bufete internacional and global business university internacional and global business university ......

Octubre 2010

Bufete Internacional and Global Business University

Welcomes you to the Course:

Exponent: Dr. Eduardo Reyes Diaz Leal

International Commerce International Commerce TermsTerms (INCOTERMS)(INCOTERMS)

Interational UseFacilitate International

Commerce

Important part of anycommercial contract

Detail commercialresponsibilities for the

parts

Escenario

Necesidad

VeryVery Active Active Global Global EconomyEconomy

ConsumerConsumermarketmarket

ExplotionExplotion

IncreasedIncreased numbernumberand and typestypes of of

productsproducts

IncreasesIncreases in in thethe speedspeedof of businessesbusinesses

FocusFocus onon thethe““needsneeds” of ” of thethe

clientsclients

Necesidad

actual de

los

negocios

ClarityClarity and and understandingunderstanding

CompetitiveCompetitiveAdvantagesAdvantages

LegalitiesLegalities SafetySafety

ProblemsProblems thatthat getget solvedsolved!!

Selling price variesfrom purchase price

Differences in languagesmakes understanding

quite difficult

Facilitates theapplication of justice

There are differencesin the legal meaningsfrom one country to

another

What are theflashpoints in international

business?

HighHigh pointspoints in in businessesbusinesses

PracticalPractical/Legal /Legal ComprehensionComprehension

IT and IT and CommunicatiosCommunicatios

AdaptabilityAdaptability

Marketing Marketing EthicsEthics

TransportTransport EvolutionEvolutionUnfairUnfair PracticesPracticesin International in International

BusinessBusiness

Legal Legal ScopesScopes

Safety and Safety and warrantieswarranties

FinancialFinancialAspectsAspects

Intelectual Intelectual PropertyProperty

ContractContract

Normal Content………………Normal Content………………

AcceptanceAcceptance of of thethe INCOTERMS 2010INCOTERMS 2010

VoluntaryVoluntary RulesRules

SpecifySpecify conditionsconditions whenwhen differentdifferent toto“defaults”.“defaults”.

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Volume Quality and design Payment methods

Warranties Intelectual Property Period

Rescission and Penalities Tribunals

INCOTERMS INCOTERMS DO NOTDO NOT substitutesubstitute thethe

contractcontract, , sincesince theythey don’tdon’t eveneven

prononuceprononuce, , forfor exampleexample, , thethe priceprice

of of thethe propertyproperty oror thethe methodmethod oror

meansmeans of of paymentpayment

INCOTERMS 2010INCOTERMS 2010

Born in 1936

Globally acepted

Constant Actualization

‒Constant Dynamism

Come from the International Commerce Chamber

Headquarters: Paris, France

Commercial, legal and practice Commision

Seeking to satisfy businesses needs

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INCOTERMS 2010INCOTERMS 2010ReformsReforms

2010 (effective from 2011)

Considers free trade zones

Allows the use of electronic communications

Takes into account safety

Adopts transport evolution

They simplify [From 13 a 11]

R

1953 – 1967 - 1976 – 1980 – 1990 - 2000

Previous Reforms

INCOTERMS coverage

3 big groups

You can add or reduce conditions or outcomes as agreedwith sufficient clarity and contract.

Tasks RisksCosts

Deliverydate

Deliveryplace

INCOTERMS 2010INCOTERMS 2010IncludedIncluded ConceptsConcepts

Notifications

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Assistance

Documentation Inspections CustomsClearance

Delivery DatesPackage and

LabelingRisks

Losses Damages

Transport Insurance

Load and Unload

IN

CO

TER

MS

20

10

IN

CO

TER

MS

20

10

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Quality/Quantity

Payment

Documentation

NotificationsLa

be

lin

g

Pa

ck

ag

ing

Legal Entrance

Variables

Load and Unload

Customs Clearances Transport and Insurance

Scope

CustomsCustomsBasisBasis

TaxableTaxable

CommercialCommercial CostsCosts

RisksRisks

TasksTasks

FinancialFinancial DeductionsDeductions

AccumulationAccumulation

LegalLegal ResponsibilityResponsibility

INCOTERMS 2010INCOTERMS 2010WhatWhat are are theythey??

