Inco 2010 2t2zc
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Inco 2010
Inco 2010 What do the Changes Mean?
International Commercial History Inco 2010
• Initially created in 1936 by the International Chamber of Commerce (ICC) and have been periodically revised (Inco® 2010 is the 8 th revision) • Inco® are generally good for approximately 10 years ~ not a magic number, but historically about accurate • Inco® reflect world-wide trade practices, as practices change, Inco® are revised • Inco® 2010 were written by the ICC, represented by 8 individuals from various countries/areas of the world – – – –
Met 11 times in person Received over 2000 suggestions in first request Refined suggestions over 4 proposals Controlling source document is written in British English and will be translated into 35+ languages.
What are Inco ® 2010? Inco 2010
• Eleven (11) Inco® 2010 (used to be 13 ) – Four (4) were deleted and two (2) new were created
• Inco® 2010 began from January 1, 2011 • Available worldwide through 100 International Chamber of Commerce National Committees – The aren’t law; no laws that require their use and are not all inclusive – Country neutral – they don’t favor one country over another – Self-contained – all information that determines responsibility and risk are in one place
Inco 2010
Definitions…..
Just what do we mean?
Key Definitions Inco 2010
• What is Delivery?
As defined in Inco® 2010, “it is used to indicate where the risk of loss of or damage to the goods es from the seller to the buyer.”
• It is not always: – When the goods arrive in your customer’s hands or – When the goods leave your dock – Defined the same in all countries
• You must know your contract and your Incoterm® – Note: A Purchase Order and a matching Acknowledgement will constitute a “contract” if there isn’t a separate stand-alone contract related to the transaction.
Transportation Definitions Inco 2010
• Pre-carriage: inland transportation on the seller’s side – Domestic: from the place where the shipment starts to any subsequent transportation carriage – International: from the place where the shipment starts to the departure point on the seller’s side
• Main Carriage: – Domestic: subsequent transportation beyond pre-carriage – International: transportation from the point of departure on the seller’s side to the arrival pint on the buyer’s side
• On-carriage: – Domestic: subsequent transportation beyond main carriage – International: transportation from the arrival pint on the buyer’s side
Transportation Definitions Inco 2010
• Door – to – Door – Contract of carriage that includes pre-carriage, main-carriage and on-carriage by the same carrier
• Door – to – (Air) Port: – Contract of carriage including pre-carriage and main-carriage to airport or ocean port or truck terminal port or rail port
• (Air) Port – to – (Air) Port: – Contract of carriage for main carriage only
• (Air) Port – to – Door: – Contract of carriage including main carriage and on-carriage
Type of Transportation? Inco 2010
• Company A
• Company B
Door to Door – one contract for all carriage (pre-, main, and on-carriage)
Type of Transportation? Inco 2010
• Company A
Door to Port – contract for pre-carriage and main-carriage
Company B responsible for arranging pick up at Arrival Airport
A Few More Definitions….. Inco 2010
• Omni-modal: Used with that use all modes of transportation (truck, airplane, vessel, train…) • Marine-restricted: that only apply to carriage by vessel • Shipment Contract: sales/purchase contract where the seller’s responsibility ends when goods are handed over to the first carrier • Arrival Contract: sales/purchase contract where seller’s responsibility ends when goods have arrived at agreed place
Packaging Definitions Inco 2010
1. The packaging of the goods to comply with any requirements under the contract of sale. 2. The packaging of goods so that they are fit for transportation. 3. The stowage of the packaged goods within a container or other means of transport. Only Definition 1 & 2 are addressed in Inco® 2010. Definition 3 must be addressed within the contract between the parties.
What Questions to Ask? Inco 2010
• Who furnishes the goods? • Who packages the goods in a manner suitable for shipment (export)? • Who moves the goods from the seller’s factory to a port, airport, or border crossing in the seller’s country? • Who arranges for export clearance in the seller’s country (if applicable)? • Who arranges for main carriage (international transportation) from the departure port to the arrival port? • Who pays for main carriage? • Who insures the shipment? • Who arranges for import clearance? • Who pays import duties? • Who pays for on-carriage from the arrival port to the delivery destination? • Who arranges and pays for country-specific documentation (e.g., consular invoices, inspection reports, licenses)?
Inco 2010
Now that we have some basic definitions…
What do Inco® 2010 Do? Inco 2010
• Divides up tasks, responsibilities, costs and risks to deliver goods from seller to buyer – If used correctly, no duplication of effort between seller & buyer – Acts as signposts for who needs to have additional contracts (i.e., with vessel steamship line, inland trucking company, etc.) to complete transaction – If something goes wrong, clearly defines responsibilities based on where the goods were in the transportation chain of delivery
• Address “String sales” – Shipments where ownership changes in transit
• Address Cargo Security concerns – Authorized Economic Operator (AEO), Customs-Trade Partnership Against Terrorism (C-TPAT), Importer Security Filing (ISF 10+2)
• Defines mode of transportation by their use – 4 are for Marine-Restricted for sea & inland waterway transport only – 7 are Omni-modal for use with all modes of transportation
• Increasingly considered replacement for Uniform Commercial Code (UCC) shipment/delivery .
