INCOTERMS (international commercial terms)

INCOTERMS (part 1)
by: Jose G Echeverry.


the international commercial terms are international sales terms created by the International Chamber of Commerce (ICC) and were introduced for the first time in 1936, the latest modification of the incoterms was in 2000 and is expected to be another in 2010.
The incoterms define responsibilities of the exporters and importers in an international transaction as well as the transfer of the liabilities, it is extremely importat to know which incoterm will be used in an international sale, as it will affect the costs and responsibilities of the transaction (insurance, tariffs, shipping).

TYPES OF INCOTERMS

GROUP E

EXW: Ex Works- Represents the minimun liability to the seller, risk and expenses of the sale are paid for the importer, title of the goods and risk pass to the buyer once the goods are recived at the seller´s premises, the transportation and insurance costs are assumed by the buyer, this incoterm is used for any mode of transportation, the seller has fulfilled obligation when the goods are placed at the disposal of the buyer. Loading the goods for transportation and all the documents required are at the cost of the buyer, however if both sides agree that the risks and costs of loading will be taken by the seller, the sentence " loaded upon the departing vehicle at the cost and risk of the seller " must be added after EXW in in the purchase order.

GROUP F
the seller pays for pre-carriage at the origin point but does not pay for main carriage

FCA: Free Carrier- Transportation and insurance costs passes to the buyer on his vehicle, it´s the buyer responsiblity to recieve the seller´s vehicle unloaded, the seller fulfill his obligation when the goods are delivered at the into the custody of the main carrier at the designated point but not loaded onto the main carrier, this incoterm can be used for "multimodal" transport.

normally the seller´s assistance is required in making the contract with the carrier therefore the seller may act on behalf of the buyer.

FAS: Free Alongside Ship- Risk, trasportation and insurance costs passes to the buyer once the goods are delivered alongside ship by the seller, is used for see or inland waterway transportation, the export clearance obligation rest with the seller.





FOB:Free On Board- means that the seller fulfilled his obligation when the goods passed the ship´s rail at the named port of shipment, this means that the buyer must afford all risks and costs of loss or damage to the goods from that point. This term can be used only for ocean transportation, it is important to be clear and specify the port of shipment to avoid problems, so it´s important to quote in the contract "FOB" followed by the requested port of shipment rather than the city. for example: it is preferable to request "FOB UK port", rather than "FOB london", or "FOB North Continental port" rather than "FOB Hamburg".