination. This means that the

buyer bears all risks and any additional costs occurring after the

goods have been so delivered. Attention that in CIP the seller also

has to procure insurance against the buyer's risk of loss of or

damage to the goods during the carriage. Explain with an example.


“Paying in CIP”.


Slide

Facilitator

Post-it

Post-it

9 minutes

Slide 2-27

Break

New Page


2-26


“CIP”.

Do you have problems with the CIP term? Could you share

your experiences with us?



Question

Post-it

New Page


2-27

Show the Slide 2-28 about CIP.

Explain the primary duties of seller and buyer in CIP. Inform the


Emphasize the critical points in CIP as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-28

New Page


2-28

DAF – Delivered at the Frontier (...named place)

Show the Slide 2-29 and explain DAF process.

The seller delivers the export-cleared goods to a predetermined

destination, the goods are cleared for export but not unloaded or

cleared for import at the named point, in other words they are

delivered to the frontier before customs. Attention that when

delivery is to take place in the port of destination, on board a vessel

or on the quay (wharf), the DES or DEQ terms should be used.

Explain with an example.


“DAF”.


Slide

Post-it

Facilitator

8 minutes

Slide 2-29

New Page


2-29

Show the Slide 2-30 about DAF.

Explain the primary duties of seller and buyer in DAF. Inform the


Emphasize the critical points in DAF as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-30

New Page


2-30

DES – Delivered Ex Ship (...named port of destination)

Show the Slide 2-31 and explain DAF process on the screen.

The seller delivers when the goods are placed at the disposal of the

buyer on board the ship but not cleared for import at the named port

of destination. The seller has to bear all costs and risks involved in

bringing the goods to the named port of destination before

discharging them. If the parties wish the seller to bear the costs and

risks of discharging the goods, then the DEQ term should be used.

Explain with an example.


“DES”.

In which cases are DAF or DES terms more useful?



Question

Post-it

Slide

Facilitator

8 minutes

Slide 2-31

New Page


2-31

Show the Slide 2-32 about DES.

Explain the primary duties of seller and buyer in DES. Inform the


Emphasize the critical points in DES as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-32

New Page


2-32

DEQ – Delivered Ex Quay (...named port of destination)

Show the Slide 2-33 and explain DEQ process.

The goods are placed at the disposal of the buyer at the quay; they

are not cleared for import at the named port of destination. The

seller has to bear the costs and risks involved in bringing the goods

to the named port of destination and also release the goods onto

the quay. Attention that if the parties wish to include in the seller's

obligations all or part of the costs payable upon import of the goods,

this should be made clear by adding explicit wording to this effect in

the contract of sale. Explain with an example.


“DEQ”.

What is the main difference between DES and DEQ terms?



Post-it

Slide

Question

Facilitator

8 minutes

Slide 2-33

New Page


2-33

Show the Slide 2-34 about DEQ.

Explain the primary duties of seller and buyer in DEQ. Inform the


Emphasize the critical points in DEQ as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-34

New Page


2-34

Attention that if the parties wish to include in the seller's obligations

the risks and costs of the handling of the goods from the quay to

another place (warehouse, terminal, transport station, etc.) in or

outside the port, the DDU or DDP terms should be used (pg. 32).

DDU – Delivered Duty Unpaid

Show the Slide 2-35 and explain DDU process.

The seller delivers the goods to the buyer, not cleared for import,

and not unloaded from any arriving means of transport to the named

destination.


Slide

Attention

Facilitator

8 minutes

Slide 2-35

New Page


2-35

Show the Slide 2-36 about DDU.

Explain the primary duties of seller and buyer in DDU. Inform the


Emphasize the critical points in DDU as mentioned in the separate



Slide

Facilitator

Attention

Slide 2-36

New Page


2-36


“DDU”.

DDP – Delivered Duty Paid (...named place of destination)

Show the Slide 2-37 and explain DDP process.

The seller delivers the goods to the buyer, cleared for import, and

not unloaded from any arriving means of transport to the named

destination. The seller has to bear all costs and risks involved with

bringing the goods thereto, including, where applicable, any ‘duty’

for import into the country of destination.


Post-it

Slide

Facilitator

9 minutes

Slide 2-37

New Page


2-37


“DDP”.

Attention that this term may be used irrespective of the mode of

transport but when delivery is to take place in the port of destination

on board the vessel or on the quay (wharf), the DES or DEQ terms

should be used.

Discuss in which situations the DDP term is more useful.



Post-it

Question

Facilitator

New Page


2-38

Show the Slide 2-38 about DDP.