What Inco® 2010
DO NOT Do…
Inco 2010
• Automatically Apply • Determine When Ownership Changes – When delivery occurs or when payment happens can impact when ownership changes – Must be addressed specifically in contract • Under US Law, it is when the product is delivered • If jurisdiction is under another sovereign nation law, you need to address per that country regulation • If contract is subject to the United Nations Convention on Contracts for the International Sale of Goods (CSIG) the law does not specify if it is not addressed specifically within the contract
• Identify when Revenue is Recognized – Under GAAP and Securities & Exchange Commission (SEC) Rules 1) ownership must prior to recognizing revenue and 2) delivery must occur • If not specifically addressed in contract, look to applicable contract law
What Inco® 2010
DO NOT Do…
Inco 2010
• Identify if a Breach of Contract occurs, when it happened – Does not determine remedies for breach of contract
• Provide relief from obligations/exemptions from liability in unexpected or unforeseeable situations • Address Payment issues – Tells you that the buyer must pay, but not when or where
• Address more than one contract – Drop Shipments are TWO Contracts 1) between the seller and their supplier and 2) between the seller and the buyer – Inco® 2010 could be the same or different in each contract
• Specifically task a party with container stowage obligations
Inco® 2000 vs. 2010 Inco 2010
•
EXW – Ex Works
• • •
FCA – Free Carrier FAS – Free Alongside Ship FOB – Free On Board
• • • •
CFR – Cost and Freight CIF – Cost, Insurance & Freight T – Carriage Paid To CIP – Carriage & Insurance Paid To
• • • • •
DEQ – Delivered Ex Quay DES – Delivered Ex Ship DAF – Delivered at Frontier DDU – Delivered Duty Unpaid DDP – Delivered Duty Paid
Marine Restricted Omni-Modal
•
EXW – Ex Works
• • •
FCA – Free Carrier FAS – Free Alongside Ship FOB – Free On Board
• • • •
CFR – Cost and Freight CIF – Cost, Insurance & Freight T – Carriage Paid To CIP – Carriage & Insurance Paid To
• • •
DAT – Delivered At Terminal DAP – Delivered At Place DDP – Delivered Duty Paid
Inco 2010
Group Term Definitions
F – C – D –
F-Group Inco 2010
• Are considered to be “Shipment Contracts” • Are considered Buyer Friendly
Seller • Handles Export Clearance • Handles Pre-carriage • Named Place on Seller’s Side
• • • •
Buyer Contracts for Main Carriage In charge of Carrier (and usually forwarder) selection Control over Freight Costs Control of Documentation
C-Group Inco 2010
• Are considered to be “Shipment Contracts” • Are considered Seller Friendly • • • • • •
•
Seller Contracts for Main Carriage In charge of carrier (and usually forwarder) selection Handles pre-carriage Has control over freight costs In control of documentation es risk of loss (delivers) to Buyer prior main carriage Handles export clearance
Buyer • Named Place is on Buyer’s side • Has risk of loss while goods are in transit with carrier selected and paid for by seller • Must rely heavily on Seller for data elements required for ocean shipments such as Importer Security Filing (known as ISF or 10+2) If informed, should not consider “C” due to downside described
D-Group Inco 2010
• Are considered to be “Arrival Contracts” Seller • Contracts for Main Carriage • In charge of carrier (and usually forwarder) selection • Handles pre-carriage • Has control over freight costs • In control of documentation • es risk of loss (delivers) to Buyer at freight arrival point • Handles export clearance • Seller may have revenue recognition issues since “delivery” occurs on arrival side, meaning revenue is recognized only upon arrival
• •
• •
Buyer Named Place on Buyer’s side Must rely heavily on Seller for data elements required for ocean shipments such as Importer Security Filing (known as ISF or 10+2) Undertakes less risk than in “C” If inexperienced, or does not have good relationship with carriers, is served will by “D”
Inco 2010
Omni-Modal Inco® 2010
Ex Works (EXW) + (Named Place) Inco 2010
Named Place is generally Seller’s Location (or where product initially ships from) • Delivery – Seller delivers goods when placed at buyer’s disposal at the name place of delivery – Goods are packaged – Goods are NOT LOADED on the collecting vehicle
• Seller Risks – Minimum obligation for seller; once packaged there is a loss of control over transportation movement, where package is finally received, how export or import documentation is presented to relevant governments • Buyer Risks – Buyer bears all costs and risks involved in taking the goods from the named place • Carriage: Buyer responsibility to arrange for pre-carriage, main carriage, on-carriage • Insurance: Neither party required to insure goods • Export/Import Clearance: Buyer must handle all requirements, pay all associated duties and fees Note: Should NOT be used when the buyer cannot carry out export requirements directly or indirectly
