SCMT 340: CH 6 INTERNATIONAL TERMS OF TRADE
Location where cargo shifts from one mode of transportation to another; from truck to rail, or from rail to ocean
Intermodal Terminal
When the exporter delivers the goods to the first carrier in the exporting country
Carriage and Insurance Paid To (CIP) Point at which the responsibility for the goods shifts from exporter to importer
The exporter must package the goods for the international voyage, provide importer with the docs necessary yo clear customs in the importing country, as well as arrange and pay for pre-carriage, main-carriage, on-carriage, and insurance to the city of destination -In countries where export authorities req a pre shipment inspection, exporter must pay for it
Carriage and Insurance Paid To (CIP) Responsibilities of the Exporter
The importer must do everything else: Importer's responsibility starts when the exporter delivers the goods to the first carrier. The importer is responsible for unloading the carriers truck, clearing customs in the importing country, and for transportation costs beyond the city of destination. -If the importing country req a pre-shipment inspection, the importer has to pay for it
Carriage and Insurance Paid To (CIP) Responsibilities of the Importer
CIP can be used for any type of product
Carriage and Insurance Paid To (CIP) Scope
CIP [Address in the City of Destination where goods are delivered], Incoterms 2010. Example: CIP Ulitsa Puruchik Nedelcho Bonchev, Sofia, Bulgaria, Incoterms 2010.
Carriage and Insurance Paid To (CIP) Syntax
DDP [Address in the City of Destination where goods are delivered], Incoterms 2010. Example: DDP Kopparbergsgatan 226, Malmo 214 44, Sverige/Sweden, Incoterms 2010.
Delivered Duty Paid (DDP) Syntax
*Allows the exporter to provide a high level of service by delivering the goods to the importers place of business-or some other location chosen by the importer *Replaced former Incoterms rule DDU-Delivered Duty Unpaid
Delivered at Place (DAP)
-The DAP Incoterms rule was created in 2010. It was meant to replace the Delivery Duty Unpaid (DDU) Incoterms rule that had been in existence until 2010 -Under DAP Incoterms rule the exporter and the importer generally agree to use a location in the importing country. However, they could agree on a location in the exporting country or one in a country through which the goods will transit.
Delivered at Place (DAP) Incoterms 2010
DAP can be used for any mode of transportation
Delivered at Place (DAP) Modality
Importer must do everything else: pays the costs of unloading the goods from the means of conveyance used for the on-carriage, and has to clear customs in the importing country, using the documents provided by the exporter
Delivered at Place (DAP) Responsibilities of the Importer
DAP can be used for any type of product
Delivered at Place (DAP) Scope
*Reflects the practice that containerized cargo often transits through a container terminal whether in an exporting or importing country.
Delivered at Terminal (DAT)
In a DAT transaction, delivery takes place in the terminal, when the goods are unloaded from the means of transportation provided by the exporter. If the terminal is in the port of origin, then the exporter delivers the goods when they are unloaded from the truck that took them to the terminal. If the terminal is in the port of destination, the transfer of responsibility takes place when the goods are unloaded from the ship.
Delivered at Terminal (DAT) Delivery
The DAT Incoterms rule was created in 2010. It is meant to be used for containerized cargo delivered to a port and to replace the maritime cargo terms (FCA, FOB, CFR, CIF), which the ICC wants to reserve for non-containerized cargo Under the DAT Incoterms rule the exporter and the importer can agree on a terminal that is located in the exporting country or one located in the importing country or yet one located in a country through which the goods will transit The DAT Iconoterms rule reflects the practices followed by companies that utilize containers in intl trade. They deliver containers to terminals in the country of export and collect containers at terminals located in a country of import.
Delivered at Terminal (DAT) Incoterms 2010
DAT can be used for any mode of transportation
Delivered at Terminal (DAT) Modality
Importer must do everything else: Responsibility starts when the exporter has delivered the goods in the terminal. Depending on the terminal's location, the transportation costs may include main carriage, on-carriage and possibly pre-carriage. If the importing country requires a pre-shipment inspection the importer pays for it.
