# Presentation: 321071

## Incoterms 2000

**Presented by:**
**James Fernandes, Fernandes International LLC**

## Slide 2

## South Carolina District Export Council (DEC)

-     *The District Export Councils contribute leadership and international trade expertise to complement the U.S. Commercial Service’s export promotion efforts through counseling businesses on the exporting process and conducting trade education and community outreach. *
-      District Export Councils (DECs) are organizations of leaders from the local business community, appointed by successive Secretaries of Commerce, whose knowledge of international business provides a source of professional advice for local firms.

## INCOTERMS

-    These are _**in**_ternationally accepted _**co**_mmercial _**terms**_ defining the respective roles and responsibilities (including _costs_) of the buyer and seller in the arrangement of transportation and _other obligations_

- I recommend the ICC Guide to Incoterms 2000 available at:
- http://www.iccbooks.com/

## CISG

*United Nations Convention on *_*C*_*ontracts for the *_*I*_*nternational *_*S*_*ale of *_*G*_*oods* (1980)
*entered into force in the United States on January 1, 1988** *
- ...... is a binding agreement or contract between nations. It establishes a set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different countries.
- By adopting it, a nation undertakes to the other nations that have adopted it that it will treat the Convention's rules as part of its law.
- CISG Article 9 (2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.
- http://www.cisg.law.pace.edu/

**CISG**

## Incoterms

- Group E - Departure:
- EXW. _[Ex Works](http://en.wikipedia.org/wiki/Ex_Works)__ (named place) _
- Group F - Main Carriage Unpaid:
- FCA _[Free Carrier](http://en.wikipedia.org/wiki/Free_Carrier)__ (named place) _
- FAS _[Free Alongside Ship](http://en.wikipedia.org/wiki/Free_Alongside_Ship)__ (named loading port_)
- FOB _[Free On Board](http://en.wikipedia.org/wiki/Free_On_Board)__ (named loading port_)
- Group C - Main Carriage Paid:
- CFR _[Cost and Freight](http://en.wikipedia.org/wiki/Cost_and_Freight)__ (named destination port_)
- CIF _[Cost, Insurance and Freight](http://en.wikipedia.org/wiki/Cost%2C_Insurance_and_Freight)__ (named destination port_)
- CPT _[Carriage Paid To](http://en.wikipedia.org/wiki/Carriage_Paid_To)__ (named destination) _
- CIP _[Carriage and Insurance Paid to](http://en.wikipedia.org/wiki/Carriage_and_Insurance_Paid_to)__ (named destination) _
- Group D - Arrival:
- DAF _[Delivered At Frontier](http://en.wikipedia.org/wiki/Delivered_At_Frontier)__ (named place) _
- DES _[Delivered Ex Ship](http://en.wikipedia.org/wiki/Delivered_Ex_Ship)__ (named port_)
- DEQ _[Delivered Ex Quay](http://en.wikipedia.org/wiki/Delivered_Ex_Quay)__ (named port_)
- DDU _[Delivered Duty Unpaid](http://en.wikipedia.org/wiki/Delivered_Duty_Unpaid)__ (named destination place) _
- DDP _[Delivered Duty Paid](http://en.wikipedia.org/wiki/Delivered_Duty_Paid)__ (named destination place)_

## Obligations 

**A1 Provision of goods in conformity with the contract**
**B1 Payment of the price**
**A/B 2 Licenses, Authorizations and Formalities**
**A/B 3 Contracts of carriage and insurance**
**A4 Delivery**
**B4 Taking Delivery**
**A/B 5 Transfer of risks**
**A/B 6 Division of costs**
**A7 Notice to the buyer**
**B7 Notice to the seller**
**A/B 8 Proof of delivery, transport document or equivalent electronic message**
**A9 Checking – packaging - marking**
**B9 Inspection of goods**
**A/B 10 Other obligations**

**Obligations **
- Parts 1 – 10  A = Buyer b = Seller

## Incoterms 2000

**EXW**

**SELLER**

**BUYER**

**FCA**
**FAS**
**FOB**

**CFR**
**CIF**
**CPT**
**CIP**
**DES**
**DEQ**

**DDU**
**DDP**

**DAF**

**FCA**

**CPT**
**CIP**

## Obligations 

- Obligations
- Parts 1 – 10  A = Buyer b = Seller

- A1. _Provision of goods in conformity in conformity with the contract_
- The seller must provide the goods and the commercial invoice, or its equivalent electronic message, in conformity with the contract of sale and any other evidence of conformity which may be required by the contract.