Free Carrier (FCA) + (Named Place) Inco 2010
• Named Place is generally: – Seller’s Place of Business • Seller responsible for having goods available when promised, packaged to the extent known or agree, loaded onto collecting vehicle • Buyer responsible for pre-carriage, main carriage, on-carriage – Another Location on Seller’s side (i.e., International Airport, Freight Forwarder Warehouse for consolidation, another location agreed by Seller and Buyer) • Seller responsible for having goods available when promised, packaged to the extent known or agree, loaded onto collecting vehicle, pre-carriage • Buyer responsible for unloading pre-carriage delivering vehicle, main carriage, on-carriage
FCA + (Named Place) Inco 2010
• Contract of Carriage: Buyer is responsible to make a contract of Carriage, however if requested or the buyer does not give instruction in due time, the seller may contract for carriage on usual at the buyer’s risk and expense. • Risks: es to buyer at point of delivery • Insurance: Neither party required to insure goods • Export Clearance: Handled by Seller
– Associated Licenses can be obtained and maintained under US Law – Automated Export System filings can be completed by Seller
• Import Clearance: Handled by Buyer – responsible for the customs formalities and any duties, fees, other charges due upon importation.
This is the most versatile of the “F” .
Inco 2010
Carriage Paid To (T) + Named Place (on Buyer’s Side)
• Delivery: Seller delivers goods to a carrier or another person nominated by the seller, at an agreed place, for transportation to the named destination on the Buyer's side, appropriately packaged • Carriage: Seller chooses and pays cost of carriage to bring the goods to the named destination (the final location, not the destination port) • Risks: Seller bears all risks and costs incurred until the goods are delivered to the first carrier on the Seller’s side • Export Clearance: handled by Seller • Import clearance: Buyer responsibility for paperwork and all costs • Insurance: Neither party required Note: Risk of Loss es on Seller’s side to Buyer BUT Cost is Seller’s responsibility to named location on Buyer’s side
Inco 2010
Carriage and Insurance Paid To (CIP) + Named Place (on Buyer’s Side)
• Delivery: Seller delivers goods to a carrier or another person nominated by the seller, at an agreed place, for transportation to the named destination on the Buyer's side, appropriately packaged • Carriage: Seller pays cost of carriage to bring the goods to the named destination (the final location, not the destination port) • Risks: Seller bears all risks and costs incurred until the goods are delivered to the first carrier on the Seller’s side • Export Clearance: handled by Seller • Import clearance: Buyer responsibility for paperwork and all costs • Insurance: Seller required to obtain minimum coverage Note: Risk of Loss es on Seller’s side to Buyer BUT Cost is Seller’s responsibility to named location on Buyer’s side
Inco 2010
Delivered at Terminal – DAT + Named Place (Buyer’s side)
• Replaces DEQ Term • Delivery: Seller delivers goods to named destination terminal on Buyer’s side, packaged appropriately and unloaded • Carriage: – Seller responsible for pre-carriage and main carriage – Buyer responsible for on-carriage
• Risks: Transfer from Seller to Buyer once goods are unloaded on buyer’s side at terminal • Export Clearance: Seller Responsibility • Import Clearance: Buyer Responsibility – documentation and fees associated • Insurance: Neither party required to insure
Inco 2010
Delivered at Place (DAP) + Named Place (Buyer’s Side)
• Previously contained elements of DDU, DAF, DES • Delivery: Seller delivers the goods to the buyer at the named place on the Buyer’s side, appropriately packaged, but not unloaded • Carriage: Seller handles all carriage to named place on buyer’s side • Risks: Transfer from Seller to Buyer once goods are delivered to the named place on buyer’s side • Export Clearance: Seller handles • Import Clearance: Buyer handles and pays associated costs • Insurance: neither party required to insure
Inco 2010
Delivered Duty Paid (DDP) + Named Place (Buyer’s Side)
• Delivery: Seller delivers goods to the Buyer, cleared for import on the arrival transportation, but not unloaded at the final destination • Carriage: Seller handles all carriage to named place on Buyer’s side • Risks: Transfer from Seller to Buyer once goods are delivered to the named place on the Buyer’s side • Export Clearance: Seller Handles • Import Clearance: Seller Handles & pays for any charges associated • Insurance: Neither party required to provide
DDP Caveats Inco 2010
