11/06/2013

Incoterms 2010, incoterms 2000, incoterms 2013

Incoterms 2010, incoterms 2000, incoterms 2013
Domestic and International Trade Terms – Valid as of 1. January 2011

Regardless of whether you send something to a customer or order something from a supplier, your freight must arrive on time; otherwise you will have problems. That is why we, as a global acting insurance company, always think a couple of steps ahead, not only analysing your transportation risks but also advising you on all matters concerning transportation routes, delivery conditions, etc.

What to consider
Incorporate the Incoterms 2010 rules into your contract of sale
If you want the Incoterms 2010 rules to apply to your contract, you should make this clear in the contract, through words such as, “the chosen Incoterms rule including the named place, followed by Incoterms 2010”.


Choose the appropriate Incoterms rule
The chosen Incoterms rule needs to be appropriate to the goods, to the means of their transport, and aboveall to whether the parties intend to put additional obligations, for example such as the obligation to organize carriage or insurance, on the seller or on the buyer.

Specify your place or port as precisely as possible
The chosen Incoterms rule can work only if the parties name a place or port, and will work best if the parties specify the place or port as precisely as possible. A good example of such precision would be: “FCA 38 Cours Albert 1er, Paris, France Incoterms 2010”

The terms regulate in particular:
• The delivery and taking delivery of goods
• The contract s of carriage and insurance
• The transfer of risks
• The allocation of costs
• The delivery of documents and proof of delivery

They do not regulate:
• The price to be paid
• The method of payment
• The transfer of ownership
• The consequences of a breach of contract

Agree on the INCOTERMS 2010 in your commercial agreements and record this, e.g. “CIF INCOTERMS 2010”. This clarifies matters. If measures in certain countries should mean that legal regulations make it necessary to take out transportation insurance abroad, it is possible to safeguard against a not unsubstantial financial risk by means of indemnity insurance. The indemnity insurance (Clause TR12/2006) has nothing in common with an export risk guarantee. It simply provides comprehensive insurance coverage in addition to foreign transportation insurances.

The trading terms, which are to some degree restrictive, result in the transportation insurer making the following recommendation:
Exporters: The exporter should handle exports on the basis of, for example, the CIF or CIP clauses.
Importers: The importer should deal with imports on the basis of, for example, the CFR or CPT clauses.


What benefits does the exporter or importer gain from this recommendation?
• With Zurich you have a global acting insurer on whom you can always count.
• You determine the insurance coverage that is appropriate for your goods.
• The insurance is valid from the point of departure to the destination.
Always obtain a ‘house-to-house’ insurance.
• Claims can be dealt within your domizil.
• You reduce your financial risk to a minimum, because when you lodge a claim you have no transfer difficulties
(e.g. as the result of currency restrictions), nor do you have any exchange risk.

Main feature of the Incoterms 2010 rules:
Two new Incoterms rules – DAT and DAP – have replaced the Incoterms 2000 rules DAF, DES, DEQ and DDU. The number of Incoterms rules has been reduced from 13 to 11.
Under the FOB, CFR and CIF rules the transfer of risks has changed at the point of delivery.
Mode of transport and the appropriate INCOTERMS 2010

Rules for any mode or modes of transport

Rules for see and inland waterway transport
 

EXW Ex Works (… named place of delivery)
Seller‘s Obligation
• Place the goods at the disposal of
the buyer at the named place of delivery
(i.e. works, factory, warehouse, etc.).
 Points of prime importance
• Even after the delivery of the goods, you still
bear a considerable financial risk as long as
full payment has not been made.
• These conditions are disadvantageous for
the buyer. He bears a high risk and has to
arrange everything himself such as export,
clearance, transportation, insurance etc.

Buyer’s Obligation
• Take delivery of the goods as soon as they
have been made available at the seller‘s
premises or another named place
(i.e. works, factory, warehouse, etc.).
• Bear all costs and risks involved with
organising the transport from that time on.
 Points of prime importance
• Risks of loss or damage to the goods is
transferred to the buyer as soon as they
have been placed at their disposal at the
named place of delivery.
• The seller does not need to load the goods
on any collecting vehicle.
• In cases where the seller is in a better
position to load the goods, FCA is usually
more appropriate.

