Download - INCOTERMS 2010 Slide
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TRADE WORKSHOP
29 May 2012
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Presentation Contents
History of Incoterms
Why Incoterms?
What do Incoterms cover?
Key Changes of Incoterms 2010
How to use Incoterms 2010
Key Aspects of Incoterms 2010
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1Importer applies for
Letter of Credit.
3
Request to advise
& possibly confirm
the Letter of
Credit
Advice
/Confirmation of the
Letter of Credit.
Issuing Bank2
4
Exporter/ Beneficiary
Importer/Applicant
Sales
Contract
Advising/
Confirming Bank
Letters of Credit Issuance
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Issuing Bank
2
4
Exporter/
Beneficiary
Importer/App
licant
Document
6
5
Docu
me
nts
Document
3
7
Nominated/
Negotiating Bank
1
GOODS
Flow of Documents & Payment
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INCOTERMS ACRONYM
Incoterms
is an acronym for
International
Commercial
Terms
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HISTORY
The International Chamber of Commerce first published in
1936 a set of international rules for the interpretation of trade
terms, were known as INCOTERMS 1936
Amendments and additions were later made in :
19531967197619801990 2000 2010 (effective : 1 January 2011)
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Thus,the uncertainties of different interpretations of such terms in different countries can be avoided.
Incoterms provide a set of international rules accepted by governments, legal authorities and practitioner worldwide.
For example:FOB American Coy diff FOB UK trader
considerable degree = banyak tafsiran
Why Incoterms ?
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What do they cover ?
something goes wrong.
Was the correct Terms used?
Had Risk passed?
Who is responsible for Insurance ?
What was the named placedafter the INCOTERM?
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SELLERS COST SELLERS COST SELLERS COST
SELLERS RISK SELLERS RISK
Goods
uncleared
for export
Merchandise Cost
Tracking / Train Cost
Export permit /
Export Tax (if available)
Port of Loading Cost :
Terminal handling Chgs.
Loading chgs
Freight and Insurance Cost
Port of discharge Cost :
Terminal handling chgs,
Unloading chgs
Import Permit /
Import Duties
Tracking / Train Cost
Buyers Works,Factory,Warehouse, etc.
BUYERS COST BUYERS COST
BUYERS RISK BUYERS RISK BUYERS RISK BUYER S
Sellers Works,Factory,Warehouse, etc.
Terminal Handling Charges (if available)
Risks :
Loss or damage of the
goods
The
Buyer
Explanation Cost/Risk/Responsibility
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What Do They Cover?
In drawing up a sales contract, the importer and the exporter need to agree how they divide up the
Costs
Risks
Responsibilities
involved in transporting the goods from the exporter to the importer. This agreement is represented by a trade term which is known as an INCOTERM.
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COSTS, RISKS And RESPONSIBILITIES
Costs - who will bear the costs involved in
delivering the goods;
Risks - who will bear the risks of loss or
damage to the goods in transit;
Responsibilities - who is responsible for
making all the necessary
arrangements.
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COSTS, RISKS And RESPONSIBILITIES
Costs the division of cost between sellers & buyers
Risks the point at which delivery occurs i.e.