• Should not be used if SELLER CANNOT clear goods in importing country • NOT recommended if Buyer wants control of import documents and declarations to Customs • DDP DOES NOT MEAN Buyer is absolved of all Customs Regulations & Responsibilities
Inco 2010
Water Transport Only Inco® 2010
Inco 2010
Free Alongside Ship (FAS) + Named Place (alongside vessel at port on Seller’s side)
• Delivery: Seller delivers goods to Buyer alongside the vessel chosen by Buyer at the named port of shipment, packed appropriately • Carriage: – Seller handles pre-carriage – Buyer handles main carriage and on-carriage
• Risks: from Seller to Buyer once goods place alongside the vessel on Seller’s side • Insurance: Neither party required to insure goods • Export Clearance: Seller Handles • Import Clearance: Buyer is responsible for requirement and fees associated
Inco 2010
Free On Board (FOB) + Named Place (loaded on vessel at a port on the Seller’s side)
• Delivery: Seller delivers goods to Buyer on board the vessel chosen by the Buyer at the named port of shipment, packaged for shipment • Carriage: – Seller handles pre-carriage – Buyer handles main carriage and on-carriage
• Risks: from Seller to Buyer once goods are placed on board the vessel on the Seller’s side • Insurance: Neither party is required to insure goods • Export Clearance: Handled by Seller • Import Clearance: Handled by Buyer NOTE:
“Ships Rail” is no longer part of Inco® 2010. If using Marine , Contract or PO must exactly state what “on board the vessel” means for the transaction – where on the vessel is the container, item to be placed
Inco 2010
Cost and Freight (CRF) + Named Place (port on Buyer’s side)
• Delivery: Seller delivers goods packaged for shipment on board the Seller-designated vessel at the port on Seller’s side • Carriage: – Seller handles pre-carriage and main carriage – Buyer handles on-carriage following delivery to port on Buyer’s side
• Risks: es from Seller to Buyer once goods are on board the vessel • Insurance: Neither party required to insure goods • Export Clearance: Handled by Seller • Import clearance: Buyer is responsible for the NOTE: customs requirements and associated costs (fees, Even though risk es from Seller to Buyer on Seller’s side duties, etc.) (once loaded per contract), Seller contracts for and pays freight necessary to bring goods to the named port on the Buyer’s side
Inco 2010
Cost Insurance Freight (CIF) + Named Place (port on Buyer’s side)
• Delivery: Seller delivers goods packaged for shipment on board the Seller-designated vessel at the port on Seller’s side • Carriage: – Seller handles pre-carriage and main carriage – Buyer handles on-carriage following delivery to port on Buyer’s side
• Risks: es from Seller to Buyer once goods are on board the vessel • Insurance: Seller required to procure minimum coverage against Buyer’s risk of loss or damage to the goods during carriage • Export Clearance: Handled by Seller • Import clearance: Buyer is responsible for the customs NOTE: Even though risk es from Seller to Buyer requirements and associated costs (fees, duties, etc.)on Seller’s side (once loaded per contract), Seller contracts for and pays freight necessary to bring goods to the named port on the Buyer’s side Same as T + Insurance coverage
Price Considerations with Inco® 2010 Inco 2010
When negotiating a contract, keep in mind the following: • Basic Rule of Thumb: The more responsibility the Seller takes on, the more they must charge the Buyer. • Example: What is the price the Seller should quote for 10 units to be shipped from Hilltown to Seattle?
•$10,000 EXW, Johnsburg Factory •$10,200 FCA, Carrier in Hilltown •$10,600 CIP, Newark Airport •$10,800 DAT, O’Hare Airport •$12,000 DDP Seattle
Importing and Inco® 2010 Inco 2010
• Some charges if included and detailed in commercial invoice need to be deducted from the dutiable value of the shipment – – – – – –
Main carriage Any foreign inland freight Insurance Supply chain security fees Terminal handling fees Etc.
Inco 2010 Chart Inco 2010
Any Mode
Control of Costs
Main Carriage Cost
Risk of Costs
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
CIP (Carriage & Insurance Paid To)
Seller
Seller
Buyer
T (Carriage Paid To)
Seller
Seller
Buyer
DAT (Delivered at Terminal)
Seller
Seller
Seller
DAP (Delivered at Place)
Seller
Seller
Seller
Departure, Freight Collect
EXW (Ex-Works) Main Carriage Freight Collect
FCA (Free Carrier) Main Carriage Freight Prepaid
Arrival, Freight Prepaid
DDP (Delivered Duty Paid)
Seller
Seller
Seller
39
Inco 2010 Chart Inco 2010
Sea, Inland Waterway Transport
Control of Costs
Main Carriage Cost
Risk of Costs
FAS (Free Alongside Ship)
Buyer
Buyer
Buyer
FOB (Free on Board)
Buyer
Buyer
Buyer
CFR (Cost and Freight)
Seller
Seller
Buyer
CIF (Cost, Insurance, and Freight)
Seller
Seller
Buyer
Main Carriage Freight Collect
Main Carriage Freight Prepaid
40
Questions? Inco 2010
Inco 2010 What do the Changes Mean?