- B1. _Payment of the price_
- The buyer must pay the price as provided in the contract of sale.

## Group E - Departure: 

**EXW**

- Group E - Departure:
- EXW. _[Ex Works](http://en.wikipedia.org/wiki/Ex_Works)__ (named place)_

**SELLER**

**BUYER**

**------ = Buyer’s COST & CONTROL**

## Obligations 

- The seller must render the buyer, at the latter’s request, risk and expense, every assistance in obtaining, where applicable, any export license or other official authorization necessary for the export of the goods.

**Obligations **
- Section A/B 2 _Licenses, Authorizations and Formalities_

- EXW Ex Works (....named place)

## Export Requirements

- Who has export compliance responsibility?
- U.S. Principal Party in Interest (USPPI)
- The person in the United States that receives the primary benefit
- monetary or otherwise of the export transaction.

- Prepare the SED/AES record OR authorize a forwarding or other agent to prepare and file the SED/AES record, with a power of attorney, written authorization, or signing the authorization on the paper SED.
- _Maintain_ documentation to support the information reported on the SED/AES record.
**Recordkeeping §762.6**
*All records required to be kept by the EAR must be retained for five years*
- http://www.aesdirect.gov/support/usppi_overview.html

## Export Requirements

- A freight forwarder needs an authorization from the USPPI to act on their behalf before submitting information through AES. Either a power of attorney _or a written letter of authorization_ is acceptable.
- http://www.census.gov/foreign-trade/regulations/forms/index.html

## WRITTEN AUTHORIZATION TO PREPARE OR TRANSMIT 

**SHIPPER’S EXPORT INFORMATION**
- I , ----_Exporter (U.S. Principal Party in Interest_)---- authorize ----(_Forwarding Agent)_, to act as forwarding agent for
- export control and customs purposes and to sign any Shipper’s Export Declaration (SED), or transmit such export information electronically, which may be required by law or regulation in connection with the exportation or transportation of any merchandise on behalf of said U.S. Principal Party in Interest. The U.S. Principal Party in Interest certifies that necessary and  proper documentation to accurately complete the SED or transmit the information electronically is and will be provided to the said Forwarding Agent. The U.S. Principal Party in Interest
- further understands that civil and criminal penalties may be imposed for making false or fraudulent statements or for the violation of any United States laws or regulations on exportation and agrees to be bound by all statements of said agent based upon information or documentation provided by exporter to said agent.
- Signature:
- (U.S. Principal Party in Interest)
- Capacity:
- Date:

## Export Requirements

- What do you have to be compliant with?
- Compliance not only involves controlled goods and
- technologies, it also involves restrictions on
- shipping to certain countries, companies,
- organizations, and/or individuals.

## Export Requirements

- Administered by the DOC Bureau of Industry and Security (BIS)
- _http://www.bis.doc.gov/ComplianceAndEnforcement/index.htm_
- Commerce Control List (CCL)
- Excluded Parties List System
- _http://www.epls.gov/_
- _The Entity List_
- _http://www.bis.doc.gov/Entities/Default.htm_
- _Specially Designated Nationals List_
- _http://www.treas.gov/offices/enforcement/ofac/sdn/_

## Export Control Systems

- http://www.bis.doc.gov/licensing/exportingbasics.htm
- Export Management System (EMS)
_**http://www.bis.doc.gov/ComplianceAndEnforcement/ExportManagementSystems.htm**_
- An Export Management System (EMS) is an optional program to
- assist exporters in complying with the Export Administration
- Regulations (EAR).

**Export Control Systems**

## Slide 18

## Slide 19

## Obligations 

- Section A4 (Sellers Obligation), & B4 (Buyers Obligation)

**Obligations **

- A4 – _Delivery_ – The seller must place the goods at the disposal of the buyer at the named place of delivery, not loaded on any collecting vehicle.......

- B4 – _Taking delivery_ – The buyer must take delivery of the goods ....

- EXW Ex Works (....named place)

## Obligations 

- Section A5 (Sellers Obligation), & B5 (Buyers Obligation) _Transfer of risks_

**Obligations **

- A5 –The seller must ....... bear all risks of loss of or damage to the goods until such time as they have been delivered.....

- B5 – The buyer must bear all risks of loss of or damage to the goods
-  from the time they have been delivered....

- EXW Ex Works (....named place)

## Obligations 

- Section A6 (Sellers Obligation), & B6 (Buyers Obligation) _Division of costs_

**Obligations **

- A6 –The seller must ....... pay all costs relating to the goods until such time as they have been delivered.....

