The Role of Logistics and International Transport Part II

The Role of Logistics and International
Transport
Part II
IQS School of Management

INTERNATIONAL TRADE
Fall 2020
1. Incoterms – Introduction &

definitions
2. The 11 Incoterms
3. Selection factors
Summary 4. Influence on costs
5. Common misbeliefs and errors
6. Exercises
Josep María Cervera & Jan Jonckheere, IQS International Trade. 2

1. Incoterms – Introduction & definitions
Fall 2020 Josep María Cervera & Jan Jonckheere, IQS International Trade. 3
Why is it important?
1) Looking at your competition

(and ensuring such prices still give you a margin)
2) Calculating your costs and adding your margin
Setting prices
4
Product cost versus other costs
• An invoice to a client usually has to main 2 parts:
1. The merchandise cost = unit cost * total units
2. Some extra costs = transport, insurance, etc
 This last part is where the INCOTERMS play a role.

Amongst other things, INCOTERMS state who bears the transport and the insurance.
Note: when your client (whether a distributor or a retailer) sets its own price,
they will use their “real” unit cost, called the “landed cost”
Why is it important? Incoterms
When doing International Trade, or any economical
activity in general, there are many items to discuss.
Price, quantities, qualities, timing, exclusivities, post
sales services, etc.
Now, you’re at
1. Not everything is negotiable. Sometimes your
the negotiation product is “as is”.
table 2. But some items are negotiable:

• Price
• Payment terms (not how much, but when)
• Transport terms. Implies financial cost but
also management headaches: who takes
care of it? Where to we Exchange? At your
place, at mine, in the middle?

The Exchange Place
The questions are:
“I will have to send it?”
“The buyer will come himself? But I don’t want to let strangers in my house”
Or you, how many times have you chosen a neutral place for a Wallapop sale (in case the
product is small), instead of home?
This distance & privacy situation is what is now giving space to other e-services, through
Wallapop also: e-payment and e-sending (at the beginning, all was a DIY)
Incoterms
As we’ve already seen, exporting from A to B is not a single movement situation:
• From plant to truck • From boat to receiving port dock

• From truck to port warehouse • From receiving port dock to port warehouse
• From port warehouse to port dock • From port warehouse to truck
• From port dock to boat • From truck to buyer’s warehouse
Incoterms
• Who manages all these transports? (freight forwarders: but contracted by whom?)
• Who pays for all these transports?
• Who is the owner of the merchandise at every time? (this has consequences: insurance)
That’s also what INCOTERMS are for.
Incoterms within the Selling process
Prospection Contact Sales After Sales
ti ng
ex is
e s from mers
l
Sa custo
SALES Currency exchange

Insurances (currency exchange,
transport, credit)
RFQ Offer Closing
Incoterms
Commercial conditions
Payment conditions
Delivery times
RFQ Offer Closing
Sales contract
- general sales conditions
- specific sales conditions
(specific to this particular sales Contract)
- pricelist
Order confirmation
Proforma Invoice
Customs Customs
clearance clearance
Customs Customs
Shipment Export Import Customer
Packing
Incoterms Internal Internal
Payment transport transport
conditions International
Documents transport
Incoterms
• Created by the ICC: International Chamber of Commerce: https://iccwbo.org/

• Post WWI era: 1923, 1928, 1936, …
• After ICC’s creation in 1919, one of its first initiatives was to facilitate international trade. In the
early 1920’s the world business organization set out to understand the commercial trade terms used
by merchants. This was done through a study that was limited to six commonly used terms in just 13
countries. The findings were published in 1923, highlighting disparities in interpretation.
• The latest revision is from 2020.

Incoterms – what are they?
Rights and obligations of the parts in the contract of sale

- Other contracts as transportation, insurance... are not applied.
- Although they have consequences over them
CIP - CIF = transport + insurance (only 2 conditions where insurance is obligatory!)
They clarify what to do with regard to

 the distribution of charges and costs
 the delivery point (where the physical delivery of a merchandise is made)
 the ones that carry with transport risk
 the responsibility of customs proceeding
 who owns the merchandise at every moment

 Only with tangible goods, not intangible ones.
If you export services ------ you do not use INCOTERMS
 Primarily international business.
You can also use them for national sales, but it is not recommendable and does
not make sense
 The use of Incoterms (2020) is not obligatory
But it is highly recommendable and commonly used in International Business

When we buy goods, INCOTERMS 2020 will indicate

us:
 If we have to make logistic arrangements to move

the goods
 If we have to make arrangements to clear the
goods (customs) for export and/or import
 What is included in the agreed price (freight,
duties, insurance, etc.)
 If there is a problem in transit, who will be held
responsible?

