Inconterms

The Incoterms They are a set of international rules, governed by International Chamber of Commerce (Paris), determining the scope of the commercial clauses included in international sales contract.

Also they called price clauses, as each term to determine the elements that compose. The selection of the Incoterm influences on the cost of the contract. The purpose of Incoterms is to provide a set of international rules for the interpretation of the most commonly used terms in international trade.

The Incoterms determine:

  • The price range.
  • In that moment and where the transfer of risk on the merchandise occurs seller to the buyer.
  • The place of delivery of goods.
  • Who hires and pays transportation
  • Who hires and pays the insurance
  • What documents processed each part and its cost.

Here you have a table that provides the International Chamber of Commerce in Paris (ICC) for those interested in international trade, Incoterm remember that each has a standardized criteria but can be modified if the buyer and seller agree.

make click to download the full table of Incoterms 2010.

Ex Works (EXW). Factory

It can be used for any mode of transport, or where more than one mode of transport. This Incoterm assigns the minimum responsibility on the seller, you just need to put the goods available, in suitable packaging, in the right place, usually Seller's factory or warehouse. The buyer is responsible for loading the goods on a vehicle (even though the seller may be better able to do this), for all export procedures, for transport and all expenses arising after the collection of the goods. In international trade, This Incoterm can present practical difficulties. Specific, the exporter may need to participate in the process of export clearance, and can not leave these to the buyer. Preferably the Incoterm FCA (local seller) instead, especially if the seller is obligated to load the goods. Other things to consider. Although the seller has no obligation to load the goods, if the seller does, this is at buyer's risk.

Free Carrier (FCA). Franco Carrier

It can be used for any mode of transport, or when more than one mode, multimodal transport. It is a very flexible Incoterm, suitable for all situations where the buyer of the main transport is responsible.

For instance:

• The seller arranges transport of the seller's premises to the right place, it can be a terminal or a transportation hub. The transfer risk is performed when the vehicle truck or other reaches this place, ready for download – in other words, the carrier is responsible for unloading the goods.(If more than one company, then transfers the risk of delivery falls on the first carrier.)

• If the named place is the seller's premises, the seller is responsible for loading the goods on the truck, etc. This is an important difference EXW.

In all cases, the seller is responsible for export clearance, the buyer bears all risks and costs that the goods have been delivered at the agreed place. Incoterm FCA is that we choose for containerized cargo where the buyer organizes the main transport.

Carriage Paid To (CPT). Carriage Paid To

It can be used for any mode of transport, or when more than one mode. The seller is responsible for organizing transportation to the designated place, but not to ensure the goods to the agreed place. Nevertheless, delivery of goods takes place, and the transfer of risk from seller to buyer, before the main transport, at the time the goods happen to be in charge of the first carrier. Please note costs terminal handling (THC) are those used by the terminal operator either at the beginning or end of the transport operation, or both. These expenses may or may not be included by the company in its loading costs – the buyer should ask if the price includes THC CPT, to avoid surprises. The buyer will have to arrange insurance coverage for main transport, from the time when the property passes to the carrier.

Carriage and Insurance Paid To (CIP). Carriage and Insurance Paid

It can be used for any mode of transport, or when more than one mode. The seller is responsible for organizing transportation to the agreed place, and it is also responsible for ensuring goods. As with CPT, delivery of goods takes place, and risk transfers from seller to buyer, before the main transport, at the time the goods are made available to the first carrier.

To consider.

The costs of terminal handling (THC) are those used by the terminal operator either at the beginning or end of the transport operation, or both. These expenses may or may not be included by the company in its loading costs – the buyer should ask if the price includes THC CIP, to avoid surprises. Although the seller is obliged to take out insurance for the trip, the Incoterm CIP only requires a minimum level of coverage, which may be unrealistic. Therefore, to take into account whether a higher level of coverage required in the contract.

Delivered At Terminal (THAT). Delivered at Terminal

It can be used for any mode of transport, or when more than one mode. The seller is responsible for arranging transportation and delivery of goods, unloaded from the means of transport arriving, at the agreed place. Transfers the risk from seller to buyer when the goods have been discharged. ‘Terminal’ It can be anywhere – a pier, container terminal, warehouse or transportation hub. The buyer is responsible for import clearance and applicable local taxes or import duties.