Delivered at Terminal (DAT) Responsibilities of the Importer
DAT can be used for any type of product, but it is designed for containerized cargo (intermodal containerized shipments)
Delivered at Terminal (DAT) Scope
DAT [Address of the Terminal where the goods are delivered], Incoterms 2010. Example: DAT Paranagua Container Terminal, Avenida Portuaria, Paranagua, Parana 832016-410, Brazil, Incoterms 2010. *Address can be located in the exporting country in which the importer is responsible for the main carriage or in the importing country, in which case the exporter is responsible for the main carriage
Delivered at Terminal (DAT) Syntax
-EXW Incoterms does not specify anything regarding the delivery of the goods. Delivery occurs at the time at which the importer or the importer's agent picks up the goods at the exporter's plant. Delivery must take place at a mutually convenient time. The exporter is req to notify the importer that the goods are available for pickup and the importer is req to notify the exporter of the time at which the goods will be picked up. *No specific transportation document, although exporter is generally given a copy of the bill of lading or some form of receipt for the goods.
Delivery under Ex-Works (EXW)
-A scope: the type of products for which it can be used -A modality: the mode of transport for which it can be used -A syntax: The way it has to be stated on invoices and paperwork
Each Incoterms rule has...
-The responsibilities of the exporter -The responsibilities of the importer -A specific transfer point at which the responsibilities for the goods shifts from the exporter to the importer
Each incoterms rule defines...
Modality: Ex-Works can be used for any mode of transportation
Ex-Works (EXW) Modality
When the exporter makes the goods available to the importer
Ex-Works (EXW) Point at which the responsibility for the good shifts from exporter to importer
-Responsibilities of the Exporter: The exporter must package the goods for the international voyage (if damaged due ti improper packaging exporter is responsible) and provide the importer with the documents necessary to clear the goods for export in the exporting country and to clear customs in the importing country. --> (In an EXW transaction, the exporter is only required to "place the goods at the disposal of the buyer" and "render every assistance in obtaining any export license or other official authorization necessary for the export of the goods, in addition the exporter must package the goods, but does not have to load the goods onto the importer's pre-arranged vehicle) -EXW is the easiest of the Incoterms rule for the exporter and the most difficult for the importer
Ex-Works (EXW) Responsibilities of the Exporter
-Responsibilities of the Importer: The importer must do everything else: arranging for main transport, clearing customs in the importing country, purchasing insurance and providing on-carriage transportation in the importing counry *It should be evident that EXW is not an advantageous Incoterms rule from the importer's perspective: arranging to pick up goods in a foreign country, providing domestic transportation and clearing goods for export in a foreign country is not an easy task
Ex-Works (EXW) Responsibilities of the Importer
Scope: Ex-Works can be used for any type of goods. **However, in the Incoterms rules 2010, the Intl Chamber of Commerce clearly wants EXW to be used for small packages that are picked up by express packages services, such as FedEx or DHL
Ex-Works (EXW) Scope
EXW [Address in the City of Departure where goods are made available], Incoterms 2010. Example: EXW 2400 Progress Drive, Poughkeepsie, New York 12601, USA, Incoterms 2010. **Address=location at which the exporter will hold the merchandise available to the importer, location is in the exporting country
Ex-Works (EXW) Syntax
-Bring together volume at another consolidation spot- ship charges based on number of containers *leverage volume to get best rate possible *consolidation points in between port and vendor
Walmart Incoterms
FAS: Free Alongside Ship FOB: Free On Board ----------------------------------- CFR: Cost and Freight CIF: Cost, Insurance, and Freight
Incoterms: Main Carriage by OCEAN
C-terms: Pay for shipping but do not promise delivery D-terms: Follow up on delivery, pay for shipping, insurance, and promise will arrive in port/doorstep etc.
