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INCOTERMS 2000
EXW FCA FAS FOB
CFR CIF CPT CIP
DAF DES DEQ DDU DDP
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EXW
EX WORKS ... NAMED PLACE (Usually Seller's premises)
Transport
mode:
All.
Problems:
1. Buyer must handle export clearance. This is particularly difficult
for US exports.
2. Seller is not obligated to load the collecting
conveyance.
3. Diversion possibilities abound.
Breakdown:
Seller: Have goods ready when promised and export packed to the
extent the shipping particulars are made known.
Buyer: Everything else (pre-carriage, export clearance, main-carriage,
import clearance, on-carriage)
Insurance:
Neither party is required to insure.
Suggestions:
The use of EXW is questionable except as a starting
point for a more appropriate INCOTERMS. EXW sales are not truly
exports, but domestic sales of goods to be exported.
Observations:
EXW favors the buyer by putting him or her in charge
of forwarder/carrier selection. Conversely, however, this term requires
the maximum buyer risk and responsibility.
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FCA
FREE CARRIER ... NAMED PLACE
Transport mode:
All.
Problems:
None.
Breakdown:
Seller: Have goods ready when promised and export packed to the
extent the shipping particulars are made known. If carrier picks
up, load collecting conveyance. Otherwise, deliver to designated
place (buyer appointed carrier terminal) without unloading. (Note:
simplifying FCA to two alternatives is a major change from INCOTERMS
1990.) Arrange export clearance.
Buyer: Pre-carriage (unless place is carrier's terminal ), main-carriage,
import clearance, on-carriage.
Insurance:
Neither party is required to insure.
Suggestions:
FCA showing the seller's premises is the way to say
"FOB Factory" in INCOTERMS.
Observations:
All "F" terms favor the buyer by putting
him in charge of forwarder/carrier selection.
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FAS
FREE ALONGSIDE
SHIP ... NAMED PORT OF SHIPMENT
Transport mode:
Vessel.
Problems:
1. Cargo seldom if ever rests alongside the vessel at
modern ports.
2. Buyer is often charged with terminal handling costs
which should be for seller's account.
3. There is no definitive
delivery document, at least for shipments on liner terms (mate's
receipt?).
Breakdown:
Seller: Deliver the goods, appropriately export packed, alongside
the vessel designated by the buyer at the port designated by the
buyer. Arrange export clearance. (Note:
this is a major change from INCOTERMS
1990.)
Buyer: Main-carriage, import clearance, on-carriage.
Insurance:
Neither party is required to insure.
Suggestions:
Consider FOB which at least provides a definitive
delivery document.
Observations:
All "F" terms favor the buyer by putting
him or her in charge of forwarder/carrier selection.
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FOB
FREE ON
BOARD ... NAMED PORT OF SHIPMENT
Transport mode:
Vessel.
Problems:
1. Ship's rail serves no practical purpose in vessel loading at
modern ports.
2. Buyer is often charged with terminal handling/loading
costs which should be for the seller's account.
Breakdown:
Seller: Deliver the goods, appropriately export packed, past the
rail of the vessel designated by the buyer at the port designated
by the buyer. Arrange export clearance.
Buyer: Main-carriage, import clearance, on-carriage.
Insurance:
Neither party is required to insure.
Suggestions:
For containerized shipments, consider FCA showing
the carrier's terminal at the port as the designated place.
Observations:
All "F" terms favor the buyer by putting
him or her in charge of forwarder/carrier selection.
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CFR
COST AND
FREIGHT ... NAMED PORT OF DESTINATION
Transport mode:
Vessel.
Problems:
Ship's rail serves no practical purpose in vessel loading
at modern ports.
Breakdown:
Seller: Deliver the goods, appropriately export packed, past the
rail of the vessel, and pay all transport costs to the port of destination.
Arrange export clearance.
Buyer: Import clearance, on-carriage.
Insurance:
Neither party is required to insure.
Suggestions:
For containerized shipments, consider CPT showing
the destination port or an inland location on the buyer's side.
Observations:
All "C" terms are "shipment contracts."
They favor the seller by putting him or her in charge of forwarder/carrier
selection. Further, although the seller arranges and pays for main-carriage,
his or her responsibility for the condition of the goods ends when
they are handed over to a carrier on the seller's side. In other
words, the seller is never responsible for their condition during
main-carriage transport.
