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An Exporter in the US

contract with the
importer in the U.K under FOB Trade term

An Exporter delivered the goods to the Inland
CFS in the U.S

Damage has taken place journey
between the CFS to port of Loading
The Importer alleged that the goods were
not delivered as the Exporter will liable
for damage.

Who is
right?

The exporter alleged that the goods
were delivered at the time when it was
handed over to the carrier at CFS.

National
Practice are
differed?

1936 – 1957 – 1967 – 1974 – 1980 – 1990 – 2000 – 2010

To avoid any possible
confusion a reference
to the current version
should always be
referenced in the
contract of sale:

Big Chopper Corporation Ltd
in Port
Dublin
Rep of Ireland

SOLD TO:
Central Fine Furniture
898 Liberty Square
Chittagong
Bangladesh
INVOICE NUMBER 0009 01 EXPORT
GOODS SHIPPED

VALUE

250 METRIC TONNES EXCLUSIVE IRISH
PINE WOOD DRIED FUMAGATED
253,800.
IN ACCORDANCE WITH CONTRACT NO POL787/99

CIF CHITTAGONG (INCOTERMS 2010)
TOTAL

USD253,800.

– Incoterms ® 2010 Vs. CDCS Exam.
– What Incoterms all about
– Understand Each Incoterms on the
basis of Risk and Delivery.

– Incoterms and description of the
goods
– Incoterms and insurance
– Incoterms and Pre-shipment
inspection

These rules were created in the framework of the
International Chamber of Commerce (ICC), Paris,
whose validity is recognized internationally.

The word “INCOTERM” is an abbreviation of
“International Commercial Terms”

INCOTERMS describe DELIVERY – RISK
and COSTS involved in the delivery of
goods from sellers to buyers.

There are 11
incoterms
rule in
incoterms®
2010 w. e. f.
( 1st January
, 2011).

Each rule is
represente
d by 3
letters.
– CIF
Singapore
Incoterms
2010

Incoterms
rules
become
part of the
contract of
sale by
express
incorporat
ion.

The chosen
Incoterms
rule can
only work
if the
parties
include a
specific
named
place or
port

The Buyer & The seller will need to have a clear indication
of the point at which such responsibilities end.
Sellers Yard

Sellers Yard

Inland terminal
Inland terminal

Port terminal

Quay

On board

What do they define?
Who has to take care and pay for the transport
of the goods
Who has to take care and pay for the
insurance of the goods
Who has to take care and pay for other costs
like, e.g. customs, handling,..
Define the place where the seller has to put

the goods
available to the buyer.
DELIVERED
Define clearly the place and time when the risk
is transferred from one party to another.

Incoterms relate only to the
contract of sale.
Not the
price

Not the
method of
payment

Not the
method of
payment

According transport mode
Any mode of transport

EXW

Ex Works

FCA

Free Carrier

CIP

Carriage and insurance
paid to …

CPT

Carriage paid to …

DAT

Delivered At Terminal

DAP

Delivered At Place

DDP

Delivered Duty Paid

Maritime and inland
waterways

FOB

Free On Board

FAS

Free Alongside Ship

CFR

Cost & Freight

CIF

Cost, Insurance & Freight

Both the point of origin and
destination are ports.

EXW (..named place)

FCA (..named place)

CPT (..named place of Destination)

CIP (..named place of Destination)

DAT (..named PORT OF TERMINAL OR place of
Destination)

DAP (..named PORT OF TERMINAL OR place of
Destination)

DDU (..named PORT OF TERMINAL OR place of
Destination)

FAS (..named PORT OF SHIPMENT

FOB (..named PORT OF SHIPMENT

CFR (..named PORT OF DESTINATION

CIF(..named PORT OF SHIPMENT

Extent of obligations
From the standpoint of the seller
Place the goods to the buyer, in our warehouse and
unloaded.
Deliver the goods to the carrier chosen by the
buyer.