C-terms vs D-terms
**Under CPT incoterms rule the exporter and importer agree that the exporter should pre-pay the main carriage for the goods
Carriage Paid To (CPT)
Under CPT Incoterms rule, delivery takes place in the exporting country when the exporter provides the goods to the first carrier. This is the case even though the exporter has pre-paid shipping charges to the city of destination (pre-carriage, main-carriage, and on carriage) and the contract of carriage is in the exporter's name. In countries where export authorities require a pre-shipment inspection, exporter must pay for it **Under CPT, delivery takes place when goods are loaded onto their first means of conveyance (Image of CPT Delivery: Sugar bags are loaded in the first means of conveyance in Thailand)
Carriage Paid To (CPT) Delivery
CPT can be used for any mode of transportation *Most commonly used for goods transported by surface or air, but can still be used for goods transported by ocean; however, CPT is rarely used for cargo that is directly delivered by the exporter to an ocean carrier in a port *Also, CPT is more likely to be used for cargo that is not containerized
Carriage Paid To (CPT) Modality
When the exporter delivers the goods to the first carrier in the exporting country
Carriage Paid To (CPT) Point at which the responsibility for the good shifts from exporter to importer
The exporter must package the goods for the intl voyage, provide the importer with the docs necessary to clear customs in the importing country, as well as arrange and pre-pay for pre-carriage, main-carriage, and on-carriage to the city of destination
Carriage Paid To (CPT) Responsibilities of the Exporter
The importer must do everything else: importer assumes responsibility for goods when the exporter delivers them to the first carrier. Importer is responsible for unloading the goods from the carriers truck in the importing country, clearing customs and paying inland transportation (if any) beyond the city of destination. -If the importing country requires a pre-shipment inspection, the importer pays for it.
Carriage Paid To (CPT) Responsibilities of the Importer
CPT can be used for any type of product
Carriage Paid To (CPT) Scope
CPT [Address in the City of Destination where goods are delivered], Incoterms 2010. Example: CPT Graacher Strabe 20, Koln, Deutschland D-50969, Incoterms 2010.
Carriage Paid To (CPT) Syntax
CIP incoterms rule is a modification of the CPT Incoterms rule for which the exporter also purchases insurance for the cargo while it is in transit
Carriage and Insurance Paid To (CIP)
Under CIP, delivery takes place when the exporter provides the goods to the first carrier in the exporting country. This is the case even though the exporter has pre-paid shipping charges to the city of destination (pre-carriage, main-carriage and on-carriage) and the contract of the carriage is in the exporters name.
Carriage and Insurance Paid To (CIP) Delivery
Insurance under CIP: Under the CIP Incoterms rule, the exporter must provide insurance for the goods, but it is minimum incurance (coverage C of the institute cargo clauses) *The amount of insurance is always 110 percent of the value of the goods Incoterms rule Variant: It is possible for the exporter and importer to agree to a higher level of insurance (coverage A). In this case the Incoterms syntax changes toL CIP Ulitsa Poruchik Nedelcho Bonochev, Sofia, Bulgaria, Incoterms 2010, maximum cover.
Carriage and Insurance Paid To (CIP) Insurance
CIP can be used for any mode of transportation *Mostly designed for non-containerized cargo that travels by surface or air. It is possible to use CIP for ocean cargo as long as the cargo is not given to the ocean carrier in a port
Carriage and Insurance Paid To (CIP) Modality
Choosing the correct Incoterms rule depends on which export strategy a company is following. The following factors are particularly important: -The type of product being sold (weight, volume, perishability, value, sensitivity, to temperature changes and so on) (*Several industries, commodities in particular, prefer using some specific terms of trade rather than others) -The method of shipment (*Goods shipped by ocean or barge are sold under different Incoterm rules than cargo shipped by air or ground transportation-rail or road) (-The package size (*nature of product in terms of its inventory value, containerized goods, small packages, and large crates are transported under different Incoterms rules and use different transportation modes) -The ability and willingness of either the exporter or importer to perform the tasks involved -The amount of trust placed by either of the parties in the other party **Greatest criterion used to choose the proper incoterms rule for a transaction is the willingness of both parties to perform and pay for some of the tasks involved in the shipment--> in some cases, an exporter can gain strategic advantage and facilitate the sale of its products by assisting the importer with the tasks involved in the shipment. In others, an importer can obtain a lower price if it performs all or most of the tasks involved in the shipment **However, most companies do not determine incoterms rules on a case by case basis, but instead determine which terms of trade should be used regularly, given the company's strategy, its product line, its customers expectations, and its trade volume *Choice of Incoterms rule is often the exporter's decision: it is difficult for an exporter to adapt its incoterms rule strategy to accommodate the req of an importer- may want less responsibility or expect more and do less
Choice of an Incoterms Rule
-Choice is an integral part of the firms's export strategy -Linked to the level of customer service it wants to provide
Choice of proper Incoterms rule is a critical decision for a firm because...
