What is Incoterm ??
What is the latest Incoterm??
Current Incoterm is 2010, which is widely accepted everywhere, most of the Banks will accept only incoterm 2010 version, but there are some cases people still using previous incoterm versions.
What are the changes they made in Incoterm 2010 from the previous version?
Incoterms: DEQ, DES, DAF & DDU has been removed and added DAT & DAP
Here DDU will replace with DAP and DEQ, DES, DAF will replace with DAT.
May I know what is prepaid shipment and freight collect ?? which are the incoterms will cover on those ??
In Prepaid shipments, the shipper will take payment obligation of freight, whereas in freight collect it is vice versa payment obligation being taking taken care by consignee/buyer.
Moving on to your next question
Following incoterms are covered in prepaid shipments,
CFR, CIF, CPT, CIP, DAT, DAP & DDP
In Freight collect shipments following incoterms are covered
EXW, FCA, FAS, FOB
Reference: Incoterms: 2010
Is this all incoterms are used in all mode of shipment ?? I will make it clear is all incoterms are used in SEA, AIR, RAIL, AND ROAD ??
No, all Incoterms are not used in all mode of shipments.
Incoterms: EXW, FCA, CPT, CIP, DAT, DAP & DPP are used in all mode of shipments but FAS, FOB, CFR & CIF are used only for SEA and Inland waterway transport.
Did you please explain the Incoterms one by one ??
OK will start one by one.
1. EXW (Ex works):
Exwork will have very less obligation to seller, seller has to make cargo ready for delivery and also seller has to make Invoice and packing list ready, once material and documents are ready buyers / it is agent need to make arrangement for cargo collection, export clearance, freight, Import clearance & transportation is on buyer responsibility.
In Exwork shipment sellers obligation will finish after handing over the cargo to an agent/buyer.
If Certificate origin is required as per the term it has to be arranged by buyer, but most of the cases seller will arrange the COO though it is not mandatory.
2. FCA (Free Carrier):
As per FCA seller will have less obligation than the buyer. seller has to prepare the cargo and document ready for export but unlike EXW seller has to finish export clearance and arrange cargo delivery to named place* in sellers country.
* Named place can be buyers agent warehouse in sellers country, an Airport or consolidators vehicle or port, etc..
3. FAS (Free alongside ship):
In this term, the seller has to prepare the shipment and document ready for export and also facilitate the export clearance and deliver the cargo to port and seller will obligate to pay the charges of THC and the buyer is responsible for loading the goods and all cost thereafter.
4. Free on Board (FOB):
This is the most commonly used incoterms for Import shipments, In which buyer has to make the cargo and documents ready for delivery and proceed for export clearance and arrange cargo delivery to port and buyer obligated to pay all the charges in the port of loading.
Note: In incoterm 1 to 4 what are thing are common did you observed ??
In all terms, buyer obligation is limited to the port of discharge/loading country and buyer is not paying the freight cost and insurance.
So these terms are referred as freight collect.
Here is the next level of incoterms where the buyer will have more responsibilities, let's have a look at those.
5. CFR (Cost and Freight):
Also referred as CNF & CIF but CFR is the correct word as per incoterm 2010.
In this term Sellers, responsibility is not limited until loading country seller has to arrange freight as well.
Seller has to book and arrange freight upon cargo readiness and process for export clearance and pay all charges in load port and arrange cargo delivery till port of Discharge (Seller is responsible for freight payment as well).
Charges at Port of discharge, Export clearance and Insurance charges has to be borne by the buyer.
6. CIF (Cost Insurance and Freight):
This term is almost similar as CFR the only difference is seller has to arrange insurance as well.
7. CPT (Carriage Paid to):
In this term, the seller has to process export clearance and arrange cargo delivery till the named place* in the port of discharge from their buyer has to clear the goods and take the cargo into their premises.
Named place can be a CFS, 3-PL warehouse, and any other port or Inland terminal (ICD / Dry port) in a third country, etc...
Eg: Shipment to Afganistan from Dubai, so we decided sent the shipment through CPT term and the term will be CPT, Bandar abbas (Iran) (Which means the seller will arrange cargo till Bandar abbas port and shipper will clear the goods from Bandar Abbas and will take into their premises.
In this term, insurance is not covered by the seller.
8. CIP (Carriage and Insurance paid to):
Same as CPT only difference shipper will take care the responsibility of Insurance.
Note: All 'C' terms shipper is responsible for freight and export clearance and not responsible for Import clearance, delivery charges at destination. let's have a look at following remaining three incoterms see what is the difference.
9. DAT (Delivery at the terminal):
Seller has to arrange the cargo delivery till terminal (Terminal can be any place, container yard, warehouse, transport hub) in supplier country, the buyer has to arrange import clearance and cargo delivery from the terminal to their premises.
Sellers obligation will finish after handing over the cargo to the terminal.
10. DAP (Delivered at place);
In this term, the Seller has to do almost everything except one thing.
Seller has to arrange freight, export clearance and deliver the cargo to suppliers premises but duty has to paid by buyer.
Most of the courier companies are using DAP by default for outbound shipments, Eg: DHL.
11. DDP (Delivered at Site):
Seller will take all responsibilities of the cargo and deliver to buyers premises. Import and export customs clearance and duty payment also will be done by seller.
Mostly these terms are being used in Local deliveries, Courier delivery, and road transport.
For Terms 9 to 11 in case any support required for export clearance from buyer then it has to facilitated accordingly.
Epilogue : This is 1st article certainly there will be mistakes, so I request everyone to look into it and advise the suggestions and complaints.
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