Interpretation Application By Shankar Subramoniam Executive Director NAFL

Incoterms - International Commercial Terms Published by International Chamber of Commerce (ICC) Purpose – to provide a set of international rules for the interpretation of the most commonly used terms in trading. They tell the parties what to do with respect to Responsibility related to carriage of goods from Seller to Buyer Export and import clearance Division of costs and risk Key elements to contracts of Sale Impacts on the contract of carriage Do not deal with Title or Payment © 2014 Aster Marine

Incoterms & Contracting practice Incoterms standardises contracting practice by Use of generally recognised key words Agreeing on most common understanding of such key words Avoiding misunderstandings in the use of them Problems remain because Commercial practice is inconsistent Variation of the key word may not be appropriate or clear The Incoterm is not sufficiently precise for that transaction The parties inadvertently choose the wrong term © 2014 Aster Marine

Incoterms 2010 The main divisions Any mode of Transport Group E Departure EXW EX Works Group F Main Carriage Unpaid FCA Free Carrier Group C Main Carriage Paid CPT CIP Carriage Paid To Carriage & Insurance Paid to Group D Arrival DAT DAP DDP Delivered At Terminal Delivered At Place Delivered Duty Paid © 2014 Aster Marine Sea & Inland waterway only FAS FOB Free Alongside Ship Free On Board * often (incorrectly) referred to as C&F, CNF, C+F etc. CFR CIF Cost and Freight * Cost, Insurance & Freight

Obligations SELLER BUYER 1. General Obligations 2. Licences, authorisations, security clearances and other formalities Contracts of carriage and insurance 3. Delivery 4. Taking Delivery 5. Transfer of risks 6. Allocation of costs Notices to the Buyer Notices to the Seller 8. Delivery Document Proof of Delivery 9. Checking – Packaging – Marking Inspection of goods 7. 10. © 2014 Aster Marine Assistance with information and related costs

Incoterms 2010 EXW EX WORKS (. . . named place of delivery) Transport : üSea - conventional üSea - containerised üRoad üRail üAir üCombinations © 2014 Aster Marine Key Points : Ø Minimum obligation for the Seller. Ø Delivery : Placing goods at disposal of Buyer at Seller’s premises or at another named place. Ø Evaluate using FCA if Seller has to load on to Buyer’s vehicle. Ø Seller must not use where more export ‘control’ is required or in safety-sensitive operations. Ø Buyer should not use EXW if they cannot obtain export clearance.

Incoterms 2010 FCA FREE CARRIER (. . . named place of delivery) Transport : üSea - conventional üSea - containerised üRoad üRail üAir üCombinations © 2014 Aster Marine Key Points : Ø Covers all modes of transport incl. multimodal Ø Delivery § § Seller’s premises : Load on Buyer’s vehicle Other places : Placed at disposal of Buyer (unloading by Buyer). Ø Seller’s costs can be negotiated as part of the ‘delivery’ obligations Ø Seller is responsible for the Export clearance Ø No obligations on the Seller for freight and/or insurance unless requested.

Incoterms 2010 CPT CARRIAGE PAID TO (. . . named place of destination) Transport : üSea - conventional üSea - containerised üRoad üRail üAir üCombinations © 2014 Aster Marine Key Points : Ø Delivery : Goods handed over to carrier or nominee at agreed place. Ø Risk & cost transferred at different places. ** Ø Seller contracts for the freight to a destination place , which can be a port OR an inland destination. Ø Seller to clear goods for export. Ø Discharging costs, except where included in the freight, are for the Buyer.

Incoterms CIP 2010 CARRIAGE AND INSURANCE PAID TO (. . . named place of destination) Transport : üSea - conventional üSea - containerised üRoad üRail üAir üCombinations © 2014 Aster Marine Key Points : As CPT, except Ø Seller contracts for insurance (minimum cover) to the destination place , which can be a port OR an inland destination. Ø Insurance is contracted and paid for on behalf of the Buyer. ** Ø Risk passes to Buyer at first point of handover to Carrier

Incoterms DAT 2010 DELIVERED AT TERMINAL (. . . named Terminal at Port or place of destination) Transport : üSea - conventional üSea - containerised üRoad üRail üAir üCombinations © 2014 Aster Marine Key Points : Ø Irrespective of mode of transport. Ø Delivery : Unloaded from arriving means of transport, placed at disposal of Buyer. Ø Specify point within the Terminal / Port Ø Do not use if Seller has to arrange transport further. Ø Arrival dates become an issue (all ‘D’ terms) Ø Seller’s risk upto destination !!