FCA Free Carrier (… named place of delivery)
Seller‘s Obligation
• Deliver the goods to the carrier or another
person nominated by the buyer at the
agreed point, if any, at the named place.
• If the named place is the seller’s premises,
delivery is completed when the goods
have been loaded on the means of
transport provided by the buyer.
• In any other case, delivery is completed
when the goods are placed at the disposal
of the carrier or another person nominated
by the buyer on the seller’s means of
transport ready for unloading.
• FCA requires the seller to clear the goods
for export, where applicable.
 Points of prime importance
• The parties are well advised to specify
as clearly as possible the point within
the named place of delivery.
• Even after delivery of the goods, the seller
bears a considerable financial risk as long
as full payment has not been made.

Buyer’s Obligation
• Take delivery of the goods when they have
been delivered by the seller at the agreed
point / place.
• To contract on your own expense for
the carriage of the goods from the named
place of delivery.
 Points of prime importance
• The buyer must contract at their own
expense for the carriage of the goods
from the named place of delivery.
• If the buyer does not give any instruction
to the contrary in due time, the seller has
no obligation to make a contract of carriage.
• The buyer has no obligation to the seller to make a contract of marine insurance.

CPT Carriage paid to (... named place of destination)
Seller‘s Obligation
• Deliver the goods by handing them over
to the carrier, nominated by the seller,
at the agreed point of delivery, and to
contract from that point a contract for the
carriage to the named place of destination.
• Bear all risk of loss or damage to the goods
until they have been delivered to the first carrier.
Points of prime importance
• Even after delivery of the goods the seller
bears a considerable financial risk as long
as full payment has not been made and the
buyer has not obtained marine insurance.

Buyer’s Obligation
• Take delivery of the goods when they have
been delivered to the first carrier and receive
them from the carrier at the named place of
destination.
 Points of prime importance
• The parties should identify as precisely as
possible the point within the agreed place
of destination.
• The seller is under no obligation to take out
cargo insurance.
• Without a qualitative and quantitative
examination of the goods at the time the
carrier takes delivery, only restricted coverage
can be obtained for the subsequent transport.


CIP Carriage an Insurance paid to (... named place of destination)
Seller‘s Obligation
• Deliver the goods by handing them over
to the carrier, nominated by the seller, at
the agreed point of delivery, and to contract
from that point a contract for the carriage
to the named place of destination.
• Bear all risk of loss or damage to the goods
until they have been delivered to the first
carrier.
• The seller must obtain at their own expense
a transferable cargo insurance (110 % of
the contract price) complying at least with
the minimum cover provided by Clauses (C)
of the Institute Cargo Clauses or any similar
clauses.
 Points of prime importance
• For subsequent transportation from
the named place of destination (if different
from the final place of destination) the
buyer can only obtain a restricted insurance.

Buyer’s Obligation
• Take delivery of the goods when they have
been delivered to the first carrier and receive
them from the carrier at the named place of
destination.
 Points of prime importance
• The buyer carries all risks for loss or damage
to the goods during shipment. However,
the seller has to obtain cargo insurance
which shall cover the goods from the point
of delivery to at least the named place of
destination.
• The buyer neither knows the insurance
company nor the exact scope of coverage.
• The buyer has the option of agreeing the
scope of insurance with the seller. If no
such agreement is made, he is only obliged
to obtain a minimum cover as provided by
Clauses (C) of the Institute Cargo Clauses
or any similar clauses.

DAT Delivered at Terminal (… named terminal at port/place of destination)


 Seller‘s Obligation
• Obtain a contract for carriage of the goods as
well as place the goods at the disposal of the
buyer at the named terminal, such as a quay
warehouse, container yard or road, rail or air
cargo terminal, at the named port or place
of destination.
• Bear all costs and the risk of loss or damage
to the goods until the goods, once unloaded
from the arriving means of transport, are
placed at the disposal of the buyer at the
named terminal at the port of destination.
• To clear the goods for export.
 Points of prime importance
• Specify as clearly as possible the terminal and a
specific point within the terminal at the agreed
port or place of destination, as the risks to that
point are for the account of the seller.