They are commercial tools that define

responsibilities, tasks, costs, and risks of

the parts that facilitate the commercial

understandment. They are the basis of the

sale contract.

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RAFTSRAFTSLocal/Local/domesticdomesticNotNot usedusednowadaysnowadays

UNIFORM COMERCIAL UNIFORM COMERCIAL CODE (1952)CODE (1952)

HarmonizationHarmonization of of commercialcommercialtransactionstransactions fromfrom thetheUSUS

7 7 applicationsapplications FOBFOB

Alternatives?

Uniform Commercial Code/USA (UCC)

The UCC published in 1952, is one of a series of

actions that have been enacted to harmonize

commerce and other commercial transactions in

the U.S. From that time on, they’ve had many

reforms, including the usage of electronic data.

Terms used in the US for dommestic operationsthat are a habit.Framed in three sources:

1.- The UCC, 2.- The National Motor Freight Classification (the NMFC) and 3.- The habit.

FOB : Free On Board (Libre o Franco A Bordo) FOB Origin; FOB Origin, Freight Collect; FOB Origin, Freight Prepaid; FOB Origin, Freight Prepaid & Charged Back or FOB

Origin, Freight Prepaid & Add; FOB Destination; FOB Destination, Freight Collect; FOB Destination, Freight Prepaid; FOB Destination, Freight Collect and Allowed.

RAFTD/CC of US

Emmited by the US Chamber of Commerce, their first editionwas in 1919 and the last revision had place in 1941.

In August 1985 USCC considered them repealed andsuggested that they shouldn’t be used, but as they werevoluntary the parts can still use them in their contracts.They’re used specially by some american, mexican andcentroamerican companies.

RAFTD (Revised American Foreign Trade Definitions)

RAFTD

RAFTD don’t have groups and have only six terms:

Terms Conditions

1. - Ex* Ex -Works

2. - FOB* Free On Board

3. - FAS Vessel Free Alongside Ship Vessel

4. - C & F* Cost And Freight

5. - CIF* Cost Insurance and Freight

6. - Ex-Dock Ex-Dock

FOB, C & F (C + F, CAF, CANDF) and CIF are in accordance and apply to all means of transport.

UsageEstablished in the commercial contract(as well as invoice and order) [Incoterms aplicable] delivery place and

indicate Incoterms Version as detailed aspossible

Selection of Incoterms: Type of trasport Type of merchandise Obligations from the parts.

INCOTERMS 2010INCOTERMS 2010R

R

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The usage of the INCOTERMS 2010 oblige theparts to: Deliver in time the agreed merchandise Bill and charge by sending the documentation

(paper or electronic). Notifications (mutually) from delivery and

reception Assistance (assigning costs) in all leading.

INCOTERMS 2010INCOTERMS 2010R

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DeliveryDelivery//RiskRisk INCOTERMS 2010INCOTERMS 2010

DeliveryDelivery--DestinyDestiny

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DeliveryDelivery//RiskRisk

IncludedIncluded DestinyDestiny

CPT/CIPCPT/CIP

FAS/FOBFAS/FOB

EXWEXW

CFR/CIFCFR/CIF

DATDAT

DAT/DDPDAT/DDP

FCAFCA

Revision 2010

Reforms

Dissapearance of the 4 traditional groups ofrules.

11

E EXW

F FCA,FAS, FOB

C CFR, CIF, CPT, CIP

D DAF, DES, DEO, DDU, DDP

INCOTERMS 2010INCOTERMS 2010ReformsReforms

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Elimination of 4 INCOTERMS which are“replaced” by two new terms

22

Dissapeared Created

DES-Delivery Ex Ship DATDelivery at TerminalDEO-Delivery Ex Quay

DAF-Delivery at Frontier DAPDelivery at PlaceDDU-Delivery Duty Unpaid

INCOTERMS 2010INCOTERMS 2010ReformsReforms

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The INCOTERMS 2010 are constituted in twolarger groups classified by the means oftransport.

