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Knowing Incoterms 2000
The Incoterms were drafted for the first
time in 1936 by the International Chamber of Commerce (CCI / ICC) in order
to homogenise / standardise the vocabulary in the trade and exchange and
thus avoid the legal disputes between sellers and buyers. The latest
revision of Incoterms dates back to the end of 1999. According to the
choice of Incoterm, one may know who does what while transporting the
merchandise, who pays for transport, who insures the merchandise and after
which geographical point. There are 13 Incoterms selected by the CCI/ ICC.
These can be classified in different ways. The first classification can be
done according to the mode of transport selected.
- 1 exclusively territorial Incoterm (DAF)
- 6 exclusively maritime Incoterms (FAS, FOB,
CFR, CIF, DES, DEQ)
- 6 Incoterms valid for any means of
transport (Ex-Works, FCA, CPT, CIP, DDU, DDP)
Another classification that is frequently
found is based on the transfer of responsibility from the seller to the
buyer while starting from his minimum obligation (EXW) upto his maximum (DDP).
It is very important to give geographical
details which help avoid serious misunderstandings between the buyer and
the seller : for instance, "ex-factory" : in this case from one
factory in Belgium or from a factory established abroad by a Belgian firm.
The Incoterms are going to define the place of transfer of responsibility
between the seller and the buyer.
Tables of Incoterms
For a visual representations of Incoterms,
click here
Analysis
" EXW "
Incoterm
EXW = EX WORKS = At The Factory Gate
The single responsibility of the seller is
to hand over the merchandise to the buyer. The revision 2000 of Incoterms
recognizes a very widespread practice : the seller takes in his charge and
is responsible for loading of merchandise on to the vehicle of the buyer (
on condition of indicating EXW loaded ). The buyer incurs all the expenses
inherent in transport right from departure from the factory until arrival
at the destination
Group of " F
" = Free
FCA= FREE CARRIER = FRANCO TRANSPORTEUR
The buyer
selects the
mode of
transport as
well as
the transporter
and he
pays for
the main
transport. The
transfer of
expenses and
risks is
effected at
the time
when the
transporter takes charge
of the
merchandise. In
the case
of truck,
wagon, and
full container
it is
the seller
who does
the loading.
The passage
of export
through custom
is the
responsibility of
the seller.
"the FCA
premises of
the seller
were officialised
by the
revision of
Incoterms 2000.
FAS = FREE ALONG SIDE SHIP = FRANCO LE
LONG DU NAVIRE
The obligations of the seller are
henceforth fulfilled when the merchandise is taken out of the customs and
place along side the ship on the quay or on the barges. From this point
onwards, the buyer incurs all the expenses and risks. The buyer also
indicates the ship and pays the freight.
FOB = FREE ON BOARD = FRANCO à BORD
The merchandise is placed on board the ship by
the seller . The buyer indicates the ship and pays the freight. Transfer
of expenses and risks is effected at the time when the merchandise passes
from the slings of the ship. The export formalities devolve upon the
seller.
Group of "C"
= Cost and Carry
CFR = COST AND FREIGHT = COUT ET FRET
The seller selects the ship and pays the
freight upto the agreed port. Loading on board the ship devolves upon the
seller along with shipping formalities. The transfer of risks is the same
as in the case of FOB. CIF = COST, INSURANCE AND FREIGHT = COUT,
ASSURANCE, FRET
The terms are identical to those of CFR with
an additional obligation of the seller to supply maritime insurance policy
against risk of loss or damages to the merchandise. It is the FAP
insurance policy ( free of any special damage ) for 110 % of the value.
The seller pays the insurance premium, and the merchandise travels at the
risk and peril of the buyer. This is the Incoterm which is
very much used in practice for, it tends
to divide the expenses and risks in a fair manner. The buyers appreciate
this Incoterm, for, they are freed from the logistical formalities.
CPT = CARRIAGE PAID TO = PORT PAYE
JUSQU'A
The seller selects the transport and pays the
freight upto the place indicated. The risks of damage or loss as well as
escalation of eventual costs are at the cost of the buyer starting from
the moment when the merchandise were handed over to the first transporter.
CIP = CARRIAGE AND INSURANCE PAID TO =
PORT PAYE, ASSURANCE COMPRISE, JUSQU 'A
CIP is identical to CPT, but, the seller must
supply additionally a transport insurance. The seller signs a transport
contract pays the freight and insurance premium.
Group of " D
" = DELIVERED
DAF = DELIVERED at FRONTIER = RENDU
FRONTIERE
The seller pays the freight and
undergoes risks upto the frontier which must be defined.
He assumes responsibility for custom
formalities for export and the buyer for import. The two parties must
agree for taking charge of the insurance policy covering the entire route
of shipment. According to the 2000 revision, the buyer takes in to his
charge the expenses of unloading from the means of transport near the
frontier except when said otherwise.
DES = DELIVERED EX SHIP = RENDU EX SHIP
The seller selects the ship, pays freight and
accepts transport risks. Transfer of expenses and risks is effected
on board the ship at the time of unloading at the port of arrival.
DEQ = DELIVERED EX QUAY = RENDU A QUAI
The seller places the merchandise at
the disposal of the buyer, ensures his passage through custom on to the
quay at an agreed port. The passage through
customs of the import is henceforward put to the charge of the buyer.
DDU = DELIVERED DUTY UNPAID = RENDU
DROITS NON ACQUITTES
The seller puts the merchandise at the
disposal of the buyer, at an agreed place in the country of import,
including the unloading. The buyer is responsible for custom formalities,
duties and charges. The novel feature of 2000 revision consists of a
condition relating to unloading from the vehicle used for transport upto
the destination which is hence forward charged to the buyer. DDU is a new
Incoterm which is very much offered in trade and strengthens the position
of the seller, for, the merchandise is transported at the risk and expense
of the seller upto the premises of the buyer.
DDP = DELIVERED DUTY PAID = RENDU
DROITS ACQUITTES
The seller has in this case maximum
obligation, transfer of expenses and risks being done at the point of
delivery on the buyers premises and the unloading belongs to his
responsibility ( except when stated to the contrary ).
TAKE CARE :
The American FOBs are interpreted in a
different manner : one must obligatorily state the conditions of delivery
when your correspondent is American. The present trend in international
trade takes shape by the fact that the buyer is discharged of all the pre
occupations with logistics. This strengthens the positions of the
exporters. It is necessary to properly negotiate the terms and conditions
of the contract during the first shipment and especially in the case of
countries having risk where a credoc ( credit document ) as a means of
payment will be advised.