In a CFR transaction, delivery does not take place in the port of destination, but in the port of departure, where the exporter delivers the goods to the carrier. The point of delivery is the "FOB point". Until the merch is on board the ship it is the responsibility of the exporter; after that responsibility shifts to the importer. *Under CFR, delivery takes takes place when the goods are placed onboard the ship
Cost and Freight (CFR) Delivery
The port of destination is not the point of delivery. In a CFR transaction, the delivery (transfer of responsibility or transfer of risk) does not take place in the port of destination, but the port of departure. *Also one of the oldest maritime terms of trade, so meaning depends on the practices of the port in which the goods are unloaded. Differences in the way unloading costs are billed, so variants to the CFR Incoterms to reflect which trade partner is responsible for unloading costs. -"CFR landed" explicitly states the costs of unloading are born by the exporter -"CFR undishcharged" notes unloading costs are borne by
Cost and Freight (CFR) Incoterms 2010
CFR can only be used for ocean transportation. *Designed for ocean transportation and is not meant for any other means of transportation or for merch that is not destined to be handed to an ocean shipping line at the port of departure
Cost and Freight (CFR) Modality
The exporter must package the goods for the international voyage, provide the importer with documents necessary clear Customs in the importing country, as well as arrange and pay for pre-carriage and main carriage to the port of destination (depending on the practices at the port of destination, the pre paid contract of carriage may include the costs of unloading the goods, if it does not, then the importer must pay for unloading the ship) -Exporter is also responsible to pay for pre-shipment inspection if req in country of export
Cost and Freight (CFR) Responsibilities of the exporter
CFR can be used for any type of product. However the ICC would like CFR to be used only for non-containerized cargo.
Cost and Freight (CFR) Scope
CFR [Address of the dock in the Port of Destination where goods are delivered], Incoterms 2010. Example: CFR ENL Multi-purpose Terminal, Apapa Wharf, Lagos Nigeria, Incoterms 2010.
Cost and Freight (CFR) Syntax
Under DAP, delivery takes place when the goods arrive still loaded on the means of transportation provided by the exporter, at their destination. Since delivery usually takes place at the location of the importer's place of business, the proof of delivery is the arrival of the arrival of goods, ready to be unloaded
Delivered At Place (DAP) Delivery
When the exporter delivers the goods to the place of delivery, still loaded on the mode of transportation
Delivered At Place (DAP) Point at which responsibility for the goods shifts from the exporter to importer
The exporter must package the goods for the international voyage, provide the importer with the documents necessary to clear customs in the importing country, as well as arrange and pay for pre-carriage, main carriage, and on carriage to the city of destination -Pay for costs of pre-shipment inspection if req
Delivered At Place (DAP) Responsibilities of the Exporter
DAP [Address of the City of Destination where goods are delivered], Incoterms 2010. Example: DAP 97 Brisbane Street, Syndenham 8023, New Zealand , Incoterms 2010.