33

Any means of transport Maritime Transport

EXW FCACPT CIPDAT DAP DDP

FAS FOBCFR CIF

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INCOTERMS 2010INCOTERMS 2010ReformsReforms

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Domestic or international usage

Zones where the customs border has lostimportance (European Union)

Substitution in the US from the UniformCommercial Code.

44

INCOTERMS 2010INCOTERMS 2010ReformsReforms

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26% 26% of of thethe internationalinternational commercecommerce don’tdon’t use use customscustoms anymoreanymore..

“Guide notes” were created; they explainfundamentation and reach of each IncotermWhen they should be used(type of operation)Risk transfer momentCosts and included tasks

55

INCOTERMS 2010INCOTERMS 2010ReformsReforms

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Electronic notifications and documents areaccepted with the same value as paperElectronic Data Interchange (EDI)

66

Obligations are established between the parties,relative to obtention or contribution of assistanceand security.

77

INCOTERMS 2010INCOTERMS 2010ReformsReforms

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Freight costs are delimited, without includingunload in destiny and must be sure that thecontract doesn’t include THC (Terminal HandlingCharges)

88

CFR, CIF, DAP, DDP

INCOTERMS 2010INCOTERMS 2010DeliveryDelivery PlacePlace

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CFR, CIF, DAP, DDP

Elimination of every provition in chich deliverywas on the boat’s handrail, now, it is sidelinesor FOB.

99

INCOTERMS 2010INCOTERMS 2010ReformsReforms

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Substitution of the term “loading goods” by “providing loaded goods” to give entry to thelogistic proceses from the supply chain.

1010

CUSTOMS FORMALITIES.- All customs regulationsincluding documents, safety information, and verificationsas well as contribution payments collected in customscommonly in pacted and written form. Excluding internaltaxes.

EGA (DELIVERY).- Indicates where the risk of loss ofdamage passes to the buyer that doesnt necesarilly is theagreed point of delivery. (Legal delivery)

INCOTERMS 2010INCOTERMS 2010DefinitionsDefinitions

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DELIVERY DOCUMENTS

Documents that prove that delivery took place.

Invoice

Reception.- EXW, FCA, FAS, FOB

Transport and insurance documents

Customs Documents (EXW/DDP)

Payment documents

INCOTERMS 2010INCOTERMS 2010DefinitionsDefinitions

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Packaging

Includes:

1.Compliance of established requirements in thecontract

2.Enough packaging suitable for transportation (default)

Doesn’t include: Containment or similars

Labeling: by international regulation, must be specifiedin the contract.

INCOTERMS 2010INCOTERMS 2010DefinitionsDefinitions

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Insurance.-The obligation to insurance the goodsonlyexists in INCOTERMS CIF and CIP, and must be doneby the minimum coverage of 110% of the shippingvalue. (DEFAULT).

Insurance must have a C Clause, which is the mostrestricted. It must cover the risks established in thegeneral clauses, for multimodal transport and coveragefrom warehouse to warehouse policies.

INCOTERMS 2010INCOTERMS 2010DefinitionsDefinitions

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Security Information.- the use of the INCOTERMSobliges the parts to provide each other by petitiononly, any information about safety and shipping controlwith the correspondent coverage (logistic control).

General Asisstance.-TransportSafetyInsurancePackaging

INCOTERMS 2010INCOTERMS 2010DefinitionsDefinitions

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United States: C-TPAT

Canada: Partners in Protection (PIP)

