Incoterms

• INCOTERMS 2020

  International Commercial Terms; Trade Terms
• INCOTERMS


  • Series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) which define the responsibilities of sellers and buyers for the sale of goods in international transactions
  • Specifies who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance and other logistical activities
  • Revised by ICC every ten (10) years to correspond and adopt best practices
• ICC launched the Incoterms 2020, which is effective from the 1st of January 2020
• FOUR (4) GROUPS OF INCOTERMS


  • E GROUP (EXW)
  • F GROUP (FCA, FAS & FOB)
  • C GROUP (CFR, CIF, CPT & CIP)
  • D GROUP (DAP, DPU & DDP)
• EX WORKS (EXW), NAMED PLACE OF DELIVERY

  Cost of goods
• EXW Delivery and Risk

  1. The seller delivers the goods to the buyer when it places the goods at the disposal of the buyer at a named place (like a factory or warehouse)

  2. The named place may or may not be the seller's premises

  3. For delivery to occur, the seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable
• EXW


  • This rule may be used irrespective of the mode or modes of transport, if any, selected
  • The parties need only name the place of delivery, but are well advised to specify the precise point within the named place of delivery
  • Delivery happens when the goods are placed, not loaded, at the buyer's disposal, but risk of loss or damage during loading might lie with the buyer
• FREE CARRIER (FCA), NAMED PLACE OF DELIVERY


  EXW + Other Costs
• FCA Delivery and Risk

  The seller delivers the goods to the buyer in one of two ways:

  1. When the named place is the seller's premises, the goods are delivered when they are loaded on the means of transport arranged by the buyer

  2. When the named place is another place, the goods are delivered when they reach the named other place, are ready for unloading from seller's means of transport, and are at the disposal of the carrier or of another person nominated by the buyer
• FCA


  • This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed
  • The parties are well advised to specify the precise point within the named place of delivery
  • FCA requires the seller to clear the goods for export, where applicable, but the seller has no obligation to clear the goods for import or for transit through third countries, to pay any import duty or to carry out any import customs facilities
• FREE ALONGSIDE SHIP (FAS), NAMED PORT OF SHIPMENT


  EXW + Other Costs
• FAS Delivery and Risk


  The seller delivers the goods to the buyer when the goods are placed alongside the ship (e.g. on a quay or a barge) nominated by the buyer at the named port of shipment
• FAS

  • This rule is to be used only for sea or inland waterway transport where the parties intend to deliver the goods by placing the goods alongside a vessel
  • The parties are well advised to specify the loading point at the named port of shipment where the goods are to be transferred from the quay or barge to the ship
  • FAS requires the seller to clear the goods for export, where applicable, but the seller has no obligation to clear the goods for import or for transit through third countries, to pay any import duty or to carry out any import customs formalities
• FREE ON BOARD (FOB), NAMED PORT OF SHIPMENT


  EXW + Other Costs
• FOB Delivery and Risk

  1. The seller delivers the goods to the buyer on board the vessel nominated by the buyer at the named port of shipment

  2. The risk of loss of or damage to the goods transfers when the goods are on board the vessel, and the buyer bears all costs from that moment onwards
• FOB

  • This rule is to be used only for sea or inland waterway transport where the parties intend to deliver the goods by placing the goods on board a vessel
  • FOB requires the seller to clear the goods for export, where applicable, but the seller has no obligation to clear the goods for import or for transit through third countries, to pay any import duty or to carry out any import customs formalities
• COST AND FREIGHT (CFR), NAMED PORT OF DESTINATION

  FOB + Freight
• CFR Delivery and Risk

  1. The seller delivers the goods to the buyer on board the vessel

  2. The risk of loss of or damage to the goods transfers when the goods are on board the vessel, such that the seller is taken to have performed its obligation to deliver the goods whether or not the goods actually arrive at their destination in sound condition, in the stated quantity or, indeed, at all

  3. The seller owes no obligation to the buyer to purchase insurance cover
• CFR


  • This rule is to be used only for sea or inland waterway transport
  • Where more than one mode of transport is to be used, the appropriate rule to use is CPT rather than CFR
  • CFR requires the seller to clear the goods for export, where applicable, but the seller has no obligation to clear the goods for import or for transit through third countries, to pay any import duty or to carry out any import customs formalities
• COST INSURANCE AND FREIGHT (CIF), NAMED PORT OF DESTINATION