To consider:

The place of delivery must be specified as accurately as possible, as many ports and transport centers are very large. When there are expenses applied by terminal handling, the parties should clarify who should bear these. A useful Incoterm, very suitable for deposit operations in which the seller takes responsibility for the main transport. Very suitable for container operations.

Delivered At Place (DAP). Instead delivered

It can be used for any mode of transport, or when more than one mode. The seller is responsible for arranging transportation and delivery of goods, ready for unloading the means of transport they arrive (ships, trucks, etc.), at the agreed place. (An important difference with DAT Delivered At Terminal, where the seller is responsible for unloading.) Transfers the risk from seller to buyer when the goods are available for download, so that the discharge is at buyer's risk. The buyer is responsible for import clearance and applicable local taxes or import duties. This Incoterm can often be used to replace Incoterms 2000 Delivered at Frontier (DAF), Delivered Ex Ship (OF) y Delivered Duty Unpaid (DDU)

Delivered Duty Paid (DDP). Delivered Duty Paid

It can be used for any mode of transport, or when more than one mode. The seller is responsible for arranging transportation and delivery of the goods at the agreed place, cleared for import taxes and duties paid. Transfers the risk from seller to buyer when the goods are made available to the buyer, ready for download from the means of transport arriving at the designated place. This Incoterm puts the maximum obligation on the seller, Incoterm that is unique and requires the seller to take responsibility for import clearance and payment of taxes and / or import duties.

The latter requirements can be very problematic for the seller. In some countries, the import clearance procedures are complex and bureaucratic, so it is best left to the buyer.

Free Alongside Ship (FAS). Free alongside ship

Use of this Incoterm is limited to goods carried by sea or inland waterway. In practice should be used in situations where the seller has direct access to cargo ship, for instance, bulk cargoes and non-containerized goods. For goods in containers, FCA best to consider instead. The seller delivers the goods, dispatched to her exportación, alongside the vessel at the designated port, when the risk is transferred to the buyer.

The buyer is responsible for loading the goods on board and all costs thereafter. Suitable for bulk goods, It should not be used for containers – use FCA instead.

Free On Board (FOB). Franco a bordo

Use of this Incoterm is limited to goods carried by sea or inland waterway. In practice should be used in situations where the seller has direct access to cargo ship, for instance, bulk cargoes and non-containerized goods. For goods in containers, use FCA instead. The seller delivers the goods, dispatched to her exportación, loaded aboard the ship in port. Once the goods have been loaded on board the risk is transferred to the buyer, who bears all costs thereafter. Suitable for bulk goods, It should not be used for containers – use FCA instead.

Cost and Freight (CFR). Cost and freight

Use of this Incoterm is limited to goods carried by sea or inland waterway. In practice should be used in situations where the seller has direct access to cargo ship, for instance, bulk cargoes and non-containerized goods. For goods in containers, CPT considered instead. The seller arranges and pays for the main carriage to the agreed port. The seller delivers the goods, dispatched to her exportación, loaded on board ship. Nevertheless, the risk is transferred from seller to buyer once the goods have been loaded on board, namely, before the main transport takes place. Seller is not responsible for insuring the goods for the main transport. In this case consider CIF. Suitable for bulk goods, It should not be used for containers – use CPT instead.

Cost Insurance and Freight (CIF) Cost Insurance and Freight

Use of this Incoterm is limited to goods carried by sea or inland waterway. In practice should be used in situations where the seller has direct access to cargo ship, for instance, bulk cargoes and non-containerized goods. For goods in containers, CIP consider instead. The seller arranges and pays for transportation to the named port. The seller delivers the goods, dispatched to her exportación, loaded on board ship. Nevertheless, Risk transfer from the seller to the buyer takes place once the goods have been loaded on board, namely, before the main transport takes place. The seller also organizes and pays the insurance of the goods for transport to the port. Nevertheless, as in the CIP, Incoterm only requires a minimum level of coverage, which may be unrealistic. Therefore, to take into account whether a higher level of coverage required in the contract. Suitable for bulk goods, It should not be used for containers – use CIP in place.

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