When we sell goods, INCOTERMS 2020 will

indicate us:
 How to price our sales transaction (do we

have to include freight, duties, taxes etc.?)
 Do we have to clear the goods only for
export, or also for import?
 Do we have to make logistic arrangements?
 If there is a problem in transit, what will be
our responsibility?

Incoterms – what are they not?
 They are NOT a sales contract
 They do NOT determine ownership or transfer title to the goods, nor evoke payment
terms.
 They do NOT apply to service contracts, nor define contractual rights or obligations
(except for delivery) or breach of contract remedies.
 They do NOT protect parties from their own risk or loss, nor cover the goods before
or after delivery.
 They do not specify details of the transfer, transport, and delivery of the goods.
Container loading is NOT considered packaging, and must be addressed in the sales
contract.
 They do NOT define neither the price nor the currency

Incoterms – influence on what?
 Place of delivery
 Moment of delivery (lead time)
 Price It is not because the
 Documents goods have been
 Customs delivered to the
 Payment method buyer, that the buyer
 Contracts is the owner!
 Transport Property vs disposal
of the goods!
 Insurance
 Taxes
 Payment terms
 Property

2. The 11 Incoterms
Incoterms
Group E Exit EXW Ex works
Group F Without paying main transport FCA Free carrier

FAS Free Alongside Ship
FOB Free On Board
Group C Paying main transport CFR Cost and Freight

CIF Cost, Insurance and Freight
CPT Carriage paid To
CIP Carriage and Insurance Paid To
Group D Arrival DAT Delivered At Terminal DPU Delivered at Place Unloaded

DAP Delivered At Place
DDP Delivered Duty Paid
24
Delivery
in origin
26
Maritime
transport
only
27
Recommen-
ded for
containers

Incoterms
Examples:
1. Ex Works Barcelona w ay s h ave

You al e name
2. FOB Shanghai th
to put lace of
p
of the y
3. CIF Los Angeles deliver
4. DAP Berlin

Incoterms
Examples:
1. Ex Works Barcelona, Spain, Incoterms 2020

2. FOB Granada, Colombia, Incoterms 2020
3. CIF Los Angeles, United States, Incoterms 2010
If there may be any reason for doubt, specify!

Incoterms
Example:
You purchased a shipment of leather booths from

Australia, FOB Sydney Harbour. The boat sinks on the way
from Sidney to Spain. You are invoiced for payment but
refuse to pay because you have not received the goods.
Your Australian supplier sends your payment to a
collection agency. You are ordered to pay.
Why did that happen?

Incoterms
DPU

Incoterms

Incoterms
This term supposes a minor obligation by the seller, taking the buyer all risks and
inherent costs to the reception of goods in the buyer’s.
Risks/problems:
- You do not know whether the goods leave the country

- If your customer does not clear the goods at customs, customs will come and claim
the VAT
- Your customer can claim your goods with the wrong code – false information – you
may get a penalty for that
- If your warehouse burns down, the buyer still takes the risk
- Imagine the importer comes with his own truck, but because of lack of time, you use
your lift truck to put the goods in their truck, and on that moment something
happens???
Incoterms
A Colorado company received a large order from an overseas buyer. Since the
company was eager to accept this large order, it offered
a steep discount on the Ex Works price quote. The buyer quickly agreed, but soon
after delivery the exporter found these goods selling
at discounted prices in a chain of U.S. retail stores, which was sabotaging their
own sales.
Unknown to the naïve exporter, the Ex Works term does not require the buyer to
export the goods at all, and diversion becomes a real
risk. They learned an expensive lesson. The company had to buy back their own
under-priced merchandise off the shelves to avoid
competing with their own domestic products.
Incoterms
Another exporter received a letter of credit with the anticipated price quote, Ex Works.
However, the letter of credit required an onboard ocean bill of lading from Oakland,
California, to be presented to the bank before it released the payment.
The exporter puts the goods at the disposal of the Buyer, and the goods are being picked up
by the Buyer’s forwarder who takes care of shipping the goods.
On the expiry date of the L/C (90 days), the Exporter however does not receive any payment.
The Forwarder claims that the L/C obliges the B/L to be presented to the bank, which has
not been done.
The forwarder, receiving instructions from the party that contracted him, in this case the
Buyer, sends the Bill of Lading directly to the Buyer, who with the B/L claims and picks up the
goods.
As the Seller cannot present the B/L, the Buyer is not obliged to pay the L/C.