the point at which the risk of loss or damage
transfers from the seller to the buyer
Responsibilities which party is responsible
for export and import duties/
clearance
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2000 2010
Group E Departure
EXW Ex Works
Group F Main carriage unpaid
FCA Free Carrier (.named place)FAS Free Alongside Ship (.named port of shipment)FOB Free On Board (named port of shipment)
Group C Main carriage paid
CFR Cost and Freight (.named port of destination)CIF Cost Insurance and Freight (..named port of destination)
CPT Carriage Paid To (..named place of destination)CIP Carriage and Insurance Paid To (.named place of destination)
Group D Arrival
DAF Delivered At Frontier (.named place)DES Delivered Ex Ship (.named port of destination)DEQ Delivered Ex Quay (.named port of destination)DDU Delivered Duty Unpaid (named place of destination)
DDP Delivered Duty Paid (..named place of destination)
Group E Departure
EXW Ex Works
Group F Main carriage unpaid
FCA Free Carrier (.named place)FAS Free Alongside Ship (.named port of shipment)FOB Free On Board (named port of shipment)
Group C Main carriage paid
CFR Cost and Freight (.named port of destination)CIF Cost Insurance and Freight (..named port of destination)
CPT Carriage Paid To (..named place of destination)CIP Carriage and Insurance Paid To (.named place of destination)
Group D Arrival
DAT Delivered At Terminal (.named terminal at Port or Place of destination)
DAP Delivered At Place (..named place of destination)
DDP Delivered Duty Paid (..named place of destination)
STRUCTURE of INCOTERMS
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Overview of the Key Changes in
Incoterms 2010
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Key themes for changes
Encourage better use of Incoterms
Continue to refine for containers
E.g. terminal handling charges
Significant changes in practice:
Electronic communication
Security
Insurance
Encourage use in the USA
An eye for the commodity trade
Encourage = menganjurkan
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Consolidation of D terms
New Incoterms DAT and DAP
DAF, DES, DEQ and DDU abolished
New Incoterms!
Abolished = menghapuskan
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DAT in more detail
DAT Unloaded from arriving means of transport
Placed at the disposal of the buyer at the named terminal
Not import cleared
Replaces DEQ
More useful for containers
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DAP in more detail
DAP On arriving means of transport ready for unloading
Not import cleared
Replaces DES, DAF and DDU
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DAT DAP/DDP
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Electronic communications
Incoterms 2000 Electronic data interchange (EDI) message
Parties have to agree to use EDI
Incoterms 2010 Equivalent electronic record or procedure
If the parties so agree, or customary
Customary = biasanya
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Security
A2/B2 allocate obligations to obtain assistance in obtaining security related clearance.
A10/B10 compel seller and buyer to talk
Compel = memaksa/mendorong
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Insurance
Institute of Cargo Clauses updated
A3/B3 Information to Insurance
NB. CIF and CIP only require minimum cover by Seller
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Commodities - string sales
-Commodities sold several times via string of sale contracts. -More than one seller and only the firstseller will have been responsible for shipping the goods. -For example, CIF and CFR now refer to an obligation to contract or procure a contract for the carriage of the goods.
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Domestic and international
Apply to both international and domestic
Encourage use in USA in place of the former US Uniform Commercial.
Encourage = menganjurkan
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Terminal Handling Charges
Described clearly who should pay the Terminal Handling Charges.
Avoid paying for the same service twice by buyer (double exposure)
For example : CIF/CFR
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Better use
The biggest problem with Incoterms is
using them incorrectly
And this is not just the first time exporter/importer
Cause Dispute, Litigation, Financial loss.
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DAT and DAP replaces DAF, DES, DEQ and DDU
Domestic and international Electronic communication Insurance Security Terminal handling charges String sales Maritime made secondary Guidance notes
In summary
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How To Use Incoterms 2010
Incorporate into contract
Choose the right rule
Specify the place/port precisely
e.g. FCA Jl HR Rasuna Said Blok X 5
Kav. 2 3, Jakarta Indonesia
Incoterms 2010
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OBLIGATIONS OF SELLER: OBLIGATIONS OF BUYER:
Structure of the Incoterms 2010 Rules
The Sellers obligations are set out in articles A1-A10, and the Buyers obligations in mirror fashion in B1-B10, as follows:
A1 General obligations of the seller
A2 Licenses, authorizations security
clearances and other formalities
A3 Contracts of carriage and
insurance
A4 Delivery
A5 Transfer of risks
A6 Allocation of costs
A7 Notices to the buyer
A8 Delivery document
A9 Checking-packaging-marking
A10 Assistance with information and
related costs
B1 General obligations of the buyer
B2 Licenses, authorizations security
clearances and other formalities
A3 Contracts of carriage and insurance
B4 Taking delivery
B5 Transfer of risks
B6 Allocation of costs
B7 Notices to the seller
B8 Proof of delivery
B9 Checking-packaging-marking
B10 Assistance with information and
related costs
In addition, the text of the rules in A1-A10 and B1-B10 is supplemented by a short Introduction, setting out important features
of the new Incoterms 2010 rules generally, and Guidance Notes at the beginning of each rule, giving guidance on use and
application of the rule.