EXW
FCA – FAS - FOB

Deliver the goods to the carrier selected by seller.

CFR - CPT

Deliver the goods to the carrier chosen by seller,
dealing and paying the insurance.

CIF - CIP

Maximum obligation. Delivering the goods at
destination.

DAT – DAP - DDP

– Incoterms and description of the goods
– Incoterms and insurance
– Incoterms and Pre-shipment inspection

GOODS…….

The description of the
goods,
services
or
performance
in
a
commercial invoice must
correspond with that
appearing in the credit.
- Sub-Article 18(c) of
UCP-600

If a trade term is part of the goods
description in the credit, or stated in
connection with the amount, the invoice must
state the trade term specified, and
If the description provides the source
of the trade term, the same source must be
identified (e.g., a credit term “CIF Singapore
Incoterms 2000” would not be
satisfied by “CIF Singapore Incoterms”).
Charges and costs must be included
within the value shown against the stated
trade term in the credit and invoice. Any
charges and costs shown beyond this value are
not allowed.
- ISBP Paragraph 61

Whether the addition of "Incoterms 2000" on an
invoice made the document discrepant

An export L/C in
favour of a
beneficiary in
Country M shows the
quotation price as
CFR Esmeraldas
Ecuado

The beneficiary
presented his
invoice showing
CFR Esmeraldas
Ecuador,
Incoterms 2000

We, as the confirming
bank, contest that this is
additional information that
should not be considered
for the checking of the
documents.

The issuing bank
rejected the
documents, arguing
that the L/C does not
reference Incoterms
2000

Whether the addition of "Incoterms 2000" on an
invoice made the document discrepant

Issuing bank's view
The addition of "Incoterms
2000" affects the meaning of
the term of sale, as the
beneficiary and the applicant
may have agreed on another
version of the Incoterms (e.g.,
Incoterms 1990, etc)

ICC Official Opinion
R695
If the credit shows CFR
Esmeraldas Ecuador, the
addition of "Incoterms
2000" on the invoice does
not make the document
discrepant

Relationship between Incoterms® & Insurance……

There are two
incoterms which
basically deal
with Insurance i.
e... CIF and CIP

If there is no indication in the credit of the
insurance coverage required, the amount of
insurance coverage must be at least 110% of
the CIF or CIP value of the goods.
- Sub-Article 28(f) (ii) of UCP-600

The seller will also pay
the cost of insurance of
the goods with minimum
cover up to the port of
destination.
The
insurance shall cover at a
minimum,
the
price
provided in the contract
plus 10%, that is 110%,
and shall be in the
currency of the contract.
This
insurance
shall
entitle the buyer or any
other
party with an
insurable interest in the
goods to claim directly
from the insurer.

Relationship between Incoterms® &
Inspection……
The buyer must pay the costs of any mandatory pre-shipment
inspection, except when such inspection is mandated by the authorities
of the country of export.

The buyer has no obligation to the
seller to pay the costs of any mandatory
pre-shipment inspection mandated by
the authority of the
Country of export or of
import.

Case study on
Incoterms®
2010

Which is/are the correct statement:
Incoterms® 2010 is a complete contract of sale.
Incoterms® 2010 deals with method of payment.

Incoterms® 2010 deals with transfer of ownership of goods.

How Incoterms ® 2010 can be used:
An example : - Seller responsibility to goods shipped on board.
Buyer will pay the freight and cost of goods.

How you write the correct incoterms on your LC

DAP

FCA

CIP

CFR

DDP

CPT

CPT (..named
Destination)
Case place
Eight:of
Freight
Collect
The credit required submission of a B/L under a FOB
Chittagong [Incoterms 2010].
The presented bill of lading was marked with notation
"freight prepaid"
One of the officer approached you and said that
• Under FOB contract there always be a notation, if any,
“Freight Collect” Hence, The presentation is discrepant?

What do you think???