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CIF
COST INSURANCE AND FREIGHT ... NAMED
PORT OF DESTINATION
Transport mode:
Vessel.
Problems:
1. Ship's rail serves no practical purpose in vessel
loading at modern ports.
2. Insurance cover is often inadequate
unless the INCOTERMS obligation is exceeded.
Breakdown:
Seller: Deliver the goods, appropriately export packed, past the
rail of the vessel, and pay all transport costs to the port of destination.
Purchase at least minimum cover marine cargo insurance. Arrange
export clearance.
Buyer: Import clearance, on-carriage.
Insurance:
Seller is required to insure.
Suggestions:
For containerized shipments, consider CIP showing
the destination port or an inland location on the buyer's side.
Sellers: propose furnishing all risk warehouse-to-warehouse plus
war and strike and civil commotion coverage at additional cost.
Observations:
All "C" terms are "shipment contracts."
They favor the seller by putting him or her in charge of forwarder/carrier
selection. Further, although the seller arranges and pays for main-carriage,
his or her responsibility for the condition of the goods ends when
they are handed over to a carrier on the seller's side. In other
words, the seller is never responsible for their condition during
main-carriage transport.
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CPT
CARRIAGE PAID TO ... NAMED PLACE OF
DESTINATION
Transport mode:
All.
Problems:
Risk point may provide inadequate buyer-protection.
Breakdown:
Seller: Deliver the goods, appropriately export packed, to the
carrier to transport the goods to the named place of destination
by a usual route and in a customary manner, and pay all transport
costs to the place of destination. Arrange export clearance.
Buyer: Import clearance, on-carriage if the place of destination
is an arrival point (airport, seaport).
Insurance:
Neither party is required to insure.
Suggestions:
Ideal for containerized shipments. Buyers: If the
shipment is not on "door-to-..." Terms, insist that the seller remain
responsible for the condition of the goods until they are handed
over to the first main carrier.
Observations:
All "C" terms are "shipment contracts."
They favor the seller by putting him or her in charge of forwarder/carrier
selection. Further, although the seller arranges and pays for main-carriage,
his or her responsibility for the condition of the goods ends when
they are handed over to a carrier on the seller's side. In other
words, the seller is never responsible for their condition during
main-carriage transport.
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CIP
CARRIAGE AND INSURANCE PAID TO ... NAMED
PLACE OF DESTINATION
Transport mode:
All.
Problems:
1. Insurance cover is often inadequate unless the INCOTERM
obligation is exceeded.
2. Risk point may provide inadequate buyer-protection.
Breakdown:
Seller: Deliver the goods, appropriately export packed, to the
carrier to transport the goods to the named place of destination
by a usual route and in a customary manner, and pay all transport
costs to the place of destination. Purchase at least minimum cover marine cargo insurance. Arrange
export clearance.
Buyer: Import clearance, on-carriage if the place of destination
is an arrival point (airport, seaport).
Insurance:
Seller is required to insure.
Suggestions:
The best INCOTERM available for sellers making containerized
shipments. Sellers: Propose furnishing all risk warehouse-to-warehouse
plus war and strike and civil commotion coverage at additional
cost. Buyers: If the shipment is not on "door-to-..." terms, insist
that the seller remain responsible for the condition of the goods
until they are handed over to the first main carrier, particularly
if your insurance is not placed with the enhanced cover suggested
above.
Observations:
All "C" terms are "shipment contracts."
They favor the seller by putting him or her in charge of forwarder/carrier
selection. Further, although the seller arranges and pays for main-carriage,
his or her responsibility for the condition of the goods ends when
they are handed over to a carrier on the seller's side. In other
words, the seller is never responsible for their condition during
main-carriage transport.
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DAF
DELIVERED AT FRONTIER ... NAMED PLACE
(Usually a border location)
Transport mode:
(Theoretically) all, actually ground transportation.
Problems:
1. Limited use potential.
2. Other terms accomplish the same objective
Breakdown:
Seller: Deliver goods appropriately export packed to
designated border place without unloading. Arrange export clearance.
Buyer: Import clearance, on-carriage
Insurance:
Neither party is required to insure.
Suggestions:
Consider FCA showing the border location.
