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FREIGHT COLLECT VS. FREIGHT PREPAID EXW ExWorks FCA Free Carrier (1st Carrier, Named Place FAS Free Alongside Ship FOB Free On Board CFR Cost + Freight CIF Cost + Freight + Insure CPT Carriage Paid To CIP Carriage + Insure Paid To DPU Delivered at Place, Unloaded DAP Delivered At Place DDP Delivered Duty Paid Seller / Exporter Buyer / Importer Freight or International Freight is the same as “Main Carriage” Group E and F = Freight Collect (carrier collect freight payment from importer / buyer) Group C and D = Freight Pre-paid (exporter / seller pays carrier directly for freight) Copyright - ESSC 52
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CONTROL: RISK AND COST EXW ExWorks FCA Free Carrier (1st Carrier, Named Place FAS Free Alongside Ship FOB Free On Board CFR Cost + Freight CIF Cost + Freight + Insure CPT Carriage Paid To CIP Carriage + Insure Paid To DPU Delivered at Place, Unloaded DAP Delivered At Place DDP Delivered Duty Paid Seller / Exporter Buyer / Importer For IMPORTERS: Group E and F = Control over Forwarding, Carrier, Routing, Freight Cost For EXPORTERS: Group C and D = Control over Forwarding, Carrier, Routing, Freight Cost IMPORTER: EXW = Most Control EXPORTER: DDP = Most Control The trade-off between Control & Cost may determine the Incoterm Copyright - ESSC 54
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DEFAULT POINTS EXW ExWorks FCA Free Carrier (1st Carrier, Named Place) FAS Free Alongside Ship FOB Free On Board CFR Cost + Freight CIF Cost + Freight + Insure CPT Carriage Paid To CIP Carriage + Insure Paid To DPU Delivered at Place, Unloaded DAP Delivered At Place DDP Delivered Duty Paid Seller / Exporter Buyer / Importer Default Points refer to the point where the Exporter (Seller) must deliver the cargo to . Once delivered, the risk and cost is transferred from that point onto the Importer (Buyer). • Every Incoterm will ask for the default point, i.e. “Named Place” or “Named Port”. • The default point must be as descriptive as possible, i.e. full address of where cargo must be delivered to by the Exporter (Seller). • Always indicate the 3-digit Incoterm with the default point details on your Indent / Purchase Order. Copyright - ESSC 56
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ICC RULES ON DEFAULT POINTS EXW ExWorks FCA Free Carrier (1st Carrier, Named Place) FAS Free Alongside Ship FOB Free On Board CFR Cost + Freight CIF Cost + Freight + Insure CPT Carriage Paid To CIP Carriage + Insure Paid To DPU Delivered at Place, Unloaded DAP Delivered At Place DDP Delivered Duty Paid Seller / Exporter Buyer / Importer Articles: A1 to A10 = Exporter (Seller) Obligations | B1 to B10 = Importer (Buyer) Obligations • The obligation on part of the Exporter (Seller) shall seize once cargo has been placed at place or port as nominated by the Importer (Buyer). Risk shall transfer onto the Importer (Buyer) from that point onwards for E, F and D Terms. • NOTE, risk is transferred at the Place or Port of Loading (POL) point for the C-Terms! (CFR & CIF = FOB point | CPT & CIP = FCA point) ALWAYS SHOW THE INCOTERM USED IN THE P/O! • Cost at the nominated delivery point onwards shall transfer from Seller (Exporter) onto the Importer (Buyer) Copyright - ESSC 58
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MODES OF TRANSPORT VS. INCOTERMS EXW ExWorks FCA Free Carrier (1st Carrier, Named Place) FAS Free Alongside Ship FOB Free On Board CFR Cost + Freight CIF Cost + Freight + Insure CPT Carriage Paid To CIP Carriage + Insure Paid To DPU Delivered at Place, Unloaded DAP Delivered At Place DDP Delivered Duty Paid Seller / Exporter Buyer / Importer All Modes * Some Incoterms may only be used for Ocean Freight, whereas some may be for All Modes (multimodal) Ocean Freight Terms * All Modes Copyright - ESSC 60
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Lesson 3 EMBEDDED KNOWLEDGE – ICC INCOTERMS IN DETAIL Discussion Points: • ICC Incoterms Explained ◦ Groups E & F ◦ Group C ◦ Group D • Incoterms Checklist • Accidentally Breaking Contract • Customs Valuation Base vs. ICC Incoterms Copyright - ESSC 62
ICC INCOTERMS EXPLAINED Rules for: ------ E & F (Terms) Copyright - ESSC 63
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65 EXW (EX-WORKS); NAMED PLACE Cargo Risk & Cost Seller / Exporter POL POD Buyer / Importer Transporter Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Buyer / Importer’s Risk & Cost Copyright - ESSC
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EXW (EX-WORKS); NAMED PLACE - NOTES DEFAULT POINT: Factory, ready for export at disposal of buyer, ready for export and fit for transportation Exporter Importer Minimum obligation Maximum obligation Don’t have to load goods Most control Only supply goods Most risk Most cost Customs clearance origin and destination Copyright - ESSC 67
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69 FCA (FREE CARRIER); FCA (A) NAMED PLACE FRIST CARRIER Cargo Risk & Cost Seller / Exporter POL POD Buyer / Importer Transporter Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Buyer / Importer’s Risk & Cost Copyright - ESSC
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71 FCA (FREE CARRIER); FCA (B) NAMED PLACE FRIST CARRIER Cargo Seller / Exporter POL POD Buyer / Importer Transporter Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Seller / Exporter Risk & Cost Buyer / Importer’s Risk & Cost Copyright - ESSC
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73 FCA (FREE CARRIER); NAMED PLACE FRIST CARRIER Is there a 3 rd scenario to FCA? • What if goods were delivered to a deport or groupage / in-transit warehouse? • What if there is an extra cost from that depot or groupage / in-transit warehouse? • Who must pay for that? • Should that be covered in the ICOS? • Let’s have a look! Copyright - ESSC
