Incoterms

CITT Webinar Series

Presenter: Host:

Laurie Turnbull, CCLP

Supply Chain Consultant

Cole International

Catherine Viglas, CAE

President & CEO

CITT

Incoterms

CITT Webinar Series

Disclaimer This material has been prepared for

discussion purposes only and is not

intended as professional advice

regarding selection of Incoterms or other

issues affecting liability, obligations or

responsibilities, of buyers and sellers

regarding the international sale of

goods.

2

Incoterms

CITT Webinar Series

International Trade is Confusing!

Who pays charges for?

Who bears risk of loss or damage?

$ $ $ $ $ $ $ $ $ $

Seller Buyer

$ $ $ $ $ $ $ $ $ $

3

Incoterms

CITT Webinar Series

FOB

Contracts

Of Sale

Marine

Insurance

CISG

Incoterms

and International Trade

Transfer

of cost and risk

Choice of jurisdiction (law) and

venue

Transfer of title

Protection from loss or

damage

Domestic freight

term

4-9

Incoterms

CITT Webinar Series

Shipping Terms of Sale

5

FOB

1700s

Marine Payment

Term

AFTD

1919-1985

(Including ‘FOB’ Terms)

INCOTERMS

1936 – 2010

(Current Version)

UCC

1952-2004

(Including ‘FOB’ Terms)

Incoterms

CITT Webinar Series

Incoterms were developed by the

International Chamber of Commerce

(ICC) in 1936 to:

• Provide a set of standardized rules for

interpreting commonly used terms in

international trade

• Eliminate misunderstandings, disputes,

and litigation that can occur when buyers

and sellers are unaware of different

trading practices in foreign countries

- What are They?

6

Incoterms

CITT Webinar Series

Incoterms provide information to the

Buyer and Seller regarding:

• The carriage of goods from Seller to Buyer

• Export and import Customs clearance

• The division of costs and risks

• The obligations to give notice

• The obligations to provide documentation

7

- What Do They Do?

Incoterms

CITT Webinar Series

• Three words that often cause confusion

under Incoterms:

• These issues should be clarified in the

Buyer and Seller’s “contract of sale”

• “Delivery” can occur in a foreign Port

Delivery

• Incoterms exclude ownership

Ownership • Risk of ownership

(i.e. the need for cargo insurance)

Risk

8

Incoterms

CITT Webinar Series

Incoterm Ownership Payment

Conditions of the sale

Condition of the goods

Buyer/Seller

Contract of

Sale

Breach of contract

Jurisdiction / Venue

May not all be covered in Purchase Order terms and conditions

Which is why

carriers should

never

recommend

an Incoterm!

9-5

Incoterms

CITT Webinar Series

• Incoterms are terms of the international contract of sale, not the contract of carriage

• Incoterms were developed by the International Chamber of Commerce to assist Buyers and Sellers in international trade, they are not “law”

• Incoterms 2010 consists of eleven terms for use in international trade…

10

Incoterms

CITT Webinar Series

EXW DAT

FCA DAP

CPT DDP

CIP

FAS CFR

FOB CIF

Multimodal Terms

Ocean Terms

Incoterms 2010 can

be sorted into two

groups:

1. Those designed for

multimodal shipping

(i.e. any mode:

ocean, truck, rail, air)

and…

2. Those designed only

for marine (ocean)

shipping

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M

O

Incoterms

CITT Webinar Series

Incoterms 2010

“E” Terms (Buyer bears all costs & risks)

• EXW - Ex Works (named place of delivery)

“F” Terms (Buyer pays “main freight”)

• FCA - Free Carrier (named place of delivery)

• FAS - Free Alongside Ship (named port of

shipment)

• FOB - Free On Board (named port of

shipment)

12

O

M

M

O

Incoterms

CITT Webinar Series

Incoterms 2010

“C” Terms (Seller pays “main freight”)

• CPT - Carriage Paid To (named place of

destination)

• CIP - Carriage and Insurance Paid To (named place

of destination)

• CFR - Cost and Freight (named port of destination)

• CIF - Cost, Insurance and Freight (named port of

destination)

13

M

M

O

O

Incoterms

CITT Webinar Series

Incoterms 2010

“D” Terms (Seller bears all costs & risks):

• 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)