Delivered At Place (DAP) Syntax
When the exporter delivers the goods, unloaded from the mode of transportation at the terminal **Under DAT, delivery takes place when goods are unloaded in the terminal
Delivered At Terminal (DAT) Point at which the responsibility for the good shifts from exporter to importer
The exporter must package the goods for the international voyage, provide the importer with the documents necessary to clear customs in the importing country, as well as arrange and pay for transportation to the terminal at which the goods are to be delivered (costs may include pre-carriage, main carriage, and possibly on-carriage) -Must also pay for pre-shipment inspection when required by export authorities
Delivered At Terminal (DAT) Responsibilities of the Exporter
DDP requires exporter to provide the ultimate level of customer service. Exporter handles everything for the importer, including shipment to the customer's plant and customs clearance in the importing country. For the importer, DDP is exactly equivalent to receiving a domestic shipment from a domestic supplier: the only thing left in the importers care is unloading the merchandise, something that is usually the importer's responsibility under a domestic shipment
Delivered Duty Paid (DDP)
Under DDP, delivery takes place when the exporter places the goods at the disposal of the importer at the delivery address mentioned in the Incoterms rule. Goods are delivered loaded (responsibility of importer to arrange and pay for unloading the goods)
Delivered Duty Paid (DDP) Delivery
DDP can be used for any mode of transportation
Delivered Duty Paid (DDP) Modality
When the exporter delivers the goods to the delivery location , still loaded onto the mode of transportation
Delivered Duty Paid (DDP) Point at which the responsibility of the good shifts from exporter or importer
The exporter must package the goods for the intl voyage, arrange and pay for pre-carriage, main carriage and on carriage to the city of destination, and clear customs in the importing country (clearing the goods for export)
Delivered Duty Paid (DDP) Responsibilities of the Exporter
The importer only has the responsibility of receiving the goods at delivery and unloading them
Delivered Duty Paid (DDP) Responsibilities of the Importer
DDP can be used for any type of product
Delivered Duty Paid (DDP) Scope
*Because of these restrictions, the International Chamber of Commerce (ICC) is directing exporters to limit the use of EXW to international shipments that are transported by small -package companies, such as FedEx or DHL. In that case, the goods are clearly placed at the disposal of the buyer, who can instruct the small-package carrier to collect them at the exporter's place of business. The goods are small enough that there is no concern about placing the goods on board the means of conveyance. The small-package company then transports the goods to their destination in the importing country, under a single bill of lading. Under these circumstances, an EXW Incoterms rule is attractive to importer, since there is little effort extended to arrange for the collection and the shipment of goods.
Ex-Works (EXW) Use
**Domestic terms! Don't want to use in international context FOB (Origin): At origin belongs to buyer and buyer pays for move FOB (Destination): Put on truck, pay for truck, follow up with truck, becomes yours when it arrives on your doorstep
FOB (Origin) and FOB (Destination)
The delivery officially takes place when the exporter delivers goods "alongside" a ship designated by the importer. **Under FAS, delivery takes place when goods arrove alongside the ship in the port of departure *Problem with this Incoterms rule is that ports no longer keep merch alongside a ship or on a quay waiting for a ship. Instead, the delivery takes place in a holding area, then are cartaged (transported within the port area) from the holding area to the ship before the stevedoring (loading onto the ship) takes place. However there are some merch types that are delivered next to the ship, such as large crates or bulk cargos *No transport doc corresponding to delivery to a holding area or a quay complicated this shipping method (This is why DAT was developed, there is a clear point at which responsibility shifts)
Free Alongside Ship (FAS) Delivery
FAS can only be used for ocean transportation
Free Alongside Ship (FAS) Modality
When the exporter delivers the goods to the port of departure, unloaded from the mode of transportation
Free Alongside Ship (FAS) Point at which the responsibility for the goods shifts from exporter to importer...
