Incoterms
define incoterms
standard international trade terms which enable exporters to quote prices that allocate the costs and risks of international transport between buyer and seller
when does the Incoterm start?
when goods are ready to leave the factory- however the incoterm must be agreed upon BEFORE the order is agreed and placed
FCA
Free Carrier (named place)
what do incoterms stand for
International Commercial Terms
what does POD stand for?
PORT (PLACE) of DESTINATION
what does POL stand for?
PORT (PLACE) of LOADING
notes about CIP
seller purchases insurance risks and costs transferred at different places
when are C terms "free"
sellers are free at POD (port/place of delivery) at exporting country
when are F terms "free"
sellers are free at POL (port or place of loading)
when are D terms "free"
sellers are free at delivered place in importing country
what does CIP stand for?
CARRIAGE AND INSURANCE PAID TO (named place of destination)
what does CPT stand for?
CARRIAGE PAID TO (named place of destination)
musical notes of C's
CFR, CIF, CIP, CPT- seller is paying portion of transportation costs, but not all, and no import duties "C" stands for COST unique because cost and responsibility change in different places
what terms require seller to obtain insurance coverage?
CIF and CIP
what terms are arrival contracts?
DAT, DAP, DDP
two extreme terms of incoterms
DDP (seller has ALL risks and costs) EXW (buyer has ALL risk and costs)
musical notes of D's
DDP, DPU, DAP- implies seller has accepted BOTH cost and responsibility until the delivered place "D" stands for DELIVERED
what does DAP stand for?
DELIVERED AT PLACE (named place of destination)
what terms are considered shipment contracts?
EXW, FAS, FOB, FCA, CFR, CIF, CPT, CIP
incoterms appropriate for all modes of transport
EXW, FCA, CPT, CIP, DAT, DAP, DDP
most commonly used incoterms
EXW, FOB, CIF, DDP
musical note of E
EXW- goods responsibility transfers to buyer at factory
EXW
Ex Works
what modes are for sea/inland water transportation only?
FAS, FOB, CFR, CIF
musical notes of F's
FAS, FOB, FCA- seller is FREE of responsibility and cost at that point "F" stands for FREE
what is the most common incoterm
FOB (responsible until port of landing; both costs and risks)
note about CPT
buyer purchases insurance risk/responsibilities passed and costs transferred at DIFFERENT places
key words of incoterms
costs and risks, roles and responsibility, international transport
what does the named place in the incoterm do?
denotes the point of transfer of ownership between seller and buyer
what are incoterms NOT?
not payment terms, but are definite costs associated with the selected Incoterm no association with the goods themselves, only the transport of finished product
what is the only difference between FOB and FAS
responsibility of loading goods onto sea vessel FOB: SELLER responsible for loading goods FAS: BUYER responsible for loading goods
what are means of transportation?
sea, air, rail, truck, or any combination of the above
what is special about FCA
seller and buyer can decide if they want to transfer goods at warehouse or port (the costs/risks then vary)
shipment contracts
seller fulfills its delivery obligation at the point of SHIPPING
note about EXW
seller is required to provide correct documents for export clearance but clearance itself is arranged by buyer or buyer's forwarder
arrival contracts
seller is responsible for the goods until they arrive in the COUNTRY OF DESTINATION