14

M

M

M

EXW FCA CPT CIP DAT DAP DDP FAS FOB CFR CIF

Services

Ex Works Free Carrier

Carriage Paid To

Carriage, Insurance

Paid To

Delivered at Terminal

Delivered at Place

Delivered Duty Paid

Free Alongside

Ship

Free On Board Vessel

Cost & Freight

Cost, Insurance &

Freight

Warehouse

storage Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Warehouse

labour Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Export

packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Loading

charges Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Inland

freight Buyer

Buyer/

Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Terminal

charges Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller

Forwarder’s

fees Buyer Buyer Seller Seller Seller Seller Seller Buyer Seller Seller Seller

Loading on vessel

Buyer Buyer Seller Seller Seller Seller Seller Buyer Seller Seller Seller

Ocean/air

freight Buyer Buyer Seller Seller Seller Seller Seller Buyer Buyer Seller Seller

Charges on

arrival at

destination

Buyer Buyer Seller Seller Seller Buyer Seller Buyer Buyer Buyer Buyer

Duty, taxes

& customs

clearance

Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Buyer Buyer Buyer

Inland

delivery to

destination

Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Buyer Buyer Buyer

Incoterms 2010: Transfer of Costs (to the Buyer)

C = Recommended for containerized shipments

[ Multimodal Terms ] [ Ocean Terms ]

Multimodal C / Multimodal C / Multimodal C / Multimodal C / Multimodal C / Multimodal C / Multimodal

15

Incoterms

CITT Webinar Series

Incoterms 2010

7 Incoterms

for

Multimodal

Shipments…

16

Incoterms

CITT Webinar Series

Export/Import Customs: Buyer’s obligation for export and import

Freight Charges Buyer (from Seller’s dock)

Insurance: Seller has no obligation to the Buyer to provide insurance

Transfer of Risk: At Seller’s dock (Consider cargo insurance!)

Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”)

Multimodal Term

•This term should not be used if the Buyer is unable to arrange export customs clearance •Buyer’s obligation to load the goods (i.e. this term is intended for bulk shipments) •Not recommended for containerized shipments (use FCA)

EXW: Ex Works (named place of delivery)

Mississauga Berlin Port of Bremerhaven

Multimodal

Terms:

EXW

FCA

CPT

CIP

DAT

DAP

DDP

17-2

Incoterms

CITT Webinar Series

Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”)

FORWARDER

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Buyer from the “named place”

Insurance: Seller has no obligation to the Buyer to provide insurance

Transfer of Risk: Upon delivery to the first carrier (Consider cargo insurance!)

Multimodal Term

Recommended for containerized shipments

18

FCA: Free Carrier (named place of delivery)

Multimodal

Terms:

EXW

FCA

CPT

CIP

DAT

DAP

DDP

Incoterms

CITT Webinar Series

Transfer of Risk to Buyer

Export/Import Customs: Seller’s obligation for export /Buyer’s obligation for import

Freight Charges: Seller to named place of destination

Insurance: Seller has no obligation to the Buyer to provide insurance

Transfer of Risk: Upon delivery to the first carrier (Consider cargo insurance!)

FORWARDER

Multimodal Term

CPT: Carriage Paid To (named place of destination)

(i.e. Seller “delivers”)

19

Recommended for containerized shipments

Transfer of Cost to Buyer

Multimodal

Terms:

EXW

FCA

CPT

CIP

DAT

DAP

DDP

Incoterms

CITT Webinar Series

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Seller to named place of destination

Insurance: Seller procures insurance for the Buyer (on “minimum cover”)

Transfer of Risk: Upon delivery to the first carrier (Consider exclusions in the Seller-procured insurance policy!)

FORWARDER

Multimodal Term

CIP: Carriage and Insurance Paid To

(named place of destination)

20

Transfer of Risk to Buyer Transfer of Cost to Buyer

(i.e. Seller “delivers”)

Recommended for containerized shipments

Multimodal

Terms:

EXW

FCA

CPT

CIP

DAT

DAP

DDP

Incoterms

CITT Webinar Series

Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”)

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Seller to named terminal at place of destination

Insurance: Seller has no obligation to the Buyer to provide insurance

Transfer of Risk: Upon delivery, unloaded, at a named terminal at the named port or place of destination (Consider cargo

insurance!)

Multimodal Term

DAT Delivered at Terminal

(named terminal at port or place of destination)

21

Recommended for containerized shipments

Multimodal

Terms:

EXW

FCA

CPT

CIP

DAT

DAP

DDP

Incoterms

CITT Webinar Series

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Seller to named place of destination

Insurance: Seller has no obligation to the Buyer to provide insurance

Transfer of Risk: Upon delivery, not unloaded, at a named place of destination (Consider cargo insurance!)