- B6 – The buyer must bear all risks of loss of or damage to the goods
-  from the time they have been delivered....

- EXW Ex Works (....named place)

## Obligations 

- Section A7 (Sellers Obligation), & B7 (Buyers Obligation) _Notice to the Buyer / Seller_

**Obligations **

- A7 –The seller must give the buyer sufficient notice as to when and where the goods will be placed at his disposal.

- B7 – The buyer must, whenever he is entitled to determine the time within an agreed period and/or the place of taking delivery, give the seller sufficient notice thereof.

- EXW Ex Works (....named place)

## Obligations 

- Section A8 (Sellers Obligation), & B8 (Buyers Obligation)
- _Proof of delivery, transport document or equivalent electronic message_

**Obligations **

- A8 –The seller must give the buyer sufficient notice as to when and where the goods will be placed at his disposal.

- B8 – The buyer must, whenever he is entitled to determine the time within an agreed period and/or the place of taking delivery, give the seller sufficient notice thereof.

- EXW Ex Works (....named place)

## Group F - Main Carriage Unpaid: 

- FCA _[Free Carrier](http://en.wikipedia.org/wiki/Free_Carrier)__ (named place) _
- FAS _[Free Alongside Ship](http://en.wikipedia.org/wiki/Free_Alongside_Ship)__ (named loading port_)
- FOB _[Free On Board](http://en.wikipedia.org/wiki/Free_On_Board)__ (named loading port_)

## Group F - Main Carriage Unpaid: 

**FCA**
**FAS**
**FOB**

- Group F - Main Carriage Unpaid:
- FCA _[Free Carrier](http://en.wikipedia.org/wiki/Free_Carrier)__ (named place) – previously FRC _
- FAS _[Free Alongside Ship](http://en.wikipedia.org/wiki/Free_Alongside_Ship)__ (named loading port_)
- FOB _[Free On Board](http://en.wikipedia.org/wiki/Free_On_Board)__ (named loading port_)

**SELLER**

**BUYER**

**         ****=Seller’s COST & CONTROL**
**------ = Buyer’s COST & CONTROL**

**FCA**

**FCA**

## Obligations 

- The seller must obtain at his own risk and expense any export license or other official authorization and carry out, where applicable, all customs formalities necessary for the export of the goods.

**Obligations **
- Section A/B 2 _Licenses, Authorizations and Formalities_

- FCA Free Carrier... (named place)

## Obligations 

- Section A3 (Sellers Obligation)
- _Contracts of carriage and insurance_

**Obligations **

- No obligation

- FCA Free Carrier... (named place)

## Obligations 

- Section A4 (Sellers Obligation)
- _Delivery_

**Obligations **

- A4 –The seller must deliver the goods to the carrier or another person nominated by the buyer,.....at the named place....agreed for delivery.

- FCA Free Carrier... (named place)

## Obligations 

- Section A5 (Sellers Obligation)
- _Transfer of risks_

**Obligations **

- A5 –The seller, must subject to the provisions of B5, bear all risks of loss of or damage to the goods until such time as they have been delivered in accordance with B5

- B5** –** The buyer must bear all risks of loss of or damage to the goods
-  from the time they have been delivered in accordance with A4; .....

- FCA Free Carrier... (named place)

## Obligations 

- Section A6 (Sellers Obligation)
- _Division of costs_

**Obligations **

- A6 –The seller, must subject to the provisions of B6, pay

-  all costs relating to the goods until such time as they have been delivered....
-  where applicable, the costs of customs formalities as well as all duties, taxes and other charges payable upon export.

- FCA Free Carrier... (named place)

## Obligations 

- The seller must obtain at his own risk and expense any export license or other official authorization and carry out, where applicable, all customs formalities necessary for the export of the goods.

**Obligations **
- Section A/B 2 _Licenses, Authorizations and Formalities_

- FAS Free AlongSide Ship... (named port of shipment)

## Obligations 

- Section A4 (Sellers Obligation)
- _Delivery_

**Obligations **

- A4 - The seller must place the goods alongside the vessel nominated by the buyer at the loading place named by the buyer at the named port of shipment......