Incoterms DAP 2010 DELIVERED AT PLACE Key Points : (. . . named Place of destination) Transport : üSea - conventional üSea - containerised üRoad üRail üAir üCombinations © 2014 Aster Marine Ø Irrespective of mode of transport. Ø Delivery : Placed at disposal of Buyer in arriving transport. Ø Seller has no obligation to clear the goods for import. Ø Arrival dates become an issue Ø Note movement of Seller’s risk to destination !!

Incoterms DDP 2010 DELIVERED DUTY PAID (. . . named place of destination) Transport : üSea - conventional üSea - containerised üRoad üRail üAir üCombinations © 2014 Aster Marine Key Points : Ø Irrespective of mode of transport. Ø Delivery : Goods are cleared for import, placed at disposal of Buyer on the arriving transport. Ø Maximum obligations for the Seller. Ø Requires payment of all duties and taxes by the Seller, at import into the destination country. Ø Seller should not use DDP if unable to obtain import clearance.

Incoterms FAS Key Points : 2010 Ø For sea or inland waterway transport. FREE ALONGSIDE SHIP (. . . named port of shipment) Ø Delivery : goods are placed alongside the Transport : üSea - conventional Sea - containerised Road Rail Air Combinations © 2014 Aster Marine Ø Ø vessel (quay/barge) nominated by Buyer. Costs for loading to main carrier are for the Buyer No obligations on the Seller for freight and/or insurance. For containers, FCA to be used. Seller to clear goods for export.

Situation …. Seller : Warehouse in Jebel Ali, 2 kms from Port Buyer : Customer in Kuwait Goods : Chemicals in drums Sale terms : FOB Jebel Ali Discharge port : Kuwait Who arranges contracts of carriage? § Operations – Container / Truck arranged by forwarder nominated by Buyer – Seller loads goods onto the container at Seller’s premises 1. Truck leaves for port and meets with accident en route. 2. Container falls on the quay while loading on ship 3. Container falls on the deck while loading © 2014 Aster Marine

Incoterms Key Points : 2010 Ø For sea or inland waterway. FREE ON BOARD Ø Delivery : Risk passes when the goods are FOB (. . . named port delivered on board the vessel. of shipment) Transport : Ø Costs for loading are for the Seller. Ø Seller is responsible for the Export formalities üSea - conventional Sea - containerised Ø No obligations on the Seller for freight and/or Road insurance Rail Ø Right of access only for carrier’s receipt. Air Ø Do not use for containers. Combinations © 2014 Aster Marine

Incoterms 2010 COST AND FREIGHT CFR (. . . named port of destination) Transport : üSea - conventional Sea - containerised Road Rail Air Combinations © 2014 Aster Marine Key Points : Ø As FOB, except Ø Seller contracts for the freight to the destination port on behalf of the Buyer. ** Ø Discharge & transit costs, except where included in the freight, are for the Buyer Ø No obligation on Seller to provide (where relevant) copy of Charter Party Ø Seller has right of access of B/L

Incoterms 2010 INSURANCE AND CIF COST FREIGHT (. . . named port of destination) Transport : üSea - conventional Sea - containerised Road Rail Air Combinations © 2014 Aster Marine Key Points : As CFR, except Ø Seller contracts for insurance to the destination port. Ø Insurance is contracted on behalf of the Buyer. **

On-line resources http: //www. iccwbo. org/incoterms/ http: //www. mantissa. co. uk http: //www. linkedin. com/groups/INCOTERMS 3347103? trk=myg_ugrp_ovr http: //navgath. blogspot. com/ © 2014 Aster Marine