CHAPTER VI INTERNATIONAL TRADE TERMS American Foreign Trade

CHAPTER VI INTERNATIONAL TRADE TERMS ¨ American Foreign Trade Definitions of 1990 ¨ Incoterms of 2010 1

Functions of International Trade Terms ¨ Quotation at a fixed location ¨ Delivery point of the goods ¨ Passage of title to the goods ¨ Passage of risk of loss of or damage to the goods 2

American Foreign Trade Definitions of 1990 Understand but don’t use them in international trade t EXW (Point of Origin): EX Factory or Warehouse t FOB (Free On Board) § § § FOB (name inland carrier at named inland point of departure) FOB (same plus Freight Prepaid to named point of exportation) FOB (same plus Freight Allowed to (name point of exportation) Freight collect 3

American Foreign Trade Definitions of 1990 § FOB (Free On Board) § FOB (named inland carrier at named point of § § exportation) FOB Vessel (at named port of shipment) FOB (at named inland point in country of importation 4

American Foreign Trade Definitions of 1990 t FAS Vessel (Free Alongside Vessel) Delivery to alongside the ocean carrier t C & F (Cost & Freight) Cost of goods plus all freights to port of importation t CIF (Cost, Insurance & Freight) Cost of goods plus marine insurance premium plus all freights to port of importation t DEQ Duty Paid (named port of importation) CIF plus import duty & customs clearance Also called “Ex Dock Duty Paid” 5

Incoterms of 2010 Acronym of International Commercial Terms t Incoterms 2010 replaced Incoterms 2000 as of 1/1/2011 t t DAT of 2010 replaced DAF, DES, DEQ of 2000 DDP of 2010 replaced DDU of 2000 6

Incoterms of 2010 Group I: t t Rules for Any Mode or Modes of Transport Group II: t t Rules for Sea and Inland Waterway Transport 7

Incoterms of 2010 Group I: t t t Rules for Any Mode or Modes of Transport EXW, FCA, CPT, CIP, DAT, DAP, DDP 8

Incoterms of 2010 EXW (EX Works) … named place of delivery – Seller places goods at the disposal of buyer at seller’s premises or at another named place. – Seller is not responsible for loading – Buyer is responsible for all expenses and risks from the named place of delivery – More suitable for domestic trade – Represents minimum obligation of seller 9

Incoterms of 2010 § FCA (Free Carrier) … named place of delivery – Seller delivers goods to carrier or another person nominated by buyer at seller’s premises or another named place. – If delivery occurs at seller’s premises, seller loads goods on buyer’s means of transport. – If delivery occurs at any other place, seller places goods at the disposal of the carrier on seller’s means of transport ready for unloading – Seller clears the goods for export. 10

Incoterms of 2010 § CPT (Carriage Paid To) … named place of destination • Seller delivers the goods to carrier or another person nominated by seller at agreed place and pays cost of carriage (freight) to the named place of destination • Seller's responsibilities stop when goods have been delivered to carrier. • If several carriers are used, delivery obligation is fulfilled when goods are delivered to first carrier • Seller clears the goods for export. 11

Incoterms of 2010 § CIP (Carriage & Insurance Paid To)… named place of destination • Seller delivers the goods to carrier or another person nominated by seller at agreed place and pays the freight & insurance premium. • Seller's responsibilities stop when the goods have been delivered into the custody of the carrier. • Seller clears the goods for export. • Seller is obligated to obtain only minimum insurance coverage. 12

Incoterms of 2010 § DAT (Delivered AT Terminal)… named terminal at port or place of destination • Seller must place the goods at the disposal of the buyer, not cleared for import, on the terminal at the named port or place of destination. • Seller has to bear all costs and risks involved in bringing the goods to the named terminal and unloading them from the arriving means of transport. • Buyer is required to clear the goods for import and pay for all import customs formalities • Can be changed to DAT Duty Paid 13

Incoterms of 2010 § DAP (Delivered AT PLACE) … named place of destination • Seller delivers the goods to the named place in the country of importation, not cleared for import and not unloaded. • Seller bears all the costs and risks to the named place of import excluding duties, taxes and other charges related to importation. • Buyer clears the goods for import. 14

Incoterms of 2010 § DDP (Delivered Duty Paid) … named place of destination • Seller delivers the goods to the named place in the country of importation. • Seller bears all the costs and risks to the named place including duties, taxes and other charges to the named place in the country of importation. • Seller clears the goods for import. • Represents maximum obligation of seller 15

Incoterms of 2010 Group II: t t t Rules for Sea and Inland Waterway Transport FAS, FOB, CFR, CIF 16

Incoterms of 2010 § FAS (Free Alongside Ship) … named port of shipment • Seller places the goods alongside vessel nominated by buyer. • Seller clears the goods for export. • Loading goods on board vessel is buyer’s responsibility • Buyer pays ocean freight & marine insurance • Used only for sea or inland waterway transport 17

Incoterms of 2010 § FOB (Free On Board) … named port of shipment • Seller loads the goods on board vessel. • Seller's risks stop when goods pass ship's rail. • Seller clears the goods for export. • Buyer pays freight & marine insurance • Used only for sea or inland waterway transport 18

Incoterms of 2010 § CFR (Cost & Freight) … named port of destination • Seller loads the goods on board the vessel. • Seller's risks stop when goods pass ship's rail. • Seller clears the goods for export. • Seller pays freight. • Buyer pays marine insurance. • Used only for sea or inland waterway transport 19

Incoterms of 2010 § CIF (Cost, Insurance & Freight) … named port of destination • Seller loads the goods on board the vessel. • Seller's risks stop when goods pass ship's rail. • Seller clears the goods for export. • Seller pays insurance premium & freight • Seller is obligated to obtain only minimum marine insurance coverage. • Used only for sea or inland waterway transport 20

INCOTERMS 2010 v Group I EXW EX WORKS (. . . named place of delivery) FCA FREE CARRIER (. . . named place of delivery) CPT CARRIAGE PAID TO (. . . named place of destination) CIP CARRIAGE AND INSURANCE PAID TO (. . . named place of destination) DAT DELIVERED AT TERMINAL (. . . named terminal at port or place of destination) DAP DELIVERED AT PLACE (. . . named place of destination) DDP DELIVERED DUTY PAID (. . . named place of destination) 21

INCOTERMS 2010 v Group II FAS FREE ALONGSIDE SHIP (. . . named port of shipment) FOB FREE ON BOARD (. . . named port of shipment) CFR COST AND FREIGHT (. . . named port of destination) CIF COST, INSURANCE AND FREIGHT (. . . named port of destination) 22

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