- FAS Free AlongSide Ship... (named port of shipment)

## Group F - Main Carriage Unpaid: 

**FCA**
_**FAS**_
**FOB**

- Group F - Main Carriage Unpaid:
- FCA _[Free Carrier](http://en.wikipedia.org/wiki/Free_Carrier)__ (named place) – previously FRC _
***FAS ***_[Free Alongside Ship](http://en.wikipedia.org/wiki/Free_Alongside_Ship)__ (named loading __***port***_***) ***
- FOB _[Free On Board](http://en.wikipedia.org/wiki/Free_On_Board)__ (named loading port_)

**SELLER**

**BUYER**

**         ****=Seller’s COST & CONTROL**
**------ = Buyer’s COST & CONTROL**

**FCA**

**FCA**

## Group F - Main Carriage Unpaid: 

**FCA**
- FAS
_**FOB**_

- Group F - Main Carriage Unpaid:
- FCA _[Free Carrier](http://en.wikipedia.org/wiki/Free_Carrier)__ (named place) – previously FRC _
- FAS _[Free Alongside Ship](http://en.wikipedia.org/wiki/Free_Alongside_Ship)__ (named loading port_)*** ***
***FOB ***_[Free On Board](http://en.wikipedia.org/wiki/Free_On_Board)__ (named loading __***port***_***) ***

**SELLER**

**BUYER**

**         ****=Seller’s COST & CONTROL**
**------ = Buyer’s COST & CONTROL**

**FCA**

**FCA**

## Obligations 

- Section A4 (Sellers Obligation), & B4 (Buyers Obligation)

**Obligations **

- A4 – _Delivery_ – The seller must deliver the goods on the date or within the agreed period at the named port of shipment and in the manner customary at the port _on board the vessel_ nominated by the buyer.

- B4 – _Taking delivery_ – The buyer must take delivery of the goods ....

- FOB Free On Board (....named port of shipment)

## Obligations 

- Section A5 (Sellers Obligation), & B5 (Buyers Obligation)

**Obligations **

- A5 – _**Transfer of risks**_ – The seller must, subject to the provisions of B5, bear all risks of loss of or damage to the goods until such time as they have passed the ship’s rail at the named port of shipment.

- B5 – _**Transfer of risks**_** –** The buyer must bear all risks of loss of or damage to the goods
-  from the time they have passed the ship’s rail at the named port of shipment;

- FOB Free On Board (....named port of shipment)

## Obligations 

- Section A6 (Sellers Obligation), & B6 (Buyers Obligation)
- _Division of costs_

**Obligations **

- A6 –The seller must, subject to the provisions of B6, pay
-  all costs relating to the goods until such time as they have passed the ship’s rail at the named port of shipment.

- B6 – The buyer must pay
-  all costs relation to the goods from the time they have passed the ship’s rail at the named port of shipment; and ....

- FOB Free On Board (....named port of shipment)

## DDU

**DDU**

**FOB Plant**

## Uniform Commercial Code

- The Uniform Commercial Code (UCC) is one of the uniform acts that has been promulgated in attempts to _harmonize the law of sales_ and other commercial transactions in all 50 states _within the United States_ of America.

## Uniform Commercial Code  Article 2 – SALES,

**§ 2-319. F.O.B. and F.A.S. Terms.**
- (1) Unless otherwise agreed the term F.O.B. (which means "free on board") at a named place, even though used only in connection with the stated price, is a delivery term under which
- (a) when the term is _F.O.B. the place of shipment_, the seller must at that place ship the goods in the manner provided in this Article (Section 2-504) and bear the expense and risk of putting them into the possession of the carrier;  or
- (b) when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article (Section 2-503);
- (c) when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board.  If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this Article on the form of bill of lading (Section 2-323).

## Group C - Main Carriage Paid: 

- CFR _[Cost and Freight](http://en.wikipedia.org/wiki/Cost_and_Freight)__ (named destination port_)
- CIF _[Cost, Insurance and Freight](http://en.wikipedia.org/wiki/Cost%2C_Insurance_and_Freight)__ (named destination port_)
- CPT _[Carriage Paid To](http://en.wikipedia.org/wiki/Carriage_Paid_To)__ (named destination) _
- CIP _[Carriage and Insurance Paid to](http://en.wikipedia.org/wiki/Carriage_and_Insurance_Paid_to)__ (named destination) _

## Group C - Main Carriage Paid: (by the seller)

**CFR**
**CIF**
**CPT**
**CIP**

**Group C - Main Carriage Paid:** (by the seller)
- CFR _[Cost and Freight](http://en.wikipedia.org/wiki/Cost_and_Freight)__ (named destination port_)
- CIF Cost, Insurance and Freight (named destination _port_)
- CPT Carriage Paid To (named destination)
- CIP Carriage and Insurance Paid to (named destination