Incoterms
If the delivery is done in a different place, the obligation of the seller ends when the goods are delivered at the agreed place
(unloaded) 37
Free Carrier (FCA):
• You deliver to the first transporter (usually in the installations of the

seller, or in an agreed place)
• All transports
• The buyer has the obligation to come and pick up the goods at the agreed
place.
• The risk is transmitted on the moment of the delivery
• If the buyer does not come to pick up the goods, the buyer will be
responsible for all costs and risks
Free Carrier (FCA):
• If you deliver in your factory/warehouse: you load the goods into the
truck/train
• If you deliver on a agreed place: the first transporter does the
unloading/loading
• Seller does clearance for export
• If FLC => FCA with delivery in factory/warehouse/terminal
• Delivery should always be in the home country of the exporter
• Substitutes more and more the Ex Works term
Incoterms

Incoterms
Free alongside ship (FAS):
• Only for maritime transport

• The Seller delivers the goods alongside the ship or to the handling
operators (cranes etc..)
• Seller does export clearance
• The Buyer should inform the Seller where to deliver the goods (which
dock, which vessel,..)
• The seller has to justify the delivery with a Dock Receipt or Mate’s
Receipt

Incoterms
Free alongside ship (FAS):
• NOT for containers: you cannot leave a container

alongside a ship
• If the goods are in Groupage (LCL) which afterwards goes
in a FLC, you can not use FAS neither, as you can not
leave the goods alongside a ship to be loaded in a
container
Þ Limited use:
 Cereals, bulk products
 Special machinery etc…which does not go in a
container
Incoterms

Free on Board (FOB):

• Not for containers: you usually cannot load directly a container on a vessel;
• Nor for LCL
• The Seller has to justify the delivery to the Buyer
• The Seller takes care of export customs clearance

• The Seller has to put the goods on

board of the vessel, and will have to
pay the corresponding cost:
• For loading
• For stowing
• For Lashing

• Danger of paying double handling costs, as the forwarding company usually

include these in their Freight costs
• Recommendable for products with difficult loading or high values (the Seller
makes sure the goods get loaded well on the vessel)
• Risk of robbery or strikes in the port are for the account of the Seller
• In case the goods cannot be loaded due to the late arrival of the vessel, extra
costs derived from this event will be on the account of the Buyer

• USA:
• FOB Shipping point
• FOB Destination
Assume, for example, that Acme Clothing manufactures jeans and sells
them to retailers such as Old Navy. If Acme ships $100,000 in jeans to Old
Navy using the term FOB shipping point, Old Navy is liable for any loss
while the goods are in transit and would purchase insurance to protect the
shipment. On the other hand, if the goods are shipped FOB destination,
Acme Clothing retains the risk and would insure the shipment against loss.

Incoterms

Incoterms
Cost and Freight (CFR):
• Seller puts the goods on board of the vessel and arranges and pays
for the main transport
• Not for FLC / LCL
WHY?

Incoterms
The problem is that with modern day container ports and post-911 security measures the
WHY? shipper is not in a position to place the freight alongside the ship let alone on board it. The
shipper will hand over the container to the shipping company either at a container freight
station, container yard or depot that is located outside of the port or within the port but not
alongside the ship.
So it is impossible, in most cases, for the shipper to meet the requirements of Incoterms® for
FAS, FOB, CIF and CFR when shipping containerized cargo. The exceptions would be where
the shipper owns their own port or pier or those ports that are so small that cargo can be
brought alongside the vessel and loaded. This is far more likely to occur with non-
containerized cargo such as breakbulk cargo including commodities such as grains, oil, etc.

Incoterms
Cost and Freight (CFR):
• Seller takes care of export clearance

• Seller chooses port and Shipping company
• Justification of delivery through a B/L Freight
prepaid

Incoterms

Incoterms
Cost, Insurance and Freight (CIF):
• More a less like CFR but with Insurance

• Seller is obliged to take an insurance, in favour of the Buyer, to cover the
transport risk from the port of Shipping to the Port of Destination for 110% of
the Price of the contract
• The beneficiary is the Buyer, and therefore, if anything happens during the
transport, the Buyer will have to claim to the Insurance Company

Incoterms
Cost, Insurance and Freight (CIF):
• Insurance is ICC – clauses C (= minimum insurance)

• Maritime transport only
• Not for containers
• Neither for LCL’s Where is the
insurance paid
in case of a
justified claim?