The exporter must package the goods for the international voyage, provide the importer with the docs necessary to clear customs in the importing country, as well as arrange and pay for pre-carriage to the point of departure (Packing goods for export, transporting to port, unloading them onto quay or holding area in the port, clear goods for export, provide whatever documents and assistance the importer may need to clear customs in the importing country and obtain insurance, pre shipment inspection before export if req)
Free Alongside Ship (FAS) Responsibilities of the Exporter
Importer must do everything else: Importer is responsible for the shipment starting from the point of delivery. Therefore the importer is responsible for port handling charges, stevedoring (loading the goods in the vessel), and for ocean transportation costs, as well as insurance (if purchased), unloading in the port of arrival, and customs duties in the importing country. Pay for pre shipment inspection if importing country requires it
Free Alongside Ship (FAS) Responsibilities of the Importer
FAS can be used for any type of product. However, the International Chamber of Commerce would like FAS to be used only for non-containerized cargo
Free Alongside Ship (FAS) Scope
FAS [Address of the dock in the Port of Departure where the goods are delivered], Incoterms 2010. Example: FAS Waalhaven Noordzijde 2089, Rotterdam, 3089KM, The Netherlands, Incoterms 2010.
Free Alongside Ship (FAS) Syntax
Under FCA, delivery takes place when one of 2 conditions is met: -If it is an FCA exporters premises transaction, the delivery takes place when the goods are loaded, by the exporter and at its expense and risk, onto the carriers truck -If it is an FCA carriers premise transaction, the delivery takes place when the goods are made available to the carrier (i.e. when the goods have arrived at the carrier's dock). The goods are delivered even though they have not been unloaded from the exporter's truck. They are unloaded from the exporter's truck. They are unloaded by the carrier and at the carrier's expense (i.e. the importer's expense), and at their risk.
Free Carrier (FCA) Delivery
-Importer must do everything else: responsible for arranging the main carriage and on-carriage (i.e. finding a carrier from the exporters town and the final destination) and communicating which carrier has been selected to the exporter. The importer is also responsible for arranging for insurance and for clearing customs in the importing country. -Also has to pay if the importing country required a pre-shipment inspection
Free Carrier (FCA) Responsibilities of Importer
The exporter must package the goods for the intl voyage, (if FCA exporters premises must also load merchandise into a container provided by the carrier and load container into the truck provided by the carrier or loading the non-containerized goods onto the means of conveyance provided by the carrier) (if FCA carriers premises, then the exporter is responsible for loading the goods onto its own truck and delivering the merch to the carriers facilities), provide the importer with the docs necessary to clear customs in the importing country (and obtain insurance) , and deliver goods either on the truck either at its own place of business or at the carriers place of business
Free Carrier (FCA) Responsibilities of the Exporter
-When the goods are delivered to the carrier (FCA carriers premises) OR -Loaded onto the truck (FCA exporter's premises)
Free Carrier (FCA) point at which the responsibility for the good shifts from exporter to importer
Under FOB, the point at which the responsibility for the goods shift from the exporter to the importer is when the goods are "onboard" the vessel. <--new interpretation with Incoterms 2010 and little jurisprudence has accumulated regarding what constitututes "onboard". -Expected to mean that the goods are delivered when they are in the hold of the ship, but remain stowed- placed in the exact location on the deck. *Point at which responsibility shifts is called the FOB point.
Free On Board (FOB) Delivery
FOB can only be used for ocean transportation *Specifically designed for ocean transportation, and is not meant for any other means of transportation or merchandise that is not destined to be handed to an ocean shipping line at the port of departure **Should be used sparingly or not at all with containerized cargo (best handled under DAT)
Free On Board (FOB) Modality
When the exporter delivers the goods onboard the ship at the port of departure
Free On Board (FOB) Point at which responsibility for the good shifts from importer to exporter...
