Professional Documents
Culture Documents
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Strictly Private and Confidential
Meet the presenters:
Charnell is a Director in Citi‘s Global Transaction Services where she is a Product Manager
for Import Products and Services. In the International Banking community Charnell is
recognized as a Trade Expert with over 34 years of experience. She is on the BAFT-IFSA
Board of Directors, the ICC Drafting Committee for ISBP, and serves as an Advisory Member
of the Institute of International Banking Law & Practice, Inc.
Roland is Vice President and Global Trade Advisor at Citi. Roland has over 20 years of
experience in the financial industry. Over the past 14 years he has been working in Global
Trade Operations serving in a number of operational managerial positions. Currently he is the
North American Trade Advisory Head and also the Global Trade Advisory Coordinator leading
Citi‘s Trade Advisory Global Team of Trade experts.
Contact Roland
– roland.d.satchell@citi.com
– +1 (813) 604-7183
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These materials are provided for educational and illustrative purposes only and not as a
solicitation by Citi for any particular product or service. Furthermore, although the information
contained herein is believed to be reliable, the following does not constitute legal advice and
Citi makes no representation or warranty as to the accuracy or completeness of any
information contained herein or otherwise provided by it.
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Incoterms
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What Are They?
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What Do They Mean?
– The point at which delivery occurs, i.e., the point at which the risk of
loss or damage transfers from the seller to the buyer
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Why Do They Exist?
Incoterms have been around since the first version 1936 and has been
revised last in 2000. This is now being replaced with the 2010 version
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Main changes on the Incoterms® 2010
Number of Incoterms was reduced from 13 to 11.
EXW EXW
FAS FAS
FOB FOB
FCA FCA
CFR CFR
CIF CIF
CPT CPT
CIP CIP
DAF DAP
DES DAT
DEQ DDP
DDU
DDP
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Main changes on the Incoterms® 2010
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Purpose of Incoterms
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Who Uses Them?
And indirectly
Banks
Insurers
Carriers/Forwarding Agents
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Use by Banks
– The documents called for in the credit are consistent with the term used
NB: Only few credits state that the term used is actually an ―Incoterm‖.
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Use by Insurers
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Use by Carriers/Forwarding agents
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Incoterms and Documents
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Incoterm Categories
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Responsibilities
―EXW‖ term defines the minimum that has to be done from the sellers
perspective
―DDP‖ terms define the most that has to be done from the sellers
perspective
The other terms define the points in between these two extremes
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Format of Incoterms
E and F terms will usually be followed with a delivery place / port of loading
C and D terms will usually be followed with a place of destination / port of discharge
The named place stated after the Incoterms, is the place up to which the seller pays the
freight costs, e.g., ―EXW New York‖
Do not confuse this with the ―Delivery Point‖, i.e., the point at which the risk transfers from
seller to buyer. The risk can transfer at a different point as well ! (Eg. C Terms)
Also, ―delivery‖, in the Incoterm sense, has nothing to do with transfer of ownership. Title of
the goods always lies with the documents.
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The 11 Incoterms
EXW – Ex Works: means that the seller delivers when he places the
goods at the disposal of the buyer at the seller‘s premises or another named place (I.e.
works factory, warehouse, etc.) not cleared for export and not loaded on any collecting
vehicle
FCA – Free Carrier: means that the seller delivers the goods, cleared
for export, to the carrier nominated by the buyer at the named place. It should be noted that
the chosen place of delivery has an impact on the obligations of loading and unloading the
goods at that place. If delivery occurs at the seller‘s premises, the seller is responsible for
loading. If delivery occurs at any other place, the seller is not responsible for unloading.
CPT – Carriage Paid To: means that the seller delivers the goods to
the carrier nominated by him but the seller must in addition pay the cost of carriage
necessary to bring the goods to the named destination.
CIP – Carriage and Insurance Paid to: means that the seller delivers
the goods to the carrier nominated by him but the seller must in addition pay the cost of
carriage necessary to bring the goods to the named destination and also pay the necessary
insurance.