Singapur: Partnership for Secure Trade

European Union: Authorized Economic Operator

Jordan: Golden List

New Zealand: Secure Exports Scheme

Safety Programs of the world

1. Seguridad de las instalaciones y controles de acceso

2. Seguridad del personal

3. Seguridad de socios comerciales

4. Seguridad de la carga

5. Seguridad del medio de transporte

6. Seguridad de la información

7. Manejo de incidentes

8. Manejo de crisis y recuperación después de algúnincidente

Mexican Program of Aliance forSecure Commerce PMACS

INCOTERMS 2010INCOTERMS 2010R

EXPO IMPO INSURANCETRANSPORT

CONTRACT

OFFICIAL

INSPECTIONS

MINIMAL

PACKAGING

EXW X X X X X

FCA X X X

CPT X X

CIP X

DAT X X

DAP X X

DDP X

FAS X X X

FOB X X X

CFR X X

CIF X

INCOTERMS 201OClassification bydelivery of risk

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INCOTERMS 2010 when delivery place[transmission of risk] is the[same] place ofdestiny.

EXW (Ex Works)FCA (Free Carrier)DAT (Delivery at Terminal)DAP (Delivery at Place)DDP (Delivery Duty Paid)FAS (Free Alongside Ship)FOB (Free on Board)

ByBy riskrisk transmissiontransmission

1

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INCOTERMS 2010 in which place of destiny(fisical delivery) differs from the pointwhere risk is transmitted (legal delivery)

CPT (Carriage Paid To)CIP (Carriage and Insurance Paid To)CFR (Cost and Freight)CIF (Cost, Insurance and Freight)

[Note: the destiny place only indicates wherethe seller covers the cost]

2R

ByBy riskrisk transmissiontransmission

Any means of transport terms

EXW [EXWORKS]

Any transport

Delivery and destiny are the same place

Represents the minimum effort of the seller

Doesn’t include freight in the transport

CONTRACT OF INSURANCE AND TRANSPORTNo obligation

DELIVERYMust take place in the specified place, in case it

isn’t, in any logic place on the agrreed period ordate.

INCLUDED COST All costs until the goods have been delivered

(doesn’t include customs costs)

DELIVERY DOCUMENTS Comercial invoice and reception proof.

EXW [EXWORKS]

Any means of transport

Delivery and destiny are the same place

Includes cargo in the means of transpor but notunloading

Includes export tramits

FCA [FREE CARRIER]

CONTRACTS OF TRANSPORT AND INSURANCE

No obligation to the buyer

DELIVERYThe seller must deliver the goods to the

transport when being loaded

INCLUDED COSTSAll costs until goods are delivered, including

export and cargo to the hired transport by thebuyer

FCA [FREE CARRIER]

Any means of transport

Delivery point is distinct from destiny.Transmission of the risk takes place whenmerchandise is loaded with the final carrier postexport.

Includes cargo and, when the transportdocument mentions it, unloading

CPT [CARRIAGE PAID TO]

CONTRACT OF TRANSPORT AND INSURANCE

The seller is obliged to hire the carrier but not toinsure the merchandise

INCLUDED COSTSAll costs up to the destiny point (includes export)

CPT [CARRIAGE PAID TO]

Any means of transport

Delivery point differs from destiny. Transmission ofthe risk passes when the merchandise is loaded bythe final carrier. Post export

Includes loading and unloading, unless specified inthe contract

Includes restricted insurance clause [C]

CIP [CARRIAGE AND INSURANCE PAID TO]

TRANSPORT AND INSURANCEThe seller is obliged to hire the carrier and normal

insurance

DELIVERYTakes place with the assigned carrier and not at

arrival to the contracted destiny

INCLUDED COSTSExport, cargo, transport, insurance and unloading

at destiny

CIP [CARRIAGE AND INSURANCE PAID TO]

Any means of transport

Delivery point is the same as destiny

Includes loading and unloading, up to the specified

point on the terminal. If the goods are intended to

be taken to other points, DAP o DDP should beused

All the risks, up to determined point are from theseller

Includes export paperwork, but doesn’t have anyimport obligations

DAT [DELIVERY AT TERMINAL]

TERMINALQuayWare house Container yard

TRANSMISSION OF THE RISK (DELIVERY) At the moment of delivery in the terminal (fisical and

legal delivery are the same)

INCLUDED COSTS All costs until the goods are delivered, included in

the terminal, before import

DAT [DELIVERY AT TERMINAL]

Container roll Air cargo terminal

TRANSPORT AND INSURANCEThe seller is obliged to contract in normal

terms and has no obligation to insure thegoods

DAT [DELIVERY AT TERMINAL]

Any means of transport

The point of delivery is the same as the destiny

Includes loading until specified point which is themoment where delivery takes place for risk effects.