Buyer’s Obligation
• Taking the goods at the agreed terminal /
place.
• Bear all costs and the risk of loss or damage
to the goods from the moment they are at
the disposal of the buyer, unloaded from the
arriving means of transport, at the named
terminal.
 Points of prime importance
• Specify as clearly as possible the terminal
and a specific point within the terminal at
the agreed port or place of destination, as
the risks from that point are for the account
of the buyer.
• If the parties intend the seller to bear the
risks and costs involved in transporting
and handling the goods from the terminal
to another place, then the DAP or DDP rules
should be used.

DAP Delivered at Place (… named place of destination)
Seller‘s Obligation
• Obtain a contract for carriage of the goods
as well as place the goods at the disposal
of the buyer at the named place of
destination.
• Bear all costs and the risk of loss or damage
to the goods until they have been delivered
on the arriving means of transport, ready
for unloading, at he named place of
destination.
• To clear the goods for export.
 Points of prime importance
• Specify as clearly as possible the point
within the agreed place of destination,
as the risks to that point are for the
account of the seller.


Buyer’s Obligation
• Taking the goods at the agreed place
of destination.
• Bear all cost and the risk of loss or damage
to the goods from the moment they are at
the disposal of the buyer, ready for unloading
on the arriving means of transport, at the
named place of destination.
 Points of prime importance
• Specify as clearly as possible the point within
the agreed place of destination, as the risks
from that point are for the account of
the buyer.
• If the parties wish the seller to clear the
goods for import, pay any import duty
and carry out any import customs formalities,
the DDP term should be used.


 DDP Delivered Duty paid (... named place of destination)
Seller‘s Obligation
• Place the goods at the disposal of the
buyer on the arriving means of transport
ready for unloading at the named place
of destination.
• Bear all costs and the risk of loss or
damage to the goods as well as all costs
incurred through customs formalities,
duties, taxes and other charges.
 Points of prime importance
• The parties are advised to specify as clearly
as possible the point within the agreed
place of destination, as the costs and risks
to that point are for the account of the
seller.
• The buyer may only be able to obtainrestricted
coverage for the subsequent
transportation.
• The parties are advised not to use DDP
if the seller is unable directly or indirectly
to obtain import clearance. In such
situations, the DAP rule is more
appropriate.

Buyer’s Obligation
• Take delivery of the goods on the arriving
means of transport ready for unloading at
the named place of destination and from
that time bear all costs to the final
destination.
 Points of prime importance
• The seller is under no obligation to take out
marine insurance.
• Damage which occurs before the goods
reach the named place of destination, but
which is only detected at the final destination
can no longer be claimed for from the seller.
• Without a qualitative and quantitative
examination of the goods at the named
place of destination, only restricted coverage
can be obtained for the subsequent transport.


 FAS Free alongside Ship (... named port of shipment)
Seller‘s Obligation
• Deliver the goods, for the account of the
seller, by placing them alongside the vessel /
loading point (e.g. on a quay or a barge)
nominated by the buyer at the named port
of shipment.
• FAS requires the seller to clear the goods
for export, where applicable.
 Points of prime importance
• The buyer may only be able to obtain
restricted insurance from the named place
of shipment.
• On the one hand, you bear a considerable
financial risk should no payment have been
made before the shipment; on the other
hand, you have no guarantee that the
buyer has obtained marine insurance.
• Where the goods are in containers, it is
typical fort he seller to hand the goods
over to the carrier at a terminal and not
alongside the vessel. In such situations,
the FAS rule would be inappropriate,
and the FCA rule should be used.


Buyer’s Obligation
• Taking deliver of the goods when they have
been delivered by the seller at the named
place of shipment.
• To contract at your own expense for the
carriage of the goods from the named port
of shipment.
Points of prime importance
• The buyer bears all risks of loss of or damage
to the goods from the time they have been
delivered at the named point.
• The buyer has no obligation to the seller to
make a contract of marine insurance.

