INCOTERMS 2000
Hoops and Hurdles
Transp Mode Furnish Product Package Goods Pre-Carriage Export License Load Goods Main Carriage Insure Import License On-Carriage *Make Payment Where does Risk Pass?
EXW Any S S B B B B B B B B Seller' Place
FCA Any S S S S S or B B B B B B Named Carrier Named Point
FAS Water S S S S B B B B B B Alongside Vessell
FOB Water S S S S S B B B B B On Crossing Ship's Rail
CPT Any S S S S S S B B B B Delivery to First Carrier
CFR Water S S S S S S B B B B On Crossing Ship's Rail
CIP Any S S S S S S S B B B Delivery to First Carrier
CIF Water S S S S S S S B B B On Crossing Ship's Rail
DAF Can/Mex S S S S N/A N/A B or S B B B Border Location
DES Water S S S S S S S B B B On Ship at Import Dock
DEQ Water S S S S S S S B B B On Quay at Import Dock
DDU Any S S S S S S S B S B At Named Destination
DDP Any S S S S S S S S S B At Named Destination
*Depending on the agreed payment terms, the payment may be made anywhere on the time-line
Insure = party that should carry insurance

 

Incoterms Tips

 

·        Incoterms provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade.

 

·        Incoterms are used to define whether the buyer or seller bears the cost or obligation of the transaction related to an international sale.  The following defines all the necessary transactions related to the international sale: 

 

Exportation of product

1.      Furnish product

2.      Insurance

3.      Package goods

4.      Pre-carriage (moving goods from seller’s dock to main carriage)

5.      Export clearance

Main Carriage movement

6.      Load goods on main carriage

7.      Main carriage

Importation of product

8.      Customs Clearance

9.      On carriage (moving goods from main carriage to buyer’s facility)

 

·        Incoterms does not define where title of transfer occurs.  It does define where risk is transferred.

 

·        Uniform Commerical Code only applies in the United States.  It is not recognized internationally.

 

·        Ex Works – provides the minimum obligation to seller. 

 

·        DDP – provides the maximum obligation to seller.

 

·        The following Incoterms are used strictly for Ocean or inland water shipments (do not use them for air or surface transportation:  FAS, FOB, CFR, CIF, DES, and DEQ.

 

·        The following Incoterms are used for any type of transportation:  FCA, CPT, CIP, DAF, DDU, and DDP.

 

·        Do not confuse the FOB Incoterm used for international transportation with the US Domestic FOB Incoterm.  FOB for international transportation is to be used only for water transportation.  The definition of the US Domestic FOB Incoterm is not recognized by other countries and should only be used when transportation occurs within the United States.

 

·        Use DAF for surface transportation only.  This Incoterm was created for shipments between two bordering countries that involves only two modes of shipping.  (i.e., US to Mexico that is moved by truck).

 

·        Since Incoterms 1990 is still effective, make sure you include in your contract the Incoterms you are referencing, i.e., DDP, Incoterms 2000.

 

·        EXW, FCA, FAS, FOB, CPT, CFR, DAF, DDU, DDP, DES, and DEQ does not require either buyer or seller to obtain insurance.  CIP, CIF requires seller to provide minimum insurance coverage.