Multimodal Term

DAP Delivered at Place

(named place of destination)

22

Recommended for containerized shipments

Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”)

Multimodal

Terms:

EXW

FCA

CPT

CIP

DAT

DAP

DDP

Incoterms

CITT Webinar Series

Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”)

Export/Import Customs: Seller’s obligation for export and import

Freight Charges: Seller to named place of destination

Insurance: Seller has no obligation to the Buyer to provide insurance

Transfer of Risk: Upon delivery to the named place of destination

Multimodal Term

•This term should not be used if the Seller is unable to arrange import customs clearance

•Recommended for containerized shipments

DDP Delivered Duty Paid

(named place of destination)

23-1

Multimodal

Terms:

EXW

FCA

CPT

CIP

DAT

DAP

DDP

Incoterms

CITT Webinar Series

Incoterms 2010

4 Incoterms

for

Marine (Ocean)

Shipments…

24

Incoterms

CITT Webinar Series

Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”)

Export/Import Customs: Seller’s obligation for export/Buyer’s obligation for import

Freight Charges: Buyer from the named port of shipment

Insurance: Seller has no obligation to the Buyer to provide insurance

Transfer of Risk: Upon delivery alongside named vessel (Consider cargo

insurance!)

Ocean Term

FAS Free Alongside Ship

(named port of shipment)

Not recommended for containerized shipments (use FCA)

25

Ocean

Terms:

FAS

FOB

CFR

CIF

Incoterms

CITT Webinar Series

Export/Import Customs: Seller obligated to clear goods for export

Freight Charges: Buyer from the named port of shipment

Insurance: Seller has no obligation to the buyer to provide insurance

Transfer of Risk: When the goods are loaded on board the vessel (Consider cargo insurance!)

Ocean Term

FOB Free On Board*

(named port of shipment)

*Not recommended for containerized shipments (use FCA)

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Transfer of Cost and Risk to Buyer (i.e. Seller “delivers”) Ocean

Terms:

FAS

FOB

CFR

CIF

Incoterms

CITT Webinar Series

Transfer of Risk to Buyer

Export/Import Customs: Seller obligated to clear goods for export

Freight Charges: Seller to named port of destination

Insurance: Seller has no obligation to the buyer to provide insurance

Transfer of Risk: When the goods are loaded on board the vessel (Consider cargo insurance!)

Ocean Term

CFR Cost and Freight

(named port of destination)

(i.e. Seller “delivers”)

Not recommended for containerized shipments (use CPT)

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Transfer of Cost to Buyer Ocean

Terms:

FAS

FOB

CFR

CIF

Incoterms

CITT Webinar Series

Transfer of Risk to Buyer

Export/Import Customs: Seller obligated to clear goods for export

Freight Charges: Seller to named port of destination

Insurance: Seller arranges insurance for the Buyer (on “minimum cover”)

Transfer of Risk: When the goods are loaded on board the vessel (Consider exclusions in the Seller-procured insurance policy!)

Ocean Term

CIF Cost, Insurance and Freight

(named port of destination)

(i.e. Seller “delivers”)

Not recommended for containerized shipments (use CIP)

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Transfer of Cost to Buyer Ocean

Terms:

FAS

FOB

CFR

CIF

Incoterms

CITT Webinar Series 29

Air Freight

Road Freight

Rail Freight

Ocean Freight*

*Ocean Containers

EXW Yes Yes Yes Yes No

FCA Yes Yes Yes Yes Yes

FAS No No No Yes No

FOB No No No Yes No

CFR No No No Yes No

CIF No No No Yes No

CPT Yes Yes Yes Yes Yes

CIP Yes Yes Yes Yes Yes

DAT Yes Yes Yes Yes Yes

DAP Yes Yes Yes Yes Yes

DDP Yes Yes Yes Yes Yes

& Appropriate Modes of Transport

Chart provided for illustrative purposes only - Adapted from "UNDP Shipping and Incoterms Practice Guide"

http://www.undp.org/content/dam/undp/documents/procurement/documents/UNDP-Shipping-Guide.pdf

Incoterms

CITT Webinar Series

“Which Incoterm Should I Use?”

Comprehensive risk management policies

regarding international trade include review

of:

• Incoterms 2010

• Contracts of sale

• Cargo insurance

30

www.iccwbo.org

Buyers and Sellers should pick their Incoterm,

not carriers, freight forwarders or Customs brokers.

4

Incoterms

CITT Webinar Series

Webinar Series Presents:

FOB vs Incoterms Why Are They Different in North America?

Presented by:

Laurie Turnbull MSc, CCLP

Supply Chain Consultant

Cole International Inc.

March 16, 2017

12:00-1:00 pm EST

Incoterms

CITT Webinar Series

Canada and the EU are entering a new

trade era with CETA, but our largest

trading partner, the U.S., may be taking

a trade approach based on domestic

manufacturing.

More than ever, shippers in Canada

need to have a clear understanding of

the benefits, and drawbacks, of the

North American UCC FOB terms, and

how they differ from Incoterms.