  FOB + Insurance + Freight
• CIF Delivery and Risk

  1. The seller delivers the goods to the buyer on board the vessel

  2. The risk of loss of or damage to the goods transfers when the goods are on board the vessel, such that the seller is taken to have performed its obligation to deliver the goods whether or not the goods actually arrive at their destination in sound condition, in the stated quantity or, indeed, at all

  3. The seller must contract for insurance cover against the buyer's risk of loss or damage to the goods from the port of shipment to at least the port of destination
• CIF


  • This rule is to be used only for sea or inland waterway transport
  • Where more than one mode of transport is to be used, the appropriate rule is to use CIP rather than CIF
  • CIF requires the seller to clear the goods for export, where applicable, but the seller has no obligation to clear the goods for import or for transit through third countries, to pay any import duty or to carry out any import customs formalities
• CARRIAGE PAID TO (CPT), NAMED PLACE OF DESTINATION

  FCA + Freight
• CPT Delivery and Risk

  1. The seller delivers the goods to the buyer by handing them over to the carrier contracted by the seller

  2. Once the goods have been delivered to the buyer in this way, the seller does not guarantee that the goods will reach the place of destination in sound condition, in the stated quantity or indeed at all, as risk transfers from seller to buyer when the goods are delivered to the carrier
• CPT


  • This rule may be used irrespective of the mode of transport selected and may also be used when more than one mode of transport is employed
  • If the seller incurs costs under its contract of carriage related to unloading at the named place of destination, the seller is not entitled to recover such costs separately from the buyer unless otherwise agreed
  • CPT requires the seller to clear the goods for export, where applicable, but the seller has no obligation to clear the goods for import or for transit through third countries, or to pay any import duty or to carry out any import customs formalities
• Carriage and Insurance Paid To (CPT)

  FCA + INS + FRT
• Letter of Credit (L/C)


  It gives the seller assurance that he will receive the payment for the goods and a binding document that a buyer can request from his bank in order to guarantee that the payment for goods will be transferred to the seller. In order for the payment to occur, the seller has to present the bank with the necessary shipping documents confirming the delivery of goods within a given time frame.
• Opening an L/C

  1. All L/Cs must be opened on or before the date of shipment

  2. Only one L/C should be opened for each import transaction

  3. Importers shall submit to the AAB the documents listed in Appendix 5

  4. Amendments of L/Cs need not be referred to the BSP for prior approval

  5. L/Cs shall be negotiated in accordance with the terms and conditions set forth in the L/C and shall be governed by the Uniform Customs and Practices on Documentary Credits
• Deferred L/Cs

  • Shall be governed by the pertinent provisions of Part Three, Chapter 1 (Loans and Guarantees) hereof
  • Deferred L/Cs shall refer to those with payment terms of more than one year reckoned from initial shipment date
• Documents Against Payment (D/C)


  An arrangement under documentary collection in which an exporter instructs the presenting bank to hand over shipping and title documents to the importer only if the importer fully pays the accompanying bill of exchange or draft
• D/C process

  1. AABs shall advise the importer of the receipt of the complete original shipping documents and effect the release of said documents to the importer upon receipt of payment

  2. AABs shall remit payment to the supplier through the correspondent bank abroad
• Documents Against Acceptance (D/A)


  An arrangement under documentary collection in which an exporter instructs the presenting bank to hand over shipping and title documents to the importer only if the importer accepts and signs the accompanying bill of exchange or draft
• D/A process


  The original shipping documents are released to the importer by the AAB concerned at the instance of the seller's bank upon the importer's acceptance of the seller's bill of exchange obligating the importer to pay for the shipment at some future date
• Open Account (O/A)

  An arrangement whereby the shipping documents are sent and released by the exporter directly to the buyer, without coursing the documents through the banks, upon the buyer's promise to pay at some future date after shipment
• O/A process


  1. The said documents are released by the seller directly to the importer without coursing the documents through the banks, upon the importer's promise to pay at some future date

  2. An import transaction to be considered under D/A or O/A must be payable at least 30 days after bill of lading (B/L) or airway bill (AWB) shipment date
• Direct Remittance (D/R)


  A supplier-buyer arrangement where payment is made within 29 calendar days from bill of lading/airway bill date
• D/R process

  1. AABs and AAB-forex corps may service within twenty nine (29) calendar days after B/L or AWB shipment date applications for direct remittance of import payments upon presentation of the complete original shipping documents, in accordance with existing rules, and if applicable, import clearance, for regulated items issued by concerned government agencies

  2. If the 29th day falls on a non-banking day, the following banking day shall apply and the importation will still be considered DR