International Commercial History Inco 2010
• Initially created in 1936 by the International Chamber of Commerce (ICC) and have been periodically revised (Inco® 2010 is the 8 th revision) • Inco® are generally good for approximately 10 years ~ not a magic number, but historically about accurate • Inco® reflect world-wide trade practices, as practices change, Inco® are revised • Inco® 2010 were written by the ICC, represented by 8 individuals from various countries/areas of the world – – – –
Met 11 times in person Received over 2000 suggestions in first request Refined suggestions over 4 proposals Controlling source document is written in British English and will be translated into 35+ languages.
What are Inco ® 2010? Inco 2010
• Eleven (11) Inco® 2010 (used to be 13 ) – Four (4) were deleted and two (2) new were created
• Inco® 2010 began from January 1, 2011 • Available worldwide through 100 International Chamber of Commerce National Committees – The aren’t law; no laws that require their use and are not all inclusive – Country neutral – they don’t favor one country over another – Self-contained – all information that determines responsibility and risk are in one place
Inco 2010
Definitions…..
Just what do we mean?
Key Definitions Inco 2010
• What is Delivery?
As defined in Inco® 2010, “it is used to indicate where the risk of loss of or damage to the goods es from the seller to the buyer.”
• It is not always: – When the goods arrive in your customer’s hands or – When the goods leave your dock – Defined the same in all countries
• You must know your contract and your Incoterm® – Note: A Purchase Order and a matching Acknowledgement will constitute a “contract” if there isn’t a separate stand-alone contract related to the transaction.
Transportation Definitions Inco 2010
• Pre-carriage: inland transportation on the seller’s side – Domestic: from the place where the shipment starts to any subsequent transportation carriage – International: from the place where the shipment starts to the departure point on the seller’s side
• Main Carriage: – Domestic: subsequent transportation beyond pre-carriage – International: transportation from the point of departure on the seller’s side to the arrival pint on the buyer’s side
• On-carriage: – Domestic: subsequent transportation beyond main carriage – International: transportation from the arrival pint on the buyer’s side
Transportation Definitions Inco 2010
• Door – to – Door – Contract of carriage that includes pre-carriage, main-carriage and on-carriage by the same carrier
• Door – to – (Air) Port: – Contract of carriage including pre-carriage and main-carriage to airport or ocean port or truck terminal port or rail port
• (Air) Port – to – (Air) Port: – Contract of carriage for main carriage only
• (Air) Port – to – Door: – Contract of carriage including main carriage and on-carriage
Type of Transportation? Inco 2010
• Company A
• Company B
Door to Door – one contract for all carriage (pre-, main, and on-carriage)
Type of Transportation? Inco 2010
• Company A
Door to Port – contract for pre-carriage and main-carriage
Company B responsible for arranging pick up at Arrival Airport
A Few More Definitions….. Inco 2010
• Omni-modal: Used with that use all modes of transportation (truck, airplane, vessel, train…) • Marine-restricted: that only apply to carriage by vessel • Shipment Contract: sales/purchase contract where the seller’s responsibility ends when goods are handed over to the first carrier • Arrival Contract: sales/purchase contract where seller’s responsibility ends when goods have arrived at agreed place
Packaging Definitions Inco 2010
1. The packaging of the goods to comply with any requirements under the contract of sale. 2. The packaging of goods so that they are fit for transportation. 3. The stowage of the packaged goods within a container or other means of transport. Only Definition 1 & 2 are addressed in Inco® 2010. Definition 3 must be addressed within the contract between the parties.
What Questions to Ask? Inco 2010
• Who furnishes the goods? • Who packages the goods in a manner suitable for shipment (export)? • Who moves the goods from the seller’s factory to a port, airport, or border crossing in the seller’s country? • Who arranges for export clearance in the seller’s country (if applicable)? • Who arranges for main carriage (international transportation) from the departure port to the arrival port? • Who pays for main carriage? • Who insures the shipment? • Who arranges for import clearance? • Who pays import duties? • Who pays for on-carriage from the arrival port to the delivery destination? • Who arranges and pays for country-specific documentation (e.g., consular invoices, inspection reports, licenses)?
Inco 2010
Now that we have some basic definitions…
What do Inco® 2010 Do? Inco 2010
• Divides up tasks, responsibilities, costs and risks to deliver goods from seller to buyer – If used correctly, no duplication of effort between seller & buyer – Acts as signposts for who needs to have additional contracts (i.e., with vessel steamship line, inland trucking company, etc.) to complete transaction – If something goes wrong, clearly defines responsibilities based on where the goods were in the transportation chain of delivery
• Address “String sales” – Shipments where ownership changes in transit
• Address Cargo Security concerns – Authorized Economic Operator (AEO), Customs-Trade Partnership Against Terrorism (C-TPAT), Importer Security Filing (ISF 10+2)
• Defines mode of transportation by their use – 4 are for Marine-Restricted for sea & inland waterway transport only – 7 are Omni-modal for use with all modes of transportation
• Increasingly considered replacement for Uniform Commercial Code (UCC) shipment/delivery .