Observations:
The ability of Canadian and U.S. carriers to deliver
inbound cargo within each other's countries, and the willingness
of carriers to quote door-to-door to inland U.S. and Mexican locations
renders DAF almost useless to U.S. traders.
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DES
DELIVERED EX SHIP
... NAMED PORT OF DESTINATION
Transport mode:
Vessel (usually charter).
Problems:
Limited use potential.
Breakdown:
Seller: Deliver the goods, appropriately export packed,
on the vessel at the named point at the named port of destination,
and pay all transport costs involved in getting them there. Arrange
export clearance.
Buyer: Import clearance, on-carriage.
Insurance:
Neither party is required to insure.
Suggestions:
Use this only for charter shipments.
Observations:
DES is most often used for charter shipments, as
both vessel loading and unloading are normally included in carriage
contracts made under liner terms. All "D" terms are "delivery"
contracts, and favor the buyer by making the seller responsible
for the condition of the goods until they arrive at the designated
place. With the exception of DAF when used for purely ground transport,
this means that the seller remains responsible for the condition
of the goods during main-carriage.
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DEQ
DELIVERED EX QUAY ... NAMED
PORT OF DESTINATION
Transport mode:
Vessel (often charter).
Problems:
Most liner-carriers take incoming goods beyond the quay,
to a terminal or customs facility at the arriving port.
Breakdown:
Seller: Deliver the goods, appropriately export packed,
on the quay (wharf) at the named port of destination, and pay all
transport costs involved in getting them there. Arrange export clearance.
Buyer: Import clearance (note:
this is a major change from INCOTERMS
1990), on-carriage.
Insurance:
Neither party is required to insure.
Suggestions:
Use this only for charter shipments. For shipments
made under liner terms, consider DDU.
Observations:
All "D" terms are "delivery"
contracts, and favor the buyer by making the seller responsible
for the condition of the goods until they arrive at the designated
place. With the exception of DAF when used for purely ground transport,
this means that the seller remains responsible for the condition
of the goods during main-carriage.
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DDU
DELIVERED DUTY UNPAID ...
NAMED PLACE OF DESTINATION
Transport mode:
All.
Problems:
1. Arranging for on-carriage can be risky unless done
on a "...-to-door" basis.
2. Retrieving unclaimed shipments
from inland locations on the buyer's side can cause problems.
3.
Buyer failure to timely arrange for import clearance can frustrate
the seller from completing his or her delivery obligations.
Breakdown:
Seller: Deliver the goods, appropriately export packed,
to the named place of destination (which is often the buyer's premises),
and pay all transport costs involved in getting them there. Arrange
export clearance.
Buyer: Import clearance, on-carriage if the named
place is an arrival point (airport or seaport).
Insurance:
Neither party is required to insure.
Suggestions:
For delivery at inland locations on the buyer's side,
use this only with door, port or airport-to-door transportation.
Observations:
All "D" terms are "delivery"
contracts, and favor the buyer by making the seller responsible
for the condition of the goods until they arrive at the designated
place. With the exception of DAF when used for purely
ground transport, this means that the seller remains responsible
for the condition of the goods during main-carriage.
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DDP
DELIVERED
DUTY PAID ... NAMED PLACE OF DESTINATION
Transport mode:
All.
Problems:
1. Arranging for on-carriage can be risky unless done
on a "....-to-door" basis.
2. Retrieving unclaimed shipments
from inland locations on the buyer's side can cause problems, particularly
after customs clearance.
3. It is normally easier for buyers to
deal with their own governments.
Breakdown:
Seller: Deliver the goods, appropriately export packed,
to the named place of destination (which is often the buyer's premises),
and pay all costs involved in getting them there. Arrange export
and import clearances.
Insurance:
Neither party is required to insure.
Suggestions:
For delivery at inland locations on the buyer's side,
use this only with door, port or airport-to-door transportation.
This term works best when sellers and buyers are affiliated, or
when both belong to a customs union or free trade area.
Observations:
All "D" terms are "delivery"
contracts, and favor the buyer by making the seller responsible
for the condition of the goods until they arrive at the designated
place. With the exception of DAF when used for purely ground transport,
this means that the seller remains responsible for the condition
of the goods during main-carriage.
This term requires the maximum seller cost, risk and responsibility.
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