Incoterms

Incoterms
Cost, Insurance paid to (port of destination): CIP
- Seller takes care of transport up to Port of Destination

- Risks goes over on the moment of putting the goods at the disposal of the first
transporter
- Similar to CIP but:
- Can be used for all types of goods, including FLC/LCL
- All kinds of transports (not only maritime)
- Obviously, the Seller has the same obligations with reference to Insurance…
- …and the Buyer enjoys the same benefits

Incoterms
Cost, Insurance paid to (port of destination): CIP
- NEW IN INCOTERMS 2020:
Insurance is default the maximum insurance: ICC Clauses A

(unless the parties negotiate differently)
Why: because the risk is considered to be bigger than in

case of CIF

Incoterms

Incoterms
Carriage paid to (port of destination): CPT
- Seller takes care of transport up to Port of Destination

- Risks goes over on the moment of putting the goods at the disposal
of the first transporter
- Similar to CIP but:
- Without Insurance

Incoterms
CFR vs CIF: the latter includes insurance
CPT vs CIP: the latter includes insurance
CFR vs CPT:
• CFR is for maritime transport, CPT for multimodal;
• in case of CFR the risk goes over when the goods have been loaded onto the boat;
in case of CPT that is when it is transferred to the first transporter (even if the
exporter pays for the transport).
CIF & CIP: same as previously, but including the insurance

CIF & CFR: not for containers

Incoterms
Practical case:
A Chilean company exports sulphate for chemical wood pulp to Spain. The agreed delivery
conditions were CPT Polígono Industrial Can Roqueta, Calle Zinc, Nave 45 C de Sabadell
(Barcelona-Spain) Incoterms 2010. Port of embarkation Valparaiso. The loading regime is
completed and the goods are loaded in a 20-foot container. The Chilean company is
located at Avda. La Solana 190, in Santiago. The merchandise was loaded into the
container and transported to the port of Valparaiso and transferred to the TPS Valparaiso
terminal. Once dispatched for export and when the container moved from the terminal to
the ship, the crane suffered an accident and the container fell off, falling to a height of
about ten meters, causing a 65% damage to the goods.
The question that arises is:
Who is responsible for the merchandise at the time of the loss?
If the conditions would be CIP Sabadell instead of CPT Sabadell, what would be the
difference? 61
Incoterms
Practical case:
The responsibility of the merchandise at the time of the loss of the container in
the port of Valparaiso is of the Spanish importer, since the delivery occurred in
the warehouse of the vendor Avda. La Solana 190, in Santiago.
Remember that the terms CPT and CIP the delivery occurs to the main
transport named by the exporter who is who pays the transport but does not
assume the risk of it.
If they had been CIP conditions, the responsibility for the goods remains with
the buyer. In this case the amount of the loss, if this had been covered by the
insurance conditions, would be paid out to the importer who is the insured in a
CIP sale.

Practical case: moment of delivery and responsibility of the merchandise.
A Peruvian company exports to Spain two reefer containers of 20 feet of top quality asparagus.
The sales conditions were CIP Coslada, Los Pinos Industrial Park, nº48, Nave 3A, Madrid, Spain,
Incoterms 2010. The merchandise was loaded in Av. José Maria Eguren 190 of Trujillo, Peru. The
two containers were delivered by Forwarder La Libertad (Local Cargo Agent) who acted on behalf
of the Peruvian exporter.
The merchandise arrived at the port of Valencia (Spain) and

was cleared for customs. From the port of Valencia to Coslada,
the truck that transported the two 20 feet suffered a flat tyre
on the A3 Motorway, which caused one of the containers to fall
from the platform, leaving the merchandise unusable.
The value of the loss of the merchandise amounts to USD
98,590.
Both the Peruvian company and the Spanish company did not
reach an agreement on who should assume such loss. For that
reason they decided to go to an Arbitration.
63
Incoterms

Incoterms
 Who should assume the amount of the loss?
 Who is responsible for the merchandise at the time of the loss?