What Inco® 2010
DO NOT Do…
Inco 2010
• Automatically Apply • Determine When Ownership Changes – When delivery occurs or when payment happens can impact when ownership changes – Must be addressed specifically in contract • Under US Law, it is when the product is delivered • If jurisdiction is under another sovereign nation law, you need to address per that country regulation • If contract is subject to the United Nations Convention on Contracts for the International Sale of Goods (CSIG) the law does not specify if it is not addressed specifically within the contract
• Identify when Revenue is Recognized – Under GAAP and Securities & Exchange Commission (SEC) Rules 1) ownership must prior to recognizing revenue and 2) delivery must occur • If not specifically addressed in contract, look to applicable contract law
What Inco® 2010
DO NOT Do…
Inco 2010
• Identify if a Breach of Contract occurs, when it happened – Does not determine remedies for breach of contract
• Provide relief from obligations/exemptions from liability in unexpected or unforeseeable situations • Address Payment issues – Tells you that the buyer must pay, but not when or where
• Address more than one contract – Drop Shipments are TWO Contracts 1) between the seller and their supplier and 2) between the seller and the buyer – Inco® 2010 could be the same or different in each contract
• Specifically task a party with container stowage obligations
Inco® 2000 vs. 2010 Inco 2010
•
EXW – Ex Works
• • •
FCA – Free Carrier FAS – Free Alongside Ship FOB – Free On Board
• • • •
CFR – Cost and Freight CIF – Cost, Insurance & Freight T – Carriage Paid To CIP – Carriage & Insurance Paid To
• • • • •
DEQ – Delivered Ex Quay DES – Delivered Ex Ship DAF – Delivered at Frontier DDU – Delivered Duty Unpaid DDP – Delivered Duty Paid
Marine Restricted Omni-Modal
•
EXW – Ex Works
• • •
FCA – Free Carrier FAS – Free Alongside Ship FOB – Free On Board
• • • •
CFR – Cost and Freight CIF – Cost, Insurance & Freight T – Carriage Paid To CIP – Carriage & Insurance Paid To
• • •
DAT – Delivered At Terminal DAP – Delivered At Place DDP – Delivered Duty Paid
Inco 2010
Group Term Definitions
F – C – D –
F-Group Inco 2010
• Are considered to be “Shipment Contracts” • Are considered Buyer Friendly
Seller • Handles Export Clearance • Handles Pre-carriage • Named Place on Seller’s Side
• • • •
Buyer Contracts for Main Carriage In charge of Carrier (and usually forwarder) selection Control over Freight Costs Control of Documentation
C-Group Inco 2010
• Are considered to be “Shipment Contracts” • Are considered Seller Friendly • • • • • •
•
Seller Contracts for Main Carriage In charge of carrier (and usually forwarder) selection Handles pre-carriage Has control over freight costs In control of documentation es risk of loss (delivers) to Buyer prior main carriage Handles export clearance
Buyer • Named Place is on Buyer’s side • Has risk of loss while goods are in transit with carrier selected and paid for by seller • Must rely heavily on Seller for data elements required for ocean shipments such as Importer Security Filing (known as ISF or 10+2) If informed, should not consider “C” due to downside described
D-Group Inco 2010
• Are considered to be “Arrival Contracts” Seller • Contracts for Main Carriage • In charge of carrier (and usually forwarder) selection • Handles pre-carriage • Has control over freight costs • In control of documentation • es risk of loss (delivers) to Buyer at freight arrival point • Handles export clearance • Seller may have revenue recognition issues since “delivery” occurs on arrival side, meaning revenue is recognized only upon arrival
• •
• •
Buyer Named Place on Buyer’s side Must rely heavily on Seller for data elements required for ocean shipments such as Importer Security Filing (known as ISF or 10+2) Undertakes less risk than in “C” If inexperienced, or does not have good relationship with carriers, is served will by “D”
Inco 2010
Omni-Modal Inco® 2010
Ex Works (EXW) + (Named Place) Inco 2010
Named Place is generally Seller’s Location (or where product initially ships from) • Delivery – Seller delivers goods when placed at buyer’s disposal at the name place of delivery – Goods are packaged – Goods are NOT LOADED on the collecting vehicle
• Seller Risks – Minimum obligation for seller; once packaged there is a loss of control over transportation movement, where package is finally received, how export or import documentation is presented to relevant governments • Buyer Risks – Buyer bears all costs and risks involved in taking the goods from the named place • Carriage: Buyer responsibility to arrange for pre-carriage, main carriage, on-carriage • Insurance: Neither party required to insure goods • Export/Import Clearance: Buyer must handle all requirements, pay all associated duties and fees Note: Should NOT be used when the buyer cannot carry out export requirements directly or indirectly
Free Carrier (FCA) + (Named Place) Inco 2010
• Named Place is generally: – Seller’s Place of Business • Seller responsible for having goods available when promised, packaged to the extent known or agree, loaded onto collecting vehicle • Buyer responsible for pre-carriage, main carriage, on-carriage – Another Location on Seller’s side (i.e., International Airport, Freight Forwarder Warehouse for consolidation, another location agreed by Seller and Buyer) • Seller responsible for having goods available when promised, packaged to the extent known or agree, loaded onto collecting vehicle, pre-carriage • Buyer responsible for unloading pre-carriage delivering vehicle, main carriage, on-carriage
FCA + (Named Place) Inco 2010
• Contract of Carriage: Buyer is responsible to make a contract of Carriage, however if requested or the buyer does not give instruction in due time, the seller may contract for carriage on usual at the buyer’s risk and expense. • Risks: es to buyer at point of delivery • Insurance: Neither party required to insure goods • Export Clearance: Handled by Seller
– Associated Licenses can be obtained and maintained under US Law – Automated Export System filings can be completed by Seller
• Import Clearance: Handled by Buyer – responsible for the customs formalities and any duties, fees, other charges due upon importation.