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RULES FOR ANY MODE OR MODES OF TRANSPORT
Group C CPT Carriage Paid To (..named place of destination)CIP Carriage and Insurance Paid To (.named place of destination)
Group D DAT Delivered At Terminal (named terminal at port or place of destination)DAP Delivered At Place (named place of destination)DDP Delivered Duty Paid (.named place of destination)
Any Mode of TransportGroup E EXW Ex Works (..named place)Group F FCA Free Carrier (.named place)
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RULES FOR SEA AND INLAND WATERWAY TRANSPORT
Sea and inland waterway transport only
Group F
FAS Free Alongside Ship (.named port of shipment)FOB Free On Board (named port of shipment)
Group C
CFR Cost and Freight (.named port of destination)CIF Cost Insurance and Freight (..named port of destination)
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How to use Incoterms
Incorporate into contract
Choose the right rule
Specify the place/port precisely
e.g. FCA 38 Cours Albert Ier, Paris, France
Incoterms 2010
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Any Mode of Transport
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EXW (EX WORKS) Any mode or modes of transport Delivery when Seller places goods at Buyers disposal at
named place Buyer loads goods onto collecting vehicle Buyer pays transport Buyer responsible for export where applicable Minimum Seller obligation Best used for domestic/intra-trading bloc contracts
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
EXW
Risk & Responsibilities
Cost/Expense
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Real life - EXW
You buy Ex-Works (London) Incoterms 2010. You have no presence in the European Union
Any problems?
Presence = kehadiran
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You buy Ex-Works (loaded) (Jakarta) Incoterms 2010
The goods are damaged in loading
Real life - EXW
Who is responsible for the cost of repairing the damaged goods? a. You b. The Seller
c. Both You and the Seller d. Unclear
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Incoterms Variants Incoterms 2010 rules do not prohibit variants to
Incoterms as long agreed by all parties.
Such alterations extremely clear incorporated in their contract.
When using Variants, you are strongly advised to clarify exactly whose cost, risk & responsibility.
For eample: - Ex Work Loaded
- Ex Work Cleared
- CIF Maximum cover
- DDU cleared
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You buy Ex-Works (Sellers premises Jakarta) Incoterms 2010.You expected to collect from SurabayaThe Seller insists on delivery at their premises in Jakarta
Real life - EXW
Who pays for the additional transport costs from
Jakarta to Surabaya? a. You b. The Seller
c. Both You and the Seller c. Unclearinsists = menentukan
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FCA (FREE CARRIER)
Any mode or modes of transport
Delivery when Seller delivers goods to carrier or other Buyer nominee at Sellers premises or another named place
Buyer arranges and pays for transport BUT
If commercial practice or at Buyers request, Seller may (but is not required to) arrange transport at Buyers cost and risk
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
CD
E F
FCA
Risk & Responsibilities
Cost/Expense
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Real life - choosing Incoterms
The Buyer wants you to deliver to Istanbul railway station
The Buyer will then move the goods by rail to Germany
Which Incoterm should you use?
EXW, FCA or FOB?
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You sell FCA (Medan Indonesia Container Terminal) Incoterms 2010
There is a fire at the port destroying the container terminal and your
container
Real life - FCA
Must you replace the goods?
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You sell FCA (Pontianak Indonesia Container Terminal) Incoterms 2010
The Buyer demands that you provide an on board bill of lading
Real life - FCA
Do you have to provide one?
a. Yes b. No
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Real life - FCA
You sell FCA (Manado Indonesia Container Terminal) Incoterms 2010
The carrier demands payment of a new terminal charge to take custody
You pay.
Can you charge it to the Buyer?a. Yes b. No
custody = pemeliharaan
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You buy FCA (Southampton Container Port) Incoterms 2010The UK has introduced a new mandatory container screening before containers can be loaded.