Incoterms

Incoterms
Delivered ad Place Unloaded: DPU
 Old DAT-term
 All transports and multimodal (containers)
 Buyer has to specify the place and accept the goods on delivery
 Seller arranges for and pays transport
 Seller has to unload the goods at the agreed place
 Seller has to do clearance for export, not for import
 Seller has to provide the Buyer with the necessary documents to retrieve the
goods

Incoterms
Delivered at Place Unloaded: DPU
 Handling charges at destination, up to agreed place, are for account of the Seller
 Risk passes from Seller to Buyer once the goods have been unloaded on the agreed place
 Not recommended for documentary methods of payment:
 You need to get a document from the transporter of the Buyer to proof the delivery of
the goods
 Possible delays in the delivery of the documents may difficult the payment of the LC

Incoterms

Incoterms
Delivered at Place (place of destination): DAP
• All kinds of transports, multimodal (Containers)

• Delivered at Place: delivery to the place of destination indicated by the Buyer
• Risk passes from Seller to Buyer on the moment of delivery, at the Place indicated by the Buyer
• The Seller assumes the risk until handing over the goods at the Buyer’s premises
• However the Seller does not take charge of the customs duties and taxes
• What happens if the goods can not be moved from the port to the Buyer’s premises, because the
buyer does not take care of the customs clearance? Make sure the buyer has an Customs agent in
place who takes care of it.

Make sure you
Incoterms
can solve the
customs issue
easily
Delivered at Place (place of destination): DAP
• The seller must deliver the goods not unloaded at the agreed point and time
=> Handling/manipulation costs at Place of destination are for account of the Buyer
• What happens if the goods can not be moved from the port to the Buyer’s premises, because the buyer
does not take care of the customs clearance? Make sure the buyer has an Customs agent in place who
takes care of it. The Seller is responsible for these costs.
• The Seller may also have difficulties to deduct VAT on services contracted in the country of destination
• The Seller may have difficulties to contract certain services if he is not registered in the country of
destination
Recommendable in the EU,
where there are no customs

Incoterms

Incoterms
Delivered Duty Paid (place of Destination): DDP
• Delivered Duty Paid: Seller takes care of everything;

• Seller takes care of customs clearance, paying as well duties and taxes (f.i. VAT). All kinds of
transports, multimodal (Containers)
• Delivered at Place: delivery to the place of destination indicated by the Buyer
• Risk passes from Seller to Buyer on the moment of delivery, at the Place indicated by the
Buyer
• The Seller assumes the risk until handing over the goods at the Buyer’s premises

Incoterms
Delivered Duty Paid (place of Destination): DDP Only if you are

sure you can do
customs in
country of
destination
• Can you rely on local customs in the country of destination? In some

countries goods might be stuck in customs for months!
• May be very dangerous in certain countries, and in some countries a
foreign company cannot pay local taxes – should be studied very carefully.

Incoterms
DAP vs DDP: In DDP all costs related to customs clearance in the country of destination, are for
account of the Seller
DPU vs DAP:
• in DAP you deliver the goods ready for unloading
• In DPU you unload the goods in the agreed place in the country of destination
DPU vs DAP/DDP:
• In DPU the Seller only delivers to the agreed place, and as a consequence the Buyer takes care
of internal transport (in the country of destination).
• In DAP/DDP, the Seller also takes care of the internal transport
DDP vs DPU/DAP:
• In DDP the seller has to take care of customs
• In DPU/DAP the buyer has to take care of customs
Incoterms
Case study DDP Hamburg.
A Chilean company exported to a customer in Germany under conditions DDP Hamburg (Altstätder Str. 142) Incoterms
2010. Payment terms were 40% anticipated and 60% upon delivery.
The goods arrived at the port of Hamburg, customs clearance and delivered to the customer.
In parallel, the Chilean company had anticipated, through its Forwarder, the amounts corresponding to all expenses,
including the tariff.
The German customer had to pay the VAT (19%) corresponding to the import since the Chilean company considered that
they were not included in the term DDP.
Due to this fact, the German company refused to pay 60%, arguing that the import VAT is included in the Incoterm DDP.
As both parties did not reach an agreement, they decided to go to arbitration.
Is the import VAT included in the term DDP?