This is the most versatile of the “F” .
Inco 2010
Carriage Paid To (T) + Named Place (on Buyer’s Side)
• Delivery: Seller delivers goods to a carrier or another person nominated by the seller, at an agreed place, for transportation to the named destination on the Buyer's side, appropriately packaged • Carriage: Seller chooses and pays cost of carriage to bring the goods to the named destination (the final location, not the destination port) • Risks: Seller bears all risks and costs incurred until the goods are delivered to the first carrier on the Seller’s side • Export Clearance: handled by Seller • Import clearance: Buyer responsibility for paperwork and all costs • Insurance: Neither party required Note: Risk of Loss es on Seller’s side to Buyer BUT Cost is Seller’s responsibility to named location on Buyer’s side
Inco 2010
Carriage and Insurance Paid To (CIP) + Named Place (on Buyer’s Side)
• Delivery: Seller delivers goods to a carrier or another person nominated by the seller, at an agreed place, for transportation to the named destination on the Buyer's side, appropriately packaged • Carriage: Seller pays cost of carriage to bring the goods to the named destination (the final location, not the destination port) • Risks: Seller bears all risks and costs incurred until the goods are delivered to the first carrier on the Seller’s side • Export Clearance: handled by Seller • Import clearance: Buyer responsibility for paperwork and all costs • Insurance: Seller required to obtain minimum coverage Note: Risk of Loss es on Seller’s side to Buyer BUT Cost is Seller’s responsibility to named location on Buyer’s side
Inco 2010
Delivered at Terminal – DAT + Named Place (Buyer’s side)
• Replaces DEQ Term • Delivery: Seller delivers goods to named destination terminal on Buyer’s side, packaged appropriately and unloaded • Carriage: – Seller responsible for pre-carriage and main carriage – Buyer responsible for on-carriage
• Risks: Transfer from Seller to Buyer once goods are unloaded on buyer’s side at terminal • Export Clearance: Seller Responsibility • Import Clearance: Buyer Responsibility – documentation and fees associated • Insurance: Neither party required to insure
Inco 2010
Delivered at Place (DAP) + Named Place (Buyer’s Side)
• Previously contained elements of DDU, DAF, DES • Delivery: Seller delivers the goods to the buyer at the named place on the Buyer’s side, appropriately packaged, but not unloaded • Carriage: Seller handles all carriage to named place on buyer’s side • Risks: Transfer from Seller to Buyer once goods are delivered to the named place on buyer’s side • Export Clearance: Seller handles • Import Clearance: Buyer handles and pays associated costs • Insurance: neither party required to insure
Inco 2010
Delivered Duty Paid (DDP) + Named Place (Buyer’s Side)
• Delivery: Seller delivers goods to the Buyer, cleared for import on the arrival transportation, but not unloaded at the final destination • Carriage: Seller handles all carriage to named place on Buyer’s side • Risks: Transfer from Seller to Buyer once goods are delivered to the named place on the Buyer’s side • Export Clearance: Seller Handles • Import Clearance: Seller Handles & pays for any charges associated • Insurance: Neither party required to provide
DDP Caveats Inco 2010
• Should not be used if SELLER CANNOT clear goods in importing country • NOT recommended if Buyer wants control of import documents and declarations to Customs • DDP DOES NOT MEAN Buyer is absolved of all Customs Regulations & Responsibilities
Inco 2010
Water Transport Only Inco® 2010
Inco 2010
Free Alongside Ship (FAS) + Named Place (alongside vessel at port on Seller’s side)
• Delivery: Seller delivers goods to Buyer alongside the vessel chosen by Buyer at the named port of shipment, packed appropriately • Carriage: – Seller handles pre-carriage – Buyer handles main carriage and on-carriage
• Risks: from Seller to Buyer once goods place alongside the vessel on Seller’s side • Insurance: Neither party required to insure goods • Export Clearance: Seller Handles • Import Clearance: Buyer is responsible for requirement and fees associated