Explain the primary duties of seller and buyer in DDU. Inform the


Emphasize the critical points in DDU as mentioned in the separate


Give a lunch break.


Slide

Facilitator

Attention

Slide 2-38

Break

New Page


2-39

Case: Timber Exports

�� After this exercise the participants will be able select the right

Incoterm in a trade operation.

�� Let the participants divide into groups of three people.

�� Let each group to select a leader.

�� Give each group one copy of case.

�� Let the groups discuss and find solutions for the situation in the

case.

�� After group discussion let the group leaders explain their group

solutions.

�� After all give feedback to the participants and finish the

exercise.

The comments for feedback can be found in Appendix B.


Exercise

Attention

15 minutes

New Page


2-40

Case: Television Sets Imports to India

�� After this exercise the participants will be able to select the right

Incoterm in a trade operation.

�� Let the participants divide into groups of three people.

�� Let each group to select a leader.

�� Give each group one copy of case.

�� Let the groups discuss and find solutions for the situation in the

case.

�� After group discussion let the group leaders explain their group

solutions.

�� After all give feedback to the participants and finish the

exercise.

The comments for feedback can be found in Appendix B.


Exercise

Attention

15 minutes

New Page


2-41

Summary

Summarize the important points of Part 1 and continue process

with the progress check .

The international business forum is a fertile place for contractual misunderstandings

and an expensive place to resolve them through litigation. Recognizing a compelling need for

universal terminology to try to overcome these misunderstandings in international trade

contracts, the International Chamber of Commerce, among others, has developed a standard

set of terms and abbreviations called Incoterms.

The rights and obligations of each party to a contract should be more clearly understood

if the contract is expressed in Incoterms.

An international trade contract should:

�� Describe the goods to be sold and the manner of shipment

�� Set forth who is responsible if the goods are damaged or destroyed at any phase of

delivery

�� Express who is responsible for paying the expenses for clearing the goods at

customs

�� Express who is responsible for providing insurance while the goods are in transit

�� Express who is responsible for freight charges

�� Express who is responsible for loading and unloading costs

�� Express who is to pay for any inspections

�� Name the place where any litigation or arbitration will take place if a dispute arises

under the contract

�� Name the law that will apply to disputes that arise under the contract


Summary

5 minutes

New Page


2-42


New Page


2-43

Progress Check

Let the participants take the test and explain the correct answer for

each question after completion of the test.

1. Incoterms will tell the parties what to do with respect to...

a. Carriage of the goods from seller to buyer

b. Transfer of property rights in the goods

c. Consequences of various breaches of contract

d. Arrange the cost

e. To be as an intermediary

2. The incoterms group concerned with "main carriage unpaid" is:

a. Group E

b. Group F

c. Group C and group F

d. Group D

e. Group D and group E

3. In case of "FCA" terms, when does the "cost" transfer from the seller to

the buyer?

a. When goods delivered at frontier

b. When carriage is paid

c. When delivered to the port of the customer

d. When delivered to the customer duty paid

e. When the goods have been delivered to the carrier at the named

place

Check

15 minutes


2-44

4. Under "group F" terms, who is responsible for the inland transport till the

named point or place?

a. Buyer

b. Agent

c. Seller

d. Carrier

e. Consignee

5. If the seller provides the goods packaged and marked with a commercial

invoice to a carrier for transport, what kind of incoterms is this?

a. FOB

b. EXW

c. FCA

d. CPT

e. DDU

6. If the seller agrees to deliver the goods to a ship, but not to pay

for loading them, what is the terms?

a. FCA

b. FAS

c. FOB

d. DES

e. DDP


2-45

7. According to the contract, the seller is responsible for the freight charges

to the destination port. The seller may be willing to pay transportation

expenses but not be willing to assume liability for damage en route. What

is the terms in this case?

a. CIF

b. DES

c. DEQ

d. FCA

e. CFR

8. The seller is asked to deliver the goods to the warehouse of the buyer

without paying for the customs duty in this case, what kind of terms

should you offer to the customer?

a. CIP

b. DAF

c. DDU

d. DDP

e. EXW

9. What is the difference between "CIF" and "CIP" terms?

a. CIF used only for sea transport and CIP for all modes of

transport

b. Both used for all transport modes

c. No differences

d. CIF used for road and CIP used for sea transport

e. CIF used all modes of transport and CIP used only for sea transport


2-46

10. Let us assume that customer is asking you to pay for the freight but not

for the insurance and the transport will be done by vessel. What will be

your terms on the contract?

a. DDP

b. CIP

c. CFR

d. DES

e. DDU


Break

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Module 2-1: International Delivery Terms...

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