What would you have done to not have arrived at this situation?
76
Incoterms
3. Incoterms – Selection factors

Always include the term Incoterms 2020
Use the publication "Incoterms" of the ICC
Incoterms
Just use the 11 Incoterms 2020
C F R , not C & F o C + F o C A F
GOLDEN RULES
For containers/multimodal:
(EXW), FCA, CIP, CPT, DAP, DDP
For goods loaded alongside/on the vessel:
FAS, FOB, CFR, CIF
Group "C" is like "F": the goods are delivered in origin

In group "D", goods are delivered on destination
The wrong utilisation of Incoterms may have as a consequence that all

responsibility remains with the exporter/seller.
Selection factors Incoterms
 Type of transport
 Type of material
 Possibility of obtaining good transport and
insurance conditions
 Obligation of using national lines
 Control over conditions and costs of transport
 Ability to take care of customs
 Maximum control of the delivery
The seller will prefer CFR or CIF / CPT or CIP or “D”

terms for total control
The buyer will prefer FAS or FOB / FCA or EXW for
total control
BUY FOB, SELL CIF
WHY?

Related to the type of company:
• Small company, little experience in Export:

Þ Ex Works, F-terms
• Multinationals, large experience, a lot of International Business:

=> C- or D-terms

Incoterms
If you work with Documentary Credits:
• F y C YES
• Ex Works not, because you do not have a transport
document (CMR, Bill of Lading)
• D neither, as you need a document proving that you
did indeed deliver the goods on destination, which
may be more difficult (depends a.o. on the
willingness of the buyer); and it may mean a long
delay in payment in the case of international
maritime transport, as you have to wait to get this
document – which is when the vessel arrives.

Incot
erms

4. Incoterms – Influence on costs
Incoterms

COST CALCULATION Incoterms
Production cost
( B' ) Expected utility
In factory cost price
Special packing for export
Export documentation
Cost of product adaptation - to destination market
Comissión for Commercial Agent
EXW price

EXW price
Domestic Transport ( inland )
Export customs formalities
Loading costs / consolidation of goods
THC - Tariff handling charges - loading in origin harbour
FOB price
International Freight ( main transport )
Goods Insurance
CIF price
Josep María Cervera
( Basis for & Jan Jonckheere,
liquidatión IQS International
: Duties and ImportTrade.
Taxes ) 86
CIF price
( Basis for liquidatión : Duties and Import Taxes )
THC - Terminal handling charges - download at destination
Domestic Transport ( inland haulier )
Duties
Special Duties for Import
Customs formalities for import
V.A.T. or similar ( I.V.A. )
Insurance Exchange costs
Financial for deferred payments
DDP price
5. Misbeliefs and Errors
Incoterms

Incoterms 2020 – Common Incoterms
misbeliefs/misconceptions
If I sell under Ex Works INCOTERMS, I can offer a better price / the final
consumer price will be more economical
The end price of a product (consumer price) has NO relation with the
INCOTERM used:
 The INCOTERMS do not delete any costs, somebody will have to pay
for the costs
 However, depending on the situation, the seller or the buyer may be
in a more favourite position to get interesting transport prices

Incoterms 2020 – Common errors Incoterms
1. Use of non-existing INCOTERMS

2. Use of old INCOTERMS
3. Badly defined INCOTERM (place missing or not complete)
4. Purchasing/sales contract contradictory to INCOTERMS used
5. Use the wrong INCOTERMS – not all INCOTERMS serve for all types
of transport
6. Not taking well into consideration the RISKS of using certain
INCOTERMS for your company (f.i. Ex Works; DDP)

Incoterms
6. Exercises

Annex : exercises
answer Y / N
1. If you buy FAS Hong Kong, do you pay main transportation?
2. If you buy DDP Tarragona, do you pay the freight?
3. If you sell FOB Valencia, do you pay the freight?
4. If you sell CFR San Francisco, do you pay for the insurance premium of main transportation?
5. If you sell DDP Rio de Janeiro, do you pay for the insurance premium of main transportation?
6. If you buy CPT Barcelona, do you pay main transportation?
7. If you sell DAP Algeciras, do you pay transportation until that point?
8. If you buy FCA Shanghai, do you pay the insurance premium on main transportation?
9. If you sell EXW warehouse Las Palmas, do you pay the load of the truck?
10. If you buy FCA Bombay airport, do you pay for the freigth?
Annex : exercises
answer Y / N
1. If you sell CIF Jeddah, are you obliged to pay import taxes?
2. If you sell FCA Madrid, must the bill include VAT?
3. FCA Madrid sale, is it an international sale?
4. If you sell CIF New York and the goods are damaged during the trip, have you fulfilled the
contract?
5. If you buy FOB Aqaba, do you pay for the airport handling services?
6. If you buy DDP Manresa, do you pay for import customs clearance expenses?
7. If you sell CPT Liverpool, do you pay the B/L expenses?
8. If you sell FCA Madrid, do you have to contract the sea transport insurance?
9. If you buy DAP Manresa, do you pay the inland transport insurance?
10. If you are a Spanish seller and you are selling CIP Lyon, does the French buyer pay the import
custom tariff?
93
Annex : exercises
answer Y / N
1. If you sell wrapped honey EXW Manresa, do you pay the health certificate issued by the
Spanish Government?
2. If you sell DAT Veracruz and the goods are destroyed in transport, can you cash the allowance
from the insurance company?
3. If you sell FOB La Coruña, do you have to pay the export VAT?
4. If you sell FCA Athens, do you pay the profesional fees of the shipping forwarding company for
that international transport?
5. If you sell DDP Prague VAT unpaid, do you pay in advance the import VAT that belongs to the
importer?
Incoterms