Inco 2010
Free On Board (FOB) + Named Place (loaded on vessel at a port on the Seller’s side)
• Delivery: Seller delivers goods to Buyer on board the vessel chosen by the Buyer at the named port of shipment, packaged for shipment • Carriage: – Seller handles pre-carriage – Buyer handles main carriage and on-carriage
• Risks: from Seller to Buyer once goods are placed on board the vessel on the Seller’s side • Insurance: Neither party is required to insure goods • Export Clearance: Handled by Seller • Import Clearance: Handled by Buyer NOTE:
“Ships Rail” is no longer part of Inco® 2010. If using Marine , Contract or PO must exactly state what “on board the vessel” means for the transaction – where on the vessel is the container, item to be placed
Inco 2010
Cost and Freight (CRF) + Named Place (port on Buyer’s side)
• Delivery: Seller delivers goods packaged for shipment on board the Seller-designated vessel at the port on Seller’s side • Carriage: – Seller handles pre-carriage and main carriage – Buyer handles on-carriage following delivery to port on Buyer’s side
• Risks: es from Seller to Buyer once goods are on board the vessel • Insurance: Neither party required to insure goods • Export Clearance: Handled by Seller • Import clearance: Buyer is responsible for the NOTE: customs requirements and associated costs (fees, Even though risk es from Seller to Buyer on Seller’s side duties, etc.) (once loaded per contract), Seller contracts for and pays freight necessary to bring goods to the named port on the Buyer’s side
Inco 2010
Cost Insurance Freight (CIF) + Named Place (port on Buyer’s side)
• Delivery: Seller delivers goods packaged for shipment on board the Seller-designated vessel at the port on Seller’s side • Carriage: – Seller handles pre-carriage and main carriage – Buyer handles on-carriage following delivery to port on Buyer’s side
• Risks: es from Seller to Buyer once goods are on board the vessel • Insurance: Seller required to procure minimum coverage against Buyer’s risk of loss or damage to the goods during carriage • Export Clearance: Handled by Seller • Import clearance: Buyer is responsible for the customs NOTE: Even though risk es from Seller to Buyer requirements and associated costs (fees, duties, etc.)on Seller’s side (once loaded per contract), Seller contracts for and pays freight necessary to bring goods to the named port on the Buyer’s side Same as T + Insurance coverage
Price Considerations with Inco® 2010 Inco 2010
When negotiating a contract, keep in mind the following: • Basic Rule of Thumb: The more responsibility the Seller takes on, the more they must charge the Buyer. • Example: What is the price the Seller should quote for 10 units to be shipped from Hilltown to Seattle?
•$10,000 EXW, Johnsburg Factory •$10,200 FCA, Carrier in Hilltown •$10,600 CIP, Newark Airport •$10,800 DAT, O’Hare Airport •$12,000 DDP Seattle
Importing and Inco® 2010 Inco 2010
• Some charges if included and detailed in commercial invoice need to be deducted from the dutiable value of the shipment – – – – – –
Main carriage Any foreign inland freight Insurance Supply chain security fees Terminal handling fees Etc.
Inco 2010 Chart Inco 2010
Any Mode
Control of Costs
Main Carriage Cost
Risk of Costs
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
CIP (Carriage & Insurance Paid To)
Seller
Seller
Buyer
T (Carriage Paid To)
Seller
Seller
Buyer
DAT (Delivered at Terminal)
Seller
Seller
Seller
DAP (Delivered at Place)
Seller
Seller
Seller
Departure, Freight Collect
EXW (Ex-Works) Main Carriage Freight Collect
FCA (Free Carrier) Main Carriage Freight Prepaid
Arrival, Freight Prepaid
DDP (Delivered Duty Paid)
Seller
Seller
Seller
39
Inco 2010 Chart Inco 2010
Sea, Inland Waterway Transport
Control of Costs
Main Carriage Cost
Risk of Costs
FAS (Free Alongside Ship)
Buyer
Buyer
Buyer
FOB (Free on Board)
Buyer
Buyer
Buyer
CFR (Cost and Freight)
Seller
Seller
Buyer
CIF (Cost, Insurance, and Freight)
Seller
Seller
Buyer
Main Carriage Freight Collect
Main Carriage Freight Prepaid
40
Questions? Inco 2010
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