Includes export paperworks but doesn’t haveobligation over imports

DAP [DELIVERY AT PLACE]

TRANSPORT AND INSURANCEThe seller is obliged to contract transport but

has no obligations to insure the goods

INCLUDED COSTSAll costs until goods are delivered

DAP [DELIVERY AT PLACE]

Any means of transport

Delivery point is the same as destiny

Includes cargo, export, transport, import andshipping but doesn’t include unloading

Represents maximum effort from the seller

DDP [DELIVERY DUTY PAID]

TRANSPORT AND INSURANCE Seller is obliged to contract carrier but has no

obligation to insure the merchandise

DELIVERY The seller must deliver the goods at the agreed point,

after the import with no obligations to unload

INCLUDED COSTS All costs until the goods are delivered, includes

customs from export and import

DDP [DELIVERY DUTY PAID]

Terms for maritimetransport

Maritime transport

Delivery point is the same as destiny

Merchandise is delivered aside the ship. If thegoods are delivered at terminal and incontainers, FCA should be appropriate

Doesn’t include upload in the means of transport

Includes export paperwork, but has no obligationover import

FAS [FREE ALONGSIDE SHIP]

TRANSPORT AND INSURANCE CONTRACTS

No obligations for the seller

INCLUDED COSTS

All costs until the goods are delivered includescustom costs on export

FAS [FREE ALONGSIDE SHIP]

Maritime transport

Delivery is the same as destiny

The merchandise is delivered free on board oto

the company designated by the buyer Includes uploading to the transport

Includes paperwork and export tramits, but has noobligation to import

FOB [FREE ON BOARD]

TRANSPORT ANd INSURANCE CONTRACTS

No obligation to the seller

INCLUDED COSTSAll costs until the goods are delivered, includes

customs costs and uploading to the ship

FOB [FREE ON BOARD]

Maritime transport

Delivery point differs from destiny

Includes uploading but not unloading. If thegoods should be delivered unloaded, CPT or CIPshould be used.

Includes export tramits and paperwork, butthere’s no obligation to the import

CFR [COST AND FREIGHT]

TRANSPORT AND INSURANCE CONTRACTS

The seller is obliged to contract the carrier buthas no obligation to insure the goods

INCLUDED COSTS

All costs until the goods arrive at destiny, includescustoms and export costs, without unloading

CFR [COST AND FREIGHT]

Maritime transport

Delivery point differs from destiny

Includes uploading, but not unloading. If youwanted to deliver unloaded CPT or CIP should beused.

Includes cost of ordinary insurance

Includes export but there’s no obligation overimport

CIF [COST, INSURANCE AND FREIGHT]

TRANSPORT AND INSURANCEThe seller is obliged to contract transport and

insurance

CIF [COST, INSURANCE AND FREIGHT]

1. When can Incoterms be used domestically?

2. What concepts include costs when Incoterms are used in domesticcommerce?

3. If delivery takes place in containers, in the exit port, which Incotermshould be used?

4. If the merchandise is delivered at destiny, still loaded in the transport,and when delivery has taken place when unloading, which Incoterm isappropriate?a) If it’s maritimeb) If it isn’t maritime

5. Which are the risks included in the Incoterms?

6. What are the critical points in each Incoterm?

CONFIRMATION CONFIRMATION QUESTIONSQUESTIONS

The seller has no control on the export

The buyer requires help and in the exportcountry

EXAMPLEEXAMPLE

EX-WORKS

ereyes@comerciointernacional.com.mxTel. 01 (55) 1500 1400Fax 01 (55) 1500 1401

www.bufeteinternacional.com.mx

www.comerciointernacional.com.mx

¡Thank You!

DR. EDUARDO REYES DIAZ-LEAL