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75 FCA (FREE CARRIER); FCA (?) NAMED PLACE FRIST CARRIER Cargo Risk & Cost Seller / Exporter POL POD Buyer / Importer Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Buyer / Importer’s Risk & Cost Packing Depot Copyright - ESSC
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FCA (FREE CARRIER); NAMED PLACE FRIST CARRIER - NOTES DEFAULT POINT: Seller delivers goods to first carrier at a specified place (FCA refers to 2 choices, A & B) Exporter Importer A. The named place is the seller’s premises and the goods have been loaded on the means of transport provided by the buyer, or… Maximum obligation B. In any other case, when the goods are placed at the disposal of the carrier or another person nominated by the buyer on the seller’s means of transport ready for unloading. Most control Most risk Most cost Customs clearance origin Customs clearance destination Copyright - ESSC 77
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79 FAS (FREE ALONGSIDE SHIP); NAMED PORT (OF LOADING) Seller / Exporter POL POD Buyer / Importer Transporter Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Cargo Seller / Exporter Risk & Cost Buyer / Importer’s Risk & Cost Copyright - ESSC
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FAS (FREE ALONGSIDE SHIP); NAMED PORT (OF LOADING) - NOTES DEFAULT POINT: Seller delivers the goods alongside vessel at port Exporter Importer Seller to deliver to alongside vessel Maximum obligation Most control Most risk Most cost Customs clearance origin Customs clearance destination Copyright - ESSC 81
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83 FOB (FREE ON BOARD); NAMED PORT (OF LOADING) Seller / Exporter POL POD Buyer / Importer Transporter Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Cargo Seller / Exporter Risk & Cost Buyer / Importer’s Risk & Cost Copyright - ESSC
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FOB (FREE ON BOARD); NAMED PORT (OF LOADING) - NOTES DEFAULT POINT: Seller delivers the goods on board vessel named port Exporter Importer Seller to deliver on board vessel, secured Maximum obligation Most control Most risk Most cost Customs clearance origin Customs clearance destination Copyright - ESSC 85
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ICC INCOTERMS EXPLAINED Rules for: ------ C (Terms) 87 The C-Terms are also often referred to as “facilitation” terms simply because the seller / exporter facilitates the payment of freight and insurance premium only. Hence why risk and cost is NOT at the same default point! Copyright - ESSC
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89 CFR (COST AND FREIGHT); NAMED PORT (OF DISCHARGE) Seller / Exporter POL POD Buyer / Importer Transporter Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Cargo Seller / Exporter Risk up to FOB point Buyer / Importer’s Risk from FOB Point Seller / Exporter Cost up to POD (D-POE) Buyer / Importer’s Cost from POD (D-POE) Copyright - ESSC
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91 CFR (COST AND FREIGHT); NAMED PORT (OF DISCHARGE) - NOTES DEFAULT POINT: Seller contracts and pay costs & freight to bring goods to named port of destination Exporter Importer Seller to control cost up to port of destination (most cost control) At mercy of seller’s choice of main carrier Freight + loading costs + unloading (if part of contract of carriage) Most risk from port of origin Customs clearance origin Customs clearance destination Copyright - ESSC
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93 CIF (COST, INSURANCE AND FREIGHT); NAMED PORT (OF DISCHARGE) Seller / Exporter POL Buyer / Importer Transporter Int. Carrier O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Cargo Seller / Exporter Risk up to FOB point Buyer / Importer’s Risk from FOB Point Seller / Exporter Cost + min. Insurance up to POD (D-POE) Buyer / Importer’s Cost from POD (D-POE) POD Transporter Copyright - ESSC
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95 CIF (COST, INSURANCE AND FREIGHT); NAMED PORT (OF DISCHARGE) - NOTES DEFAULT POINT: Same as CFR, but Exporter (Seller) pays Insurance Freight Premium Exporter Importer Seller to control cost up to port of destination (most cost control) At mercy of seller’s choice of main carrier Freight + loading costs + unloading (if part of contract of carriage) Most risk from port of origin Customs clearance origin Customs clearance destination Insurance Note: • Minimum Insurance will apply and does not cover all risk, i.e. damages etc. during transit. • Cargo Clause C (institute Clauses) • Importer is at risk from FOB point onwards. Copyright - ESSC
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97 CPT (CARRIAGE PAID TO); NAMED PLACE OF DESTINATION Seller / Exporter POL POD Buyer / Importer Transporter Int. Carrier Transporter O - POE D - Gate POE Transport Leg 1 ORIGIN Transport Leg 1 CARRIAGE Transport Leg 3 DESTINATION Gate Cargo Seller / Exporter Risk up to FCA point Buyer / Importer’s Risk from FCA Point Seller / Exporter Cost to Final Destination Buyer / Importer’s Cost from Final Destination Final Dest. Copyright - ESSC
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99 CPT (CARRIAGE PAID TO); NAMED PLACE OF DESTINATION - NOTES DEFAULT POINT: Seller contracts and pay costs & freight to bring goods to named place of destination Exporter Importer Seller to control cost up to named place of destination (most cost control) At mercy of seller’s choice of main carrier Freight + loading costs + unloading + on-carriage Most risk from handing over at named place of carrier at origin Customs clearance origin Customs clearance destination Copyright - ESSC
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