**SELLER**

**BUYER**

**         ****=Seller’s COST & CONTROL**
**------ = Buyer’s COST & CONTROL**

**CPT**
**CIP**

## CFR Cost and Freight (named destination port) 

**CFR Cost and Freight (named destination port) **

-  means that the seller delivers when the goods pass the ship’s rail in the port of shipment
-  the seller must pay the costs and freight necessary to bring the goods to the named port of destination
-  BUT the risk of loss of or damage to the goods are transferred from the seller to the buyer
-  this term can be used only for sea transport

## CIF Cost, Insurance and Freight (named destination port) 

**CIF Cost, Insurance and Freight (named destination port) **

-  means that the seller delivers when the goods pass the ship’s rail in the port of shipment
-  the seller must pay the costs and freight necessary to bring the goods to the named port of destination
-  BUT the risk of loss of or damage to the goods are transferred from the seller to the buyer
-  the seller also has to procure marine insurance against the buyer’s risk of loss of or damage to the goods _during carriage_
-  this term can be used only for sea transport

## b. Contract of insurance

- The seller must obtain at his own expense cargo insurance as agreed in the contract, such that the buyer, or any other person having an insurable interest in the goods, shall be entitled to claim directly from the insurer and provide the buyer with the insurance policy or other evidence of insurance cover

## CPT Carriage Paid To (named destination) 

**CPT Carriage Paid To (named destination) **

-  means that the seller delivers the goods to the carrier nominated by him and the seller must pay the cost of carriage necessary to bring the goods to the named destination
-  the buyer bears all risks and any other costs occurring after the goods have been so delivered
-  if subsequent carriers are used the risk passes when the goods have been delivered to the first carrier
-  this term may be used irrespective of the mode of transport

## CIP Carriage and Insurance Paid to (named destination) 

**CIP Carriage and Insurance Paid to (named destination) **

-  means that the seller delivers the goods to the carrier nominated by him and the seller must pay the cost of carriage necessary to bring the goods to the named destination
-  the buyer bears all risks and any other costs occurring after the goods have been so delivered
-  the seller also has to procure insurance against the buyer’s risk of loss of or damage to the goods _during the carriage_
-  if subsequent carriers are used the risk passes when the goods have been delivered to the first carrier
-  this term may be used irrespective of the mode of transport

## Group D - Arrival: 

- DAF Delivered At Frontier (named place)
- DES Delivered Ex Ship (named _port_)
- DEQ Delivered Ex Quay (named _port_)
- DDU Delivered Duty Unpaid (named destination place)
- DDP Delivered Duty Paid (named destination place)

## Group D - Arrival: 

**DDU**
**DDP**

**Group D - Arrival: **
- DAF Delivered At Frontier (named place)
- DES Delivered Ex Ship (named _port_)
- DEQ Delivered Ex Quay (named _port_)
- DDU Delivered Duty Unpaid (named destination place)
- DDP Delivered Duty Paid (named destination place)

**SELLER**

**BUYER**

**         ****=Seller’s COST & CONTROL**
**------ = Buyer’s COST & CONTROL**

**DES**
**DEQ**

**DAF**

**DDU**
**DDP**

## DAF Delivered At Frontier (named place) 

- DAF Delivered At Frontier (named place)

-  the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport, not unloaded, cleared for export but not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country
-  the term “frontier may be used for any frontier including that of the country of export
-  the term may be used when goods are to be delivered at a LAND frontier

## DES Delivered Ex Ship (named port) 

- DES Delivered Ex Ship (named port)

-  the seller delivers when the goods are placed at the disposal of the buyer on board the ship, not cleared for import at the named port of destination BEFORE discharging.

## DEQ Delivered Ex Quay (named port) 

- DEQ Delivered Ex Quay (named port)

-  the seller delivers when the goods are placed at the disposal of the buyer, not cleared for import on the quay (wharf) at the named port of destination.
- The seller has to bear costs and risks involved in.....discharging the goods on the quay (wharf).

## Port of destination

**DES**

**DEQ**

## DDU Delivered Duty Unpaid (named destination place) 

- DDU Delivered Duty Unpaid (named destination place)

-  the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination
-  This term may be used irrespective of the mode of transport
- “Duty” has to be borne by the Buyer.

- The term “Duty” includes the responsibility for and risks of carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges.

## DDP Delivered Duty Paid (named destination place)

- The seller deliver the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination.
- While the** EXW **term represents the **minimum** obligation for the seller, **DDP** represents the **maximum** obligation.

## Help on the Net

## www.tradeport.org/ts/

**www.tradeport.org/ts/**
**www.census.gov/foreign-trade/www/**
**www.sba.gov/gopher/Business-Development/International-Trade/Guide-To-Exporting/**
**www.freightworld.com/information.html**