Real life - FCA
Who is obliged to pay?
a. You (Buyer) b. Seller c. BothMandatory = bersifat perintah
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CPT (CARRIAGE PAID TO)
Any mode or modes of transport
NB: Risk and cost shift to Buyer at different places
Delivery when Seller hands goods over to carrier (risk passes) BUT
Seller pays for transport (but does not have risk of transport)
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
CPT
Risk & Responsibilities
Cost/Expense
1st Carrier
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CIP (CARRIAGE AND INSURANCE PAID TO)
Any mode or modes of transport
NB: Risk and cost shift to Buyer at different places
Delivery when Seller hands goods over to carrier (risk passes) BUT
Seller pays for transport (but does not have risk of transport)
Seller contracts for minimum cover insurance against buyers transport risk
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
CIP
Risk & Responsibilities
Cost/Expense
(Cover Insurance)
1st Carrier
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Real life CPT and CIP
You sell CPT (Buyers warehouse Aceh Indonesia) Incoterms 2010
You load the container onto a truck in Medan Indonesia
In transit the truck has an accidentCargo destroyed
Do you need to replace the goods?
a. Yes b. No c. Case by Case
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You sell CPT (Brindisi Port, Italy) Incoterms 2010The shipping contract does not include unloading costsShip refuses to handover to the Buyer, until Buyer pays unloading costs
Real life CPT and CIP
Can Buyer charge you the unloading costs? a. Yes b. No
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You buy CIP (Damascus Airport) Incoterms 2010The goods arrive damagedThe insurer refuses to payInsurer states out of scope of Clause C Cargo Insurance
Real life CPT and CIP
How to mitigate the risk cover?
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DAT (DELIVERED AT TERMINAL)
Any mode or modes of transport
Delivery when Seller unloads and places them at Buyers disposal at named terminal
Seller pays for transport
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
DAT
Terminal
Risk & Responsibilities
Cost/Expense
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DAP (DELIVERED AT PLACE)
Any mode or modes of transport
Delivery when Seller places the goods at Buyers disposal not unloaded on arriving means of transport at named place
Seller pays for transport
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
DAP
Risk & Responsibilities
Cost/Expense
- Seller Not Responsible for Import
- Seller Not Unloaded
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DDP (DELIVERED DUTY PAID)
Any mode or modes of transport
Delivery when Seller places the goods, cleared for import, at Buyers disposal not unloaded on arriving means of transport at named place
Seller pays for transport
Seller responsible for export where applicable
Seller also responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
DDP
Risk & Responsibilities
Cost/Expense
-- Seller responsible for Import-- Seller Not Unloaded
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Real life DAT, DAP and DDP
Your French customer asks you to deliver on a DDP basis
Do you agree?
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You buy DAP (Buyers warehouse
Bogor) Incoterms 2010, from Dubai.
The goods are held at the Jakarta
border due to customs
Who is responsible for the delay?
a. You (Buyer) b. The Seller
c. Both
Real life DAT, DAP and DDP
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You are asked to deliver to Belawan(Medan Indonesia)s container terminal
Do you use DAT, DAP or DDP?
Real life DAT, DAP and DDP
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You buy DAT (Beirut container terminal) Incoterms 2010
The carrier tries to charge for unloading from ship and movement to stack
Do you pay? a.Yes b. No
Real life DAT, DAP and DDP
Stack - tumpukan
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You sell DAP (Buyers warehouse Istanbul)
Incoterms 2010
The container is damaged
when being unloaded
Who is responsible?
a. You (Seller) b. Buyer
Real life DAT, DAP and DDP
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You sell DDP (Hong Kong) by air Incoterms 2010
Buyer wants Seller to pay for transport between airport and warehouse
Must the Seller pay?
a. Yes b. No
Real life DAT, DAP and DDP
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Maritime only
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FAS (FREE ALONGSIDE SHIP)
Sea or inland waterway transport only
Delivery when goods are placed alongside vessel at port ofshipment
Seller may also deliver by procuring goods already delivered as above (a string sale)
Buyer pays transport
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
string sale = penjualan rutin
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Seller Buyer
A B
C D
E F
FAS
Risk & Responsibilities
Cost/Expense
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FOB (FREE ON BOARD)
Sea or inland waterway transport only
Delivery when goods are placed on board vessel at port of shipment
Seller may also deliver by procuring goods already delivered as above (a string sale)
Buyer pays transport
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
FOB
Risk & Responsibilities
Cost/Expense
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Real life FAS and FOB
You buy goods FOB (Hamburg) Incoterms 2010.
