Incoterms -2000 Nandini Dutta What are Incoterms ?

Incoterms are standard trade definitions most commonly used in International Sales Contracts They are short form for "International Commercial Terms " first introduced by International Chamber of Commerce (ICC for short ) in 1936 . The present Incoterms known as Incoterms -2000 came into force on 1st January ,2000 . ICC is currently revising Incoterms 2000. The new edition, Incoterms 2011, is expected to enter into force on 1 January 2011.

Significance of Incoterms Incoterms are international rules that are accepted by governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade. They either reduce or remove altogether uncertainties arising from differing interpretations of such terms in different countries When quoting Incoterms correctly - for example "FCA Incoterms 2000" - traders throughout the world are referring to the same set of rules Significance of Incoterms Incoterms list the Seller's and the Buyer's obligations in respect of :

Delivery Transfer of risks Division of costs

The respective obligations of both parties have been grouped under up to 13 headings where each heading on the seller's side "mirrors" the equivalent position of the buyer.

Incoterms 2000

There are thirteen Incoterms that determine the risk and responsibility of the Buyer and Seller The Incoterms are categorised into E F C D terms depending upon who and when does the Buyer and Seller assume risk and responsibility

Incoterms The Incoterms are :

EXW - EX Works ( named place) FCA -Free Carrier (named place) FAS - Free Alongside Ship (named port of shipment FOB - Free on Board(named port of shipment)
F Terms

E Term

Incoterms

The Incoterms are :

C Term (named port of destination)

CFR -Cost and Freight CIF -Cost Insurance and Freight CPT - Carriage Paid To CIP -Carriage and Insurance Paid to

DES -Delivered Ex Ship DEQ - Delivered Ex Quay DDU -Delivered Duty Unpaid DDP -Delivered Duty Paid

Incoterms

The Incoterms are :

D Term

DAF -Delivered at Frontier(named place) Others: named port of destination

The goods are delivered by the Seller at his factory gate The buyer assumes all risks and responsibility from thereon The buyer pays for
transport insurance loading /unloading duty if any

Ex Works EXW

T he Sellers delivery obligations are fulfilled when the goods pass the ships rail at named port of destination T he Buyer assumes risk and responsibility as soon as the goods pass the ships rail on board the ship
board the ship

The Seller pays for the cost and freight to the named port of destination

Cost and Freight (CFR)

However his risk ceases as soon as the goods pass over the ships rail The Buyer assumes all risk and responsibility as soon as the goods pass the ships rail although Seller pays for the carriage

Cost Insurance & Freight ( CIF ) CIF includes all Cost to the named place of discharge including unloading and insurance

Seller pays for Freight and Insurance Sellers responsibility however ceases at Ships rail Buyer assumes risk from there-on .

Correct usage of Incoterms ICC recommends that "Incoterms 2000" be referred to specifically whenever the terms are used, together with a location For example, the term "Free Carrier (FCA)" should always be accompanied by a reference to an exact place to which delivery is to be made Three examples of correct usage of Incoterms:

FCA Kuala Lumpur Incoterms 2000 FOB Liverpool Incoterms 2000 DDP Frankfurt Schmidt GmbH Warehouse 4 Incoterms 2000

Which is more cheaper for the Buyer ? Cost of each packet of Cigarettes is :

Rs. 100 (FOB) Rs. 100 (CIF)