1 Incoterms Lectures
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Transcript of 1 Incoterms Lectures
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Law of Contract• If there is a proposal from one side and if there is unconditional
acceptance from another side that is called a contract/agreement • Essential elements of a valid contract
1. Valid Offer & unconditional Acceptance2. Consideration – quid pro quo3. Capacity to contract4. Should not be mentally challenged5. Consensus ‘AD-IDEM’6. Should not be any mismatch of understanding7. Legality of object8. Capable of Performance & Intention to create legal relationship9. Age above 18
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CONTRACTUAL OBLIGATIONS
• Seller1. Deliver goods as per contract,
in time & inform buyer
2. Bear all costs, taxes, till ‘delivered’
3. Provide packaging
4. Arrange Inspection, if required
5. Provide Document of title & other documents
• Buyer1. Take delivery of goods
2. Arrange payment
3. If required, arrange freight, insurance
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CONTRACT
• The Contracts for the International Sale of Goods (CISG) will apply in any sales contract for goods between entities in countries that have signed this United Nations-sponsored treaty, unless the buyer or seller takes specific steps to exclude it. CISG was developed by United Nations Convention on International Trade Law (UNCITRAL).
• www.cisg.law.pace.edu
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INCOTERMS
Define obligations/responsibility of Seller and
Buyer in respect of• Carriage of Goods• Risks• Costs
• INCOTERMS quantify the costs borne by Seller and Buyer
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INCOTERM - 1
• When Buyer arranges to pick up the cargo from Ranipet, they will pay the cost of goods to Barakat Leather Co and bear all other costs.
Here, the terms of sale are Ex Works Ranipet or EXW.
Barakat Leather Co, Ranipet
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Free Carrier (FCA) Chennai
Barakat Leather Co delivers the cargo, custom cleared at Chennai airport, for airfreight. Thereafter Buyer will arrange to load the cargo and pay cost of airfreight and insurance.
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FAS – Free Alongside Ship (Chennai)
FOB – Free on Board (Chennai)
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Wharf or Quay
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FAS & FOB ….
• FAS (Chennai): Barakat Leather Co will pay all costs till the goods are custom cleared and brought inside Chennai port for loading. Thereafter, Buyer will bear all costs of loading, ocean freight, insurance etc.
• FOB (Chennai): Barakat Leather Co arranges loading the cargo into the ship but the freight and insurance charges are paid by Buyer.
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Destination
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CFR – Cost and Freight (Named Port of Destination)
CIF – Cost Insurance and Freight (Named Port of Destination)
CFR Marseille: Barakat Leather Co also pay the
Ocean freight cost from Chennai to Marseille over
the FOB costs, but their risk is only upto Chennai.
CIF: Barakat Leather Co pay the ocean freight cost
and insurance premium but their risk is only
upto Chennai.
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By land, Place of Destination
• CPT – carriage paid to (named place of destination)
• CIP – carriage and insurance paid to (Named place of destination)• Example: From Marseille to CPT or CIP Hamburg
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D Terms
• DAF – Delivered at Frontier (named place)• DES – Delivered ex Ship (named port of
destination)• DEQ – Delivered ex quay (named port of
destination)• DDU – Delivered Duty Unpaid (named place)• DDP – Delivered Duty Paid ( named place)• Costs and risk upto named port/place
to Barakat Leather Co’s account
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INCOTERMS
• 1 exclusively territorial Incoterm (DAF)
• 6 exclusively maritime Incoterms • (FAS, FOB, CFR, CIF, DES, DEQ)
• 6 Incoterms valid for any means of transport
• (EXW, FCA, CPT, CIP, DDU, DDP)
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INCOTERMS – Cost Implication• EXW Gurgaon cost of Maruti Swift: Rs 200,000
– Cost of transport to CFS Delhi, export documentation, and customs clearance 500
• FCA N.Delhi 200,500– THC, Stuffing, transportation to Nhava Sheva & port charges 1,000
• FAS Nhava Sheva port 201,500– Loading (stevedoring) charges 500
• FOB Nhava Sheva 202,000– Ocean freight to Hamburg 2,000
• CFR Hamburg 204,000– Marine Insurance 500
• CIF Hamburg 204,500 = $ 4, 650
– Shipping Agency charges at Hamburg 20
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INCOTERMS - Example
DES Hamburg 4,670 Unloading costs 20
DEQ Hamburg 4,690 Local transport charges to customer 40
DDU Customer’s warehouse 4,730 Clearing charges and customs duty 100
DDP Customer’s warehouse 4,830
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Incoterms Export customs
Local tpt
Loading chgs
freight insurance
Unloading chgs
tpt Import customs
EXW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
DES
DEQ
DDU
DDP
DAF
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Making a contract• Buyer and Seller• Product: description, specifications• Quantity• Packing, Marking• Price, Value• Terms of Delivery• Loadport, Discharge port/destination• Shipment schedule Insurance• Payment Documents• Inspection• Arbitration Force Majeure