When does title (ownership) pass?
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You sell FOB (Makassar-Indonesia) Incoterms 2010
You deliver the container to the container stack
The containers contents are stolen
Real life FAS and FOB
Stack = tumpukan
Do you need to replace the goods?a. Yes b. No
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You buy FOB (Hamburg) Incoterms 2010
Real life FAS and FOB
In loading a cable snapsThe cargo lands on the deck and is damaged
Who is responsible? a. You (Buyer)b. The Seller c. Both You and Seller
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CFR (COST AND FREIGHT)
Sea or inland waterway transport only
NB: Risk and cost shift to Buyer at different places
Delivery when goods are placed on board vessel at port of shipment (risk passes) BUT
Seller pays for transport (but does not have risk of transport)
Seller may also deliver by procuring goods already delivered as above (a string sale)
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
CFR
Risk & Responsibilities
Cost/Expense
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CIF (COST INSURANCE AND FREIGHT)
Sea or inland waterway transport only
NB: Risk and cost shift to Buyer at different places
Delivery when goods are placed on board vessel at port of shipment (risk passes) BUT
Seller pays for transport (but does not have risk of transport)
Seller may also deliver by procuring goods already delivered as above (a string sale)
Seller contracts for minimum cover insurance against buyers transport risk
Seller responsible for export where applicable
Buyer responsible for import where applicable
INCOTERMS 2010
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Seller Buyer
A B
C D
E F
CIF
Risk & Responsibilities
Cost/Expense
(Cover Insurance)
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Real life CFR and CIF
You sell CIF (Semarang) Incoterms 2010.
Who is responsible for the inland haulage from Solo to Semarang?
a. You (Seller) b. Buyer
Haulage = angkutan
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Real life CFR and CIF
You buy CFR (Jakarta port) Incoterms 2010
The Seller hands over to a truck at Johor
The cargo is loaded onto a ship at Singapore
The cargo was damaged between Johor and Singapore
Who is responsible?
a. You (Buyer) b. The Seller
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FOB cannot be used as the delivery point is not on to a ship.
EXW it is unusual to use EXW where delivery is not at the sellers premises.
FCA risk passes on delivery.
Under A4 delivery is on delivery not unloaded at the container
terminal.
Therefore assuming delivery has happened then the risk is on the
Buyer.
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CPT risk passes on delivery (A5).
In A4 delivery is when the goods are handed over to the carrier
contracted in accordance with A3. NB. Note the delivery point is
early it is not the place where the Seller has paid for carriage to.
CIP Under A5 risk passes to the Seller on delivery.
Under A4 delivery is when the goods were handed over to the
carrier.
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DDP A Seller will normally avoid DDP as it will not want to bear responsibility for import clearance.
DAT. Under DAT the Seller is responsible for unloading from the ship and handling costs until the container is in the terminal.
DAP will extend the Sellers obligations to include all handling cost including costs of loading the Buyers vehicle.
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FAS Under A4 the Seller must deliver the goods alongside the ship.
If the Buyer has not specified a loading point, then the Seller may
select the point within the port which best suits its purpose.
CIF Under A5 risk passes on delivery.
Under A4 delivery is when goods are placed on board.
Therefore the goods have been delivered and are at the risk of the
Buyer.
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CFR Under A5 risk passes on delivery.
Under A4 the Seller delivers by placing them on board the vessel.
Therefore the cargo is at Sellers risk until loading at vessel.
The Seller is responsible for damage to the cargo before loading
goods at port of loading.
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Transfer of risk from the seller to the buyer
DAT (ex DEQ)
FOB
CFR
CIF
Transport &
Insurance Paid
Transport Paid
FAS
DAP (ex DDU)
DDP
EXW FCA
CPT
CIP
Transport Paid
Transport & Insurance Paid
DAP (ex DES)
The
Buyer
First
carrier
Loading
PortDestination
Port
Frontier
DAP (ex DAF)
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Thank you