INCOTERMS Guidelines Incoterms 2010 Training 062116 Rev 1

INCOTERMS Guidelines Incoterms 2010 Training, 06/21/16 Rev. 1

INCOTERMS Are • • 11 terms of shipment/delivery Country neutral Legacy / long tradition (1936) Reflect rather than dictate trade practice 3 letter code + location + version Used for sales contract of tangible goods Registered trademark of ICC What INCOTERMS do • Divide cost/risk/responsibilities between seller and buyer • Mirror seller/buyer responsibilities in 10 task categories • Serve as a checklist for sales contract • Simplify sales contract terms • Reduce misunderstanding • Have a ~10 years revision cycle Are not • Law • All inclusive What INCOTERMS don‘t do • Address Title Transfer • Address revenue recognition • Address remedies of breach of contract in general • Automatically apply • Specifically address payment 2

INCOTERMS 2010 - Overview • 8 th revision since 1936 • 4 terms taken out (DAF, DEQ, DES, DDU) • 2 new terms DAP ~ former DES, DAF, DDU, DAT ~ former DEQ • Cargo security (C-TPAT, AEO) • Transportation method – SEA or Omni modal INCOTERMS do NOT address Title Transfer 3

KEY DEFINITIONS • Pre-carriage • Port-to-port • Main-carriage • Port-to-door • On-carriage • Omni-modal • Door-to-door • On-board • Door-to-port • Delivery 4

Water transport FAS - Free Alongside Ship FOB - Free On Board CFR - Cost and Freight CIF - Cost Insurance and Freight Omnimodal 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 5

Incoterm most commonly used: FCA CIP Incoterms to avoid: DDP Exworks

FCA - Free Carrier Seller obligation Buyer obligation Risk of loss • Pre-carriage • Main carriage • Export Clearance • On-carriage • Loading into collecting vehicle (if delivered at seller’s premises) • Import clearance From the Seller to the Buyer once goods are delivered at named place Mo. T All Notes • Default sales term for international shipments in General Terms & Conditions (Parts 33 C, PGS ES 104) • Triggers a Routed Export Transaction (RET) if shipping from US • Buyer controls main carriage and associated documents (revenue recognition, documentary payment risk) 7

CIP - Carriage and Insurance Paid To Seller obligation Buyer obligation Risk of loss Mo. T • All costs to deliver goods to named place • All costs upon arrival at the named place All • Pre-carriage • On-carriage • Main-carriage • Import clearance From the Seller to Buyer once goods are delivered to first carrier • Export Clearance • Insurance Notes • Contract specifies destination port/airport (Divided Risk of loss and cost transfer) • Seller required to obtain insurance only on minimum cover • Seller controls main carriage and associated documentation 8

EXW – Ex Works Seller obligation Buyer obligation Risk of loss • Notify the Buyer that goods are available at seller’s premises for pick up, packed appropriately • Pre-carriage From the Seller to the Buyer once goods are picked up from seller at the named place • Provide agreed documents (e. g. SI, PL), information (at buyer’s risk and expense) needed for export clearance • Main carriage • On-carriage Mo. T All • Export-import clearance, all related fees Notes • Seller not obliged to load though in a better position to do such; loading at Buyer’s risk! FCA may be more appropriate • Export formalities for Buyer! If buyer is not capable to handle export directly or indirectly (Buyer registered at seller’s country? ) FCA may be more appropriate • No reporting obligation on Buyer Taxation, statutory risk for seller (Lack of evidence export took place possible VAT consequences) FCA may be more appropriate • Triggers a Routed Export Transaction (RET) if shipping from US • Buyer controls main carriage and associated documents (revenue recognition, documentary payment risk) EXW not recommended for International transactions 9

DDP - Delivered Duty Paid Seller obligation Buyer obligation Risk of loss Mo. T • Pre-carriage • Take delivery of goods at named place From the Seller to the Buyer when goods delivered to buyer's door All • Main-carriage • On-carriage (including Export and Import Clearance/Costs unloaded from arriving means of transport) Notes • Seller controls main carriage and associated documentation • Not advised if seller is unable directly or indirectly carry out import clearance • VAT (~5 -25%) or or other taxes payable by seller unless otherwise specified in sales contract • Check with Finance / Trade Compliance for local VAT regime and applicable legal entity • Importer of record should have interest in the transaction • Consider DAP if import clearance capability not ensured • Highest possible risk for seller 10