The importer must handle everything else: responsible for arranging and paying for ocean transportation from the port of departure to the goods destination, clearing customs in the importing country and eventually arranging and paying for insurance. -Pay for pre-shipment inspection if req by importing country
Free On Board (FOB) Responsibilities of the Importer
FOB can be used for any type of product. However, ICC would like FAS to be used only for non-containerized cargo
Free On Board (FOB) Scope
Under the FOB term, the exporter is responsible for the goods until they are placed on the ship. The importer is responsible for them after that. *Sometimes incorrectly called Freight On Board, is one of the oldest maritime terms of trade *Unfortunately, that means that the division of of responsibilities between the exporter and the importer is somewhat dependent on the practices of the port in which the goods are loaded--> differences in how loading costs are billed triggered the need for a variant of the FOB Incoterms rule to reflect which of the trade partners is responsible for handling costs on the ship. -FOB Stowed or FOB Stowed, Trimmed, and Secured: used to denote that the exporter is responsible for those specific costs
Free on Board (FOB) Incoterms 2010
The exporter must package the goods for the international voyage, provide the importer with the documents necessary to clear customs in the importing country, arrange and pay for pre carriage to the port of departure and loading onto the ship. (by a stevedore) Pay for pre shipment inspection if req by export authorities.
Free on Board (FOB) Responsibilities of the Exporter
FOB [dock (or ship) in the Port of Departure where the goods are delivered], Incoterms 2010. Example: FOB Breakbulk Terminal, 660 Duncan Road, Cape Town, South Africa, Incoterms 2010
Free on Board (FOB) Syntax
Under the FCA Incoterms rule there are two choices regarding the delivery of the goods. The exporter and importer can agree on: -FCA Exporter's Premises: The exporter loads the goods at its place of business on a truck (means of conveyance) provided by the importer -FCA Carrier's Premises: The exporter loads the goods on its own truck and delivers them to the carriers place of business, still loaded on the truck. It is the responsibility of the carrier to unload them from the truck *In either FCA carriers premises or FCA exporters premises, the exporter is responsible for loading the goods on the means of transportation *In 2010 ICC indicated it would prefer intl shipment of goods other than small packages to be conducted under FCA rather than EXW when the exporter and importer agree that the exporter's role should be minimal
Free-Carrier (FCA) Delivery of Goods (2 choices)
Free Carrier can be used for any mode of transportation *But was created for goods shipped through multi-modal transportation-w/o being "handled" between means of transportation because it is containerized-under a single bill of lading *Can be used for shipments of either full-container loads (FCL) or less-than-container loads (LCL). FCA had become one of the most popular Incoterms as the number of multi-modal shipments has increased
Free-Carrier (FCA) Modality
Free Carrier can be used for any type of goods
Free-Carrier (FCA) Scope
FCA [Address of the city of Departure where goods are delivered to carrier], Incoterms 2010. Ex: FCA Batiment B Allee Corbiere, F-81000 Castres, France, Incoterms 2010.
Free-Carrier (FCA) Syntax
The international chamber of commerce specifies that there are 2 groups of Incotems rules: -7 Incoterms rules that can be used for any mode of transportation (ocean, road, air, train)--> *important when you have more than one mode of transportation or don't know mode of transportation (Why would you not know? -Using a third party) -4 Incoterms that can ONLY be used for OCEAN transportation (these are the oldest terms of trade)
Groups of Incoterms Rules
Incoterms rules formally define the following aspects of an international sale: 1) Which tasks will be performed by the exporter? 2) Which tasks will be performed by the importer? 3) Which activities will be paid by the importer? 4) Which activities will be paid by the exporter? 5) The exact point at which the responsibility for the goods transfers from the exporter to the importer.
Incoterms 2010 (Defines 5 aspects of the international sale, Questions Answered...)