The Role of Logistics and International Transport Part II

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The Role of Logistics and International Transport Part II

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The Role of Logistics and International

IQS School of Management

1. Incoterms – Introduction &

Josep María Cervera & Jan Jonckheere, IQS International Trade. 2

1) Looking at your competition

2) Calculating your costs and adding your margin

 This last part is where the INCOTERMS play a role.

table 2. But some items are negotiable:

Josep María Cervera & Jan Jonckheere, IQS International Trade. 6

As we’ve already seen, exporting from A to B is not a single movement situation:

• From plant to truck • From boat to receiving port dock

• Who pays for all these transports?

That’s also what INCOTERMS are for.

Prospection Contact Sales After Sales

SALES Currency exchange

RFQ Offer Closing

RFQ Offer Closing

• Created by the ICC: International Chamber of Commerce: https://iccwbo.org/

Josep María Cervera & Jan Jonckheere, IQS International Trade. 16

Rights and obligations of the parts in the contract of sale

They clarify what to do with regard to

Josep María Cervera & Jan Jonckheere, IQS International Trade. 17

 Only with tangible goods, not intangible ones.

If you export services ------ you do not use INCOTERMS

 Primarily international business.

 The use of Incoterms (2020) is not obligatory

But it is highly recommendable and commonly used in International Business

Josep María Cervera & Jan Jonckheere, IQS International Trade. 18

When we buy goods, INCOTERMS 2020 will indicate

 If we have to make logistic arrangements to move

Josep María Cervera & Jan Jonckheere, IQS International Trade. 19

When we sell goods, INCOTERMS 2020 will

 How to price our sales transaction (do we

Josep María Cervera & Jan Jonckheere, IQS International Trade. 20

Josep María Cervera & Jan Jonckheere, IQS International Trade. 21

Josep María Cervera & Jan Jonckheere, IQS International Trade. 22

Group F Without paying main transport FCA Free carrier

Group C Paying main transport CFR Cost and Freight

Group D Arrival DAT Delivered At Terminal DPU Delivered at Place Unloaded

Josep María Cervera & Jan Jonckheere, IQS International Trade. 28

1. Ex Works Barcelona w ay s h ave

Josep María Cervera & Jan Jonckheere, IQS International Trade. 29

1. Ex Works Barcelona, Spain, Incoterms 2020

If there may be any reason for doubt, specify!

Josep María Cervera & Jan Jonckheere, IQS International Trade. 30

You purchased a shipment of leather booths from

Why did that happen?

Josep María Cervera & Jan Jonckheere, IQS International Trade. 31

Josep María Cervera & Jan Jonckheere, IQS International Trade. 32

Josep María Cervera & Jan Jonckheere, IQS International Trade. 33

- You do not know whether the goods leave the country

Josep María Cervera & Jan Jonckheere, IQS International Trade. 36

• You deliver to the first transporter (usually in the installations of the

Josep María Cervera & Jan Jonckheere, IQS International Trade. 40

Free alongside ship (FAS):

• Only for maritime transport

Josep María Cervera & Jan Jonckheere, IQS International Trade. 41

• NOT for containers: you cannot leave a container

Josep María Cervera & Jan Jonckheere, IQS International Trade. 43

• Only for maritime transport

Josep María Cervera & Jan Jonckheere, IQS International Trade. 44

• The Seller has to put the goods on

Josep María Cervera & Jan Jonckheere, IQS International Trade. 45

• Danger of paying double handling costs, as the forwarding company usually