(1) Only for use with Port to Port or Inland Waterway transportation. All others for any mode of transport.
(2) New Incoterms.
In all cases, the Seller is responsible for, and assumes the cost of Export Clearance and the Buyer is responsible for Import Clearance and costs except: DDP - Seller does both, and
EXW - Buyer does both.
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The 11 Incoterms
DAT (2) – Delivered At Terminal: means that the seller delivers when the
goods, once unloaded from the arriving means of transport, are placed at the disposal of
the buyer at a named terminal at the named port or place of destination.
DAP (2) – Delivered At Place: means that the seller delivers when the
goods are placed at the disposal of the buyer on the arriving means of transport ready for
unloading at the named place of destination.
DDP – Delivered Duty Paid: means that the seller delivers the goods to
the buyer, cleared for import, and not unloaded from any arriving means of transport at the
named place of destination.
(1) Only for use with Port to Port or Inland Waterway transportation. All others for any mode of transport.
(2) New Incoterms.
In all cases, the Seller is responsible for, and assumes the cost of Export Clearance and the Buyer is responsible for Import Clearance and costs except: DDP - Seller does both, and
EXW - Buyer does both.
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The 11 Incoterms
FAS (1) – Free Alongside Ship: means that seller delivers when the goods
are placed alongside the vessel at the named port of shipment This means that the buyer
has to bear all costs and risks of loss of or damage to the goods from that moment.
FOB (1) – Free On Board: means that the seller delivers when the goods
are placed on board the ship at the named port of shipment
CFR (1) – Cost and Freight: means that the seller delivers when the goods
are placed on board the ship in the port of shipment. The seller must in addition pay the
cost of carriage necessary to bring the goods to the named destination.
CIF (1) – Cost Insurance and Freight: means that the seller delivers when
the goods are placed on board the ship in the port of shipment and also pay the necessary
freight and insurance. .
(1) Only for use with Port to Port or Inland Waterway transportation. All others for any mode of transport.
(2) New Incoterms.
In all cases, the Seller is responsible for, and assumes the cost of Export Clearance and the Buyer is responsible for Import Clearance and costs except: DDP - Seller does both, and
EXW - Buyer does both.
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Incoterms and Contracts of Carriage
They are completely separate things but, confusingly, some credits add
contract of carriage terms to the stated Incoterm, e.g. CFR Free Out,
Tincan.
Such terms are usually only encountered when there is a bulk commodity
shipment by sea involved
A bank will seldom need to know exactly what the terms really mean—
banks are just interested to see that the correct statement appears on the
documents.
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Contract of Carriage Terms
The following are some of the terms most commonly seen in credits and/or on Bills of
Lading, and what they usually mean:
– Liner – an ocean vessel which sails to a published schedule and itinerary of ports of call
– Liner In – the ―freight‖ cost levied by the carrier includes the cost of loading the goods
onto the ship
– Liner Out – the ―freight‖ cost levied by the carrier includes the cost of unloading the
goods off the ship
– Liner Terms/Berth Terms/LILO – Liner In and Liner Out
– Free Out (FO) – the ―freight‖ cost levied by the carrier does not include the cost of
discharging the cargo from the vessel
– Free In (FI) – the ―freight‖ cost levied by the carrier does not include the cost of loading
the cargo onto the vessel
– Stow – the ―freight‖ cost does not include the cost of placing the cargo safely in the ships‘
hold
– The ―freight‖ cost does not include the cost of leveling bulk cargoes in the ships‘ hold
These terms are usually seen only in conjunction with FOB and CFR (or on their own) and
in various permutations, e.g. FOBS, FOBT, FOBST, FIO, FIOS, FIOST, etc.
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How to use Incoterms 2010 effectively
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The end
Q&A
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Roland Satchell
Global Trade Advisor
roland.d.satchell@citi.com
+1 (813) 604-7183
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