2010 version of Incoterms rules created a group of commercial terms of trade that could be used for both domestic and international trade Why? 1) In 2002, US, American Law Institute and the National Conference of Commisioners on Uniform State Laws eliminated the definitions of shipping and delivery terms, thought Incoterms could help fill the void (2011 reinstated traditional shipping and delivery terms though) 2) Incoterms rules are revised and reviewed at periodic intervals 3) Companies and managers are increasingly multi-national and operate in many domestic markets in addition to their international activities--> By following Incoterms rules, managers can learn only one set of rules rather than several domestic rules, many of which contradict each other. *Unknown whether Incoterms rules will eventually gain usage as domestic terms of trade. However, the modifications made by the ICC would likely enhance that possibility
Incoterms 2010 Rules in Domestic Trade
**Another issue to recognize in incoterm rules choice is that regardless of the incoterms rule chosen, the importer always pays for the transportation and other costs of shipping internationally. The fact that the exporter pre-pays and arranges for certain aspects of the shipment is reflected in the invoice price; therefore, the importer is charged for them. In addition it is likely though not always the case that the exporter's invoice includes a charge that is higher than the actual cost of the service. Many exporters add a premium to these expenses to reflect the cost of time and effort to arrange for those services
Incoterms Payment
EXW: Ex Works FCA: Free Carrier CPT: Carriage Paid To CIP: Carriage and Insurance Paid To DAT: Delivered At Terminal DAP: Delivered At Place DDP: Delivered Duty Paid
Incoterms: Main Carriage by Any Means of Transportation (7 )
-In 1936, the International Chamber of Commerce developed International Trade Commerce rules (or Incoterms rules) that formalized these responsibilities -Revised in 1953, 1967, 1980, 1990, 2000, and 2010 (Why revised?? 1990-Transportation Deregulation, 2000- Internet, 2010- Formation of economic blocs; electronic docs (incoterms became gender neutral) 2020? Again b/c of block chain?) -The latest version of incoterms rules is dated 2010 and was implemented on 1/1/2011 =Incoterms rules follow international trade practices and are always reflecting the way shipping is conducted. The changes implemented in 2010 were significant, but were designed to facilitate the division of responsibilities between the exporter and the importer **Benefits parties to use Incoterms rules b/c info is available for each and substantial jurisprudence has accumulated **Used in all docs used in an intl transaction
International Commerce Terms Incoterms Rules
Terms of trade used in the contract of sale to determine which steps are the responsibility of the exporter and which steps are the responsibility of the importer -A series of 11 intl terms of trade Standardized by the International Chamber of Commerce (1936) -domestic transportation- ex: movers pay for damage they cause -international transportation- looking at where along the line decide when exporters responsibility ends and importers begins
International Terms of Trade (Incoterms rules) Purpose *Incoterms = International Commerce Terms
Inc profits by 5 mil -MKTG (90% COGS): Total sales should be 50 mil to generate that level of profit *spending $$ to make $$ -SCMT: Find cheapest transportation, better packaging, outsourcing, reduce cost of material, make production more effecient etc. *not spending $$
SCMT vs MKTG Business Solutions
-The goods must be cleared for export -The transport of the goods between the exporter and the importer must be arranged, often using several means of transportation (aka means of conveyance) including at least 3 distinct legs in the journey: 1) Pre-carriage, or transportation that takes place in the country of export 2) Main carriage, or the international transportation between the country of export and the country of import 3) On-carriage, or the transportation that takes place in the country of import -The goods must clear customs in the importing country **Determine who is responsible for: -The risks involved in the international transportation (insurance/documentation)
Steps involved in getting goods to the customer...
The point in time at which the ownership of the goods changes from the exporter to the importer *usually takes place when the importer has either paid the exporter-and obtained the original bill of lading (ch 9)- accepted to sign a draft (ch 7) or performed some other event specifically outlined in the contract of sale
Transfer of Title
-Coincides with delivery of goods, a point that is clearly outlined in each of the Incoterms rules and in most cases occurs chronologically much earlier than the transfer of title *In an intl voyage, the point at which the exporter ceases to be responsible for the goods -Transfer of responsibility NEVER extends beyond the services for which the company has paid. However, there are several incoterms rules where the exporter is obligated to pre-pay a portion of the transportation costs-main-carriage and on-carriage-even though the exporter is no longer responsible for the goods--> such is the case for the so-called C-terms, the terms whose three-letter acronyms start with the letter C.
Transfer of responsibility (transfer of risk) *dictated by the Incoterms rule!