FOB Free on Board (... named port of shipment)
Seller‘s Obligation
• Deliver the goods on board the vessel
nominated by the buyer at the named
port of shipment.
• Bear all costs and risks of loss or damage
to the goods until they are on board of
the vessel at the named port of shipment.
• FOB requires the seller to clear the goods
for export, where applicable.
 Points of prime importance
• On the one hand, the seller bear a considerable
financial risk should no payment
have been made before the shipment;
on the other hand, the seller has no
guarantee that the buyer has obtained
marine insurance.
• FOB may not be appropriate where goods
are handed over to the carrier before they
are on board the vessel, for example goods
in containers, which are typically delivered
at a terminal. In such situations, the FCA
rule should be used.


Buyer’s Obligation
• Obtain the required space on the vessel.
• Bear all costs and risks of loss or damage
to he goods from the time they have been
delivered on board the vessel.
 Points of prime importance
• The seller has no obligation to obtain
insurance for the maritime voyage.
• The buyer may only be able to obtain
restricted insurance from the port of
shipment.

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

Seller‘s Obligation
• Deliver the goods on board the vessel.
• To obtain a contract for carriage to
the named port of destination and
pay the freight as well as all other costs.
• Bear all risks of loss or damage to the goods
until they have been delivered on board
the vessel at the named port of shipment.
 Points of prime importance
• Even after the delivery of the goods, you
still bear a considerable financial risk until
full payment has been made.
• The buyer may only be able to obtain
restricted insurance for the maritime
voyage.
• CFR may not be appropriate where goods
are handed over to the carrier before they
are on board the vessel, for example goods
in containers, which are typically delivered
at a terminal. In such circumstances, the
CPT rule should be used.
  
Buyer’s Obligation
• Accept delivery of the goods at the named
port of destination after receipt of the
transport documents.
• Bear all risks of loss or damage to the goods
from the time they are on board of the vessel
at the named port of shipment.
 Points of prime importance
• The seller bears all risks of loss or damage
to the goods only as far as they have been
delivered onboard the vessel at the port of
shipment.
• Without a qualitative and quantitative
examination of the goods at the port of
shipment, the buyer may be able to obtain
only restricted coverage for the subsequent
transport.


 CIF Cost, Insurance Freight (... named port of destination)


Seller‘s Obligation
• Deliver the goods on board the vessel.
• To obtain a contract for carriage to the
named port of destination and pay
the freight as well as all other costs.
• Bear all risks of loss or damage to the goods
until they have been delivered on board
the vessel at the named port of shipment.
• The seller must obtain at its own expense
a transferable cargo insurance (110 % of
the contract price) complying at least with
the minimum cover provided by Clauses (C)
of the Institute Cargo Clauses or any similar
clauses.
Points of prime importance
• If the insurance has been agreed „CIF
named port of destination“, it is usually
possible to obtain only restricted coverage
for the subsequent overland transport.

Buyer‘s Obligation
• Accept delivery of the goods at the named
port of destination after receipt of the
transport documents.
• Bear all risks of loss or damage to the
goods from the time they have been
delivered on board the vessel at the
named port of shipment.
 Points of prime importance
• The seller only has to obtain minimal
coverage for the goods during the
maritime voyage.
• Without a qualitative and quantitative
examination of the goods at the port of
arrival, only restricted insurance can be
obtained for the subsequent transport
to the final destination.
• The buyer has the option of agreeing
the scope of insurance with the seller.
If no such agreements is made, he is
only obliged to obtain a minimum cover
as provided by Clauses of the Institute
Cargo Clauses or any similar clauses.


 Responsibilities for sellers an buyers for delivery of goods under sales contracts
The following illustration serves only for a first overview. The chosen Incoterms rule needs to be appropriate to the goods, to the means of their transport, and above all to whether the parties intend to put additional obligations on the seller or on the buyer. (Recommendation: Publication ICC Rules for the Use of Domestic and International Trade Terms)

What to consider?
Two new Incoterms rules – DAT and DAP - have replaced the Incoterms 2000 rules DAF, DES, DEQ and DDU.
The number of Incoterms rules has been reduced from 13 to 11. Under the FOB, CFR und CIF rules the transfer of risks has changed at the point of delivery.

Allocations of costs buyer/seller according to Incoterms 2010

Point of Delivery
In the Incoterms 2010 rules “Point of Delivery” is used to indicate where the risk of loss of or damage to
the goods passes from the seller to the buyer.

Carrier
For the purposes of the Incoterms 2010 rules, the carrier is the party with whom carriage is contracted.

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