Appendix 11

FAS - Free Alongside Ship Seller obligation Buyer obligation Risk of loss Mo. T • Deliver goods (suitably packed for export) alongside vessel at the named port • Any/all costs resulting from vessel delay or refusal to load goods • Pre-carriage • Main-carriage From the Seller to the Buyer once goods are delivered alongside vessel at named port Sea & Inland Waterway Only • Export Clearance • On-carriage • Import Clearance Notes • To be used for Sea & Waterway transport only! • Triggers a Routed Export Transaction (RET) if shipping from US • Buyer controls main carriage and associated documents (revenue recognition, documentary payment risk) • If buyer’s forwarder would handle pre-carriage FCA may be more appropriate 12

FOB - Free On Board Seller obligation Buyer obligation Risk of loss Mo. T • Pre-carriage (includes terminal handling fees) put on board. • Import Clearance From the Seller to the Buyer once goods have been placed on board Sea & Inland Waterway Only • Export Clearance • Main carriage • On-carriage Notes • To be used for Sea & Waterway transport only! • Risk of loss change: Over ship’s rail (INCOTERMS 2000) Placed on board (INCOTERMS 2010) • Triggers a Routed Export Transaction (RET) if shipping from US • Buyer controls main carriage and associated documents (revenue recognition, documentary payment risk) • If buyer’s forwarder would handle pre-carriage (FOB charges) FCA may be more appropriate 13

CFR - Cost and Freight Seller obligation Buyer obligation Risk of loss Mo. T All costs to load on board the vessel and deliver goods to the named port • All costs upon arrival at named port • Pre-carriage • Import clearance From the Seller to Buyer once goods have been placed on board • Main-carriage • On-carriage Sea & Inland Waterway Only • Export Clearance Notes • To be used for Sea & Waterway transport only! • Risk of loss change: Over ship’s rail (INCOTERMS 2000) Placed on board (INCOTERMS 2010) • Contract specifies destination port (Divided Risk of loss and cost transfer) • Seller controls main carriage and associated documentation 14

CIF - Cost Insurance and Freight Seller obligation Buyer obligation Risk of loss Mo. T • All costs to load on board the vessel and deliver goods to the named port • All costs for Import clearance and delivery of the goods to final destination From the Seller to Buyer once goods have been placed on board Sea & Inland Waterway Only • Pre-carriage • Main-carriage • Insurance • On-carriage • Import clearance • Export Clearance Notes • To be used for Sea & Waterway transport only! • Risk of loss change: Over ship’s rail (INCOTERMS 2000) Placed on board (INCOTERMS 2010) • Contract specifies destination port (Divided Risk of loss and cost transfer) • Seller required to obtain insurance only on minimum cover • Seller controls main carriage and associated documentation 15

CPT - Carriage Paid To Seller obligation Buyer obligation Risk of loss Mo. T • All costs of delivery to named place Export Clearance • All costs upon arrival at named place including import clearance and on-carriage From the Seller to Buyer once goods are delivered to first carrier All • Pre-carriage • Main-carriage • Export Clearance • import clearance • on-carriage Notes • Contract specifies destination port/airport (Divided Risk of loss and cost transfer) • No explicit insurance need on either parties (refer to GE umbrella policy) • Seller controls main carriage and associated documentation 16

DAT - Delivered at Terminal Seller obligation Buyer obligation Risk of loss Mo. T All costs to deliver goods to the named terminal at port or place of destination unloaded from arriving means of transport (pre-carriage & main-carriage, including export clearance) • Import clearance From the Seller to Buyer when goods are placed at disposal of the Buyer at named terminal or place of destination All • On-carriage Notes • Terminal: any place such as quay, warehouse, container yard, or road, rail, air cargo terminal on buyer’s side • Seller controls main carriage and associated documentation • If seller required to arrange shipment from terminal to another place than DAP, DDP should be used • This is the only term that specifically tasks the seller with unloading • Former DEQ 17

DAP - Delivered at Place Seller obligation Buyer obligation Risk of loss Mo. T All costs for delivering goods to named place of destination on the arriving means of transport ready for unloading (pre-carriage & maincarriage, including export clearance) • Import clearance From the Seller to the Buyer when goods delivered to named place All • On-carriage (? ) Notes • Seller controls main carriage and associated documentation • Former DES, DAF, DDU 18

Incoterms chart and definitions 19