Documents Used in Import-Export
Incoterms
This section of this unit will be
about ‘Incoterms’, which are very important for the importer to make a decision
to lace an order with one company or another.
In
international trade, prices for exports can be quoted either in the buyer’s
currency or the seller’s currency. But usually they are quoted in a hard
currency such as US dollars, Japanese yen or Euro. Terms of delivery are always
indicated in the price quoted. At this point, the international standard Incoterms
play an important role (for the exporter to quote the price to the importer).
Incoterms
are a set of international rules published by the International Chamber of
Commerce, Paris with the aim of avoiding disagreements which may arise from
difference in trading practices in different countries. Incoterms help make
clear the responsibilities of the exporter and the importer since there are
many costs in sending goods from one country to another, such as the cost of
packing, insurance, duty and freight, in addition to the cost or the value of
the goods themselves.
The following are INCOTERMS which are normally used in
international trade.
1). EXW (Ex Works)
The
exporter makes the goods ready to be picked up from his or her factory. The
importer is responsible for paying insurance and transportation costs to the
destination.
2). FCA (Free Carrier)
The
exporter’s obligation is fulfilled at the named point of loading the goods onto
containers or the goods have been taken to the transport terminal. In the case
of rail or road transport, the responsibility is completed when the goods have
been loaded onto the carrier. The importer pays for onward carriage and
insurance.
3). FAS (Free Alongside Ship)
The
exporter’s obligation is fulfilled at the named port of shipment, when the
goods have been placed alongside the ship on the quay. The importer is
responsible for all costs and risks onward from that moment.
4). FOB (Free on Board)
The
exporter’s obligation is fulfilled when the goods pass the ship’s rail. The
goods are loaded on board by the exporter at the port named in the contract.
The importer is responsible for onward transport and insurance costs.
5). CFR (Cost and Freight)
The
exporter is responsible for the transport cost to the named port. This term is
used only for waterway transport.
6). CIF (Cost, Insurance and Freight)
This
term is the same as CFR but the exporter is responsible for arranging and
paying for marine insurance for any risks that might happen until the goods
arrive at the named port of destination.
7). CPT (Carriage Paid)
The
exporter takes care of the transportation cost to the destination. This tem is
appropriate when using multimodal transport.
8). CIP (Carriage and Insurance Paid)
The
exporter takes care of the transportation cost to the destination (the same as
CPT) and also pays for insurance during carriage.
9). DAF (Delivery at Frontier)
The
exporter’s responsibility is over when the goods have arrived at the frontier.
In the contract it can be specified which frontier. This term is most often
used for rail or road transport but can be used with any mode.
10). DES (Delivery Ex Ship)
This
term can be used only for waterway transport, either sea or inland. The
exporter is responsible for making goods available on board ship and insurance
up to the port of destination. (The goods are uncleared for importation).
11). DEQ (Delivered Ex Quay)
The exporter is responsible for
the transportation and insurance cost up to the port of destination. Moreover,
he / she has to take care of unloading the cleared goods onto the wharf or
quay. Whether or not the exporter is responsible for duty, VAT, etc. is subject
to the contract made between the exporter and the importer.
12). DDU (Delivered Duty Unpaid)
The exporter’s
responsibility ends when the goods are ready for the importer to pick them up
at the place of destination. However, the exporter is not obliged to pay for
customs duty. This term can be used for any mode of transport.
13). DDP (Delivered Duty Paid)
The
exporter is responsible for all costs, including import duty, until the goods
arrive at the destination. Under this term, the exporter bears the maximum
obligation.
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