incoterms 2010

Transcription

incoterms 2010

INCOTERMS 2010:
Implications and Nuances
Presented by: Morgan, Lewis & Bockius LLP
Margaret M. Gatti,
Louis K. Rothberg
Timothy M. Rolland
www.morganlewis.com
Outline of Presentation
I.
II.
III.
IV.
V.
Introduction to INCOTERMS
Definitions
INCOTERMS’ Functions
Explanation & Implications of
INCOTERMS
Tips for Using INCOTERMS
© Morgan, Lewis & Bockius LLP
2
Introduction to Incoterms 2010
International Commercial Terms
11 International Sales Terms (not sales law)
Standardized trade definitions
3 Letters Each
EXW, FOB, CFR
Devised and maintained by ICC
More than 120 member countries
Updated as required by commerce trends
3
Introduction to Incoterms
Current Applicability of Incoterms
• Widely accepted / used worldwide
• U.S.: Automatically apply (default) in
international trade transactions unless:
– Alternative sales terms selected, or
– State law selected, or
– FMS (Delivery Trade Codes / DTC)
• U.S.: can be applied to domestic sales on
elective basis (recommended that companies
master and use one set of terms for all sales)
4
Key Definitions
for
Understanding
INCOTERMS
5
Key Definitions
Pre-carriage: Inland transportation on seller’s side from
shipment origin point to port of departure
Main-carriage: Transportation from the seller's side
to the buyer's side
On-carriage:
Transportation from the arrival point
on the buyer's side to any other place
(such as to the buyer's premises).
6
Key Definitions
Omni-modal:
Those terms that can be used for all
transport modes.
Marine-restricted: Those terms that can be used only
for vessel shipments.
Shipment contract: A UCC-based sales contract holding
the seller responsible for the
condition of the goods until they are
handed over / delivered to a carrier.
(Legal delivery ≠ physical delivery)
7
Key Definitions
Destination contract:
A UCC-based sales contract
holding the seller responsible for
the condition of the goods until
they arrive at an agreed place.
(Legal delivery = physical
delivery)
Revenue recognition:
Establishes when a sale becomes
an account receivable. The
Securities and Exchange
Commission (SEC) has established
revenue recognition guidelines for
publicly traded companies. The
SEC guidelines are based on the
concept of shipment and
destination contracts.
8
Key Definitions
Minimum cover: Cargo insurance that covers only
minimum perils (i.e. total loss,
general average). Minimum cover is
often called "free of particular average
(FPA) in the US, and Institute of London
Underwriters "Institute Cargo Clause C"
internationally.
All risk:
Cargo insurance coverage that is
adequate for most shipments when written
on a warehouse-to-warehouse basis and
enhanced with "war" and "strike and civil
commotion" coverage.
War Risk:
Additional cargo insurance coverage for
war-related perils.
9
INCOTERMS
Functions
10
Incoterms’ Functions
1. Delegate shipping responsibilities and
shipping costs between sellers & buyers
a. Export Packaging
 Safe carriage for transport mode
 Excludes: Labeling / Marking and SWPM
b. Export Clearance
 Obtain export license
 Apply Destination Control Statement
 Complete Electronic Export Information (EEI)
Record in AES
11
(Responsibilities and Costs) cont’d
c. Pre-carriage for Export
 Inland transportation on seller’s side
From shipment origin point
To port of departure
 Deals separately with:
Loading
Unloading
12
d. Main Carriage for Export
 International transportation
From seller’s country
To buyer’s country
Loading
Unloading
13
e. On Carriage for Export
 Inland transportation on buyer’s side
From import entry port
To location designated by buyer
Loading
Unloading
14
f. Import Clearance
 Import licenses, when applicable
 Customs import formalities
 Possible payment of:
• Import duties
• Import taxes, such as VAT
• Other fees / charges
15
(Insurance)
2. Compel seller and buyer to deal
separately with Insurance
 Only two Incoterms deal with insurance
• Hint: look for “i” in the Incoterm
 Insurance required = minimum cover
• London Clause C Coverage / Free
•
•
Particular Average
No “All” Risk
No War Risk or SRCC Risk
16
(Seller’s Pricing)
3. Guide seller in setting export price and
clarify for buyer “buyer’s costs”
Seller increases export price to include
seller’s costs under relevant Incoterm
Base export price
Plus:
Export Clearance
Pre-Carriage Loading, etc.
Export price amount and Incoterm choice
Buyer infers “buyer’s costs”
17
(Contract Responsibilities)
4. Clarify subsidiary contract responsibilities
of seller & buyer
 Contract with freight forwarder
Export clearance
 Contract with carriers
Pre, Main, On
 Contract with insurer
 Contract with customs broker
Import clearance
18
(Delivery & Risk of Loss)
5. Clarify when “delivery” occurs and “risk
of loss” transfers
Risk of loss transfers with “Delivery”
Shipment Term: Place on Seller’s Side
Legal Delivery ≠ Physical Delivery
EXW, F terms, C terms
Destination Term: Place on Buyer’s Side
Legal Delivery = Physical Delivery
D terms
19
(Do Not Include Title Transfer)
Leave title transfer for parties’ agreement or
for default determination
Incoterms “silent” on title transfer
Look to parties’ agreement, or
Make default determination
Title passes when delivery made and
risk of loss transferred!
20
(Do Not Include Revenue Recognition)
Leave timing of revenue recognition to seller
– Under GAAP and Securities & Exchange
Commission (SEC) Rules, revenue
recognition requires that:
1) ownership or title must pass prior to
recognizing revenue
2) delivery must occur
21
Explanation of
INCOTERMS
22
Explanation of INCOTERMS
ExW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
23
DAT
DAP
DDP
Transport Mode Limitations
Marine Restricted
All Modes
Individual INCOTERMS MUST
Be used with Named Point
Seller’s Side vs Buyer’s Side
24
Well, maybe not in all cases…
25
Marine Restricted
Omni-modal
FAS named shipment port
EXW Seller’s premises
FOB named shipment port
FCA named place / Seller
CFR named destination port
CPT named destination / Buyer
CIP named destination / Buyer
CIF named destination port
DAT named place / Buyer
DAP named place / Buyer
DDP named place / Buyer
26
Incoterms are grouped into four categories
which reflect the breakdown of costs /
responsibilities between Seller & Buyer:
Group E:
Group F:
Group C:
Group D:
Departure Terms
Main Carriage Unpaid Terms
Main Carriage Paid Terms
Arrival Terms
27
Incoterms Explanation
EXW
Available at seller’s premises
Rule for Any Mode(s) of Transport
28
EXW – Ex Works
(Seller’s Premises)
Cost / Responsibility
1. Export Packaging
2. Export Clearance
3. Pre-Carriage Loading
Pre-Carriage
Pre-Carriage Unloading
29
Seller
Yes
No
No
No
No
Buyer
No
Yes
Yes
Yes
Yes
EXW – Ex Works
4. Main Carriage Loading
Main Carriage
Main Carriage Unloading
5. On Carriage Loading
On Carriage
On Carriage Unloading
30
Seller
No
No
No
No
No
No
Buyer
Yes
Yes
Yes
Yes
Yes
Yes
EXW – Ex Works
6. Import Clearance
7. Insurance
31
Seller
No
Buyer
Yes
No
No
EXW – Ex Works
Minimum obligation for seller
Shipment Term
“Delivery” occurs when seller places
goods at buyer’s disposal at seller’s
premises for buyer to load!
Risk of loss transfers from seller to buyer
when seller “delivers” goods to buyer
32
EXW – Ex Works
Appropriate for “routed transactions”
Inappropriate for USML exports
Unless Foreign Buyer is an Embassy in the U.S.,
Foreign buyer cannot obtain DSP5 licenses
• Ineligible person under ITAR 120.1(c)
US forwarders for foreign buyers cannot obtain
DSP-5 export licenses for foreign buyers
• DDTC policy: applicant must be exporter
33
EXW – Ex Works
Inappropriate for Haz Mat shipments
 Seller has no control over carrier’s
performance
 Seller has no control over safety conditions
during transport
 Despite lack of control, Seller:
Shares responsibility for incidents that
result in damages to 3rd parties or damages
to the environment.
34
FCA
MAIN CARRIAGE UNPAID
Free Carrier, Named Place
FAS
Free Alongside Ship,
Named Shipment Port
FOB
Free on Board
Named Shipment Port
35
FCA / FAS / FOB
Seller
Buyer
1. Export Packaging
Yes
No
2. Export Clearance
Yes
No
Pre-Carriage
Yes
No
No
No
Yes
Yes
36
FCA / FAS / FOB
Main Carriage
On Carriage
37
Seller
No
No
No
No
No
No
Buyer
Yes
Yes
Yes
Yes
Yes
Yes
FCA / FAS / FOB
6. Import Clearance
7. Insurance
38
Seller
No
Buyer
Yes
No
No
FCA / FAS / FOB
More obligations for seller than EXW
“Delivery” occurs:
• FCA:
When seller delivers goods to
carrier or named place
• FAS:
When seller places goods
alongside vessel at shipment port
• FOB:
When goods pass ship’s rail at
shipment port
39
FCA / FAS / FOB
Risk of Loss passes from seller to buyer
when “Delivery” occurs:
• FCA:
Seller delivers goods to carrier or named
place
• FAS:
Seller places goods alongside vessel at
shipment port
• FOB:
Goods pass ship’s rail at shipment port
FCA / FAS / FOB = Shipment Contracts
40
FCA / FAS / FOB
Appropriate for “routed transactions”
Inappropriate for USML exports
FCA / FAS / FOB: Export Clearance by Seller
• US seller = eligible person (ITAR 120.1(c))
• US seller obtains DSP-5 export license
DSP-5 export license requires end
destination control
• Destination control requirements in ITAR
123.9
41
FCA / FAS / FOB
Inappropriate for Haz Mat shipments
 Seller has no control over carrier’s
performance
 Seller has no control over safety conditions
during transport
 Despite lack of control, Seller:
to the environment.
42
MAIN CARRIAGE PAID
CFR
Cost and freight destination port
CIF
CFR + Insurance
CPT
Carriage paid destination
CIP
CPT + Insurance
43
CFR / CIF / CPT / CIP
1. Export Packaging
2. Export Clearance
Pre-Carriage
44
Seller
Yes
Yes
Yes
Yes
Yes
Buyer
No
No
No
No
No
Main Carriage
On Carriage
45
Seller
Yes
Yes
No
No
No
No
Buyer
No
No
Yes
Yes
Yes
Yes
6. Import Clearance
7. Insurance
46
Seller
No
Buyer
Yes
CIF
CIP
CFR
CPT
Shipment Terms
“Delivery” and Risk of Loss Transfer:
 CFR: when goods pass ship’s rail at shipment
port
 CIF: same as CFR
 CPT: when seller delivers goods to first carrier
 CIP: same as CPT
47
Inappropriate for “routed transactions”
Appropriate for USML exports
CFR / CIF / CPT / CIP: Export Clearance by Seller
• US seller obtains DSP5 export license
DSP5 license requires end destination control
• Destination control requirements in ITAR 123.9
48
Appropriate for Haz Mat shipments
 Seller has control over carrier’s
performance
 Seller has control over safety conditions
during transport
 Seller in better position because:
to the environment.
49
ARRIVAL TERMS
DAT
Delivered at terminal, named
terminal or port
DAP
Delivered at place, named place
DDP
Delivered duty paid, named
place
50
DAT / DAP / DDP
1. Export Packaging
2. Export Clearance
Pre-Carriage
51
Seller
Yes
Yes
Yes
Yes
Yes
Buyer
No
No
No
No
No
DAT / DAP / DDP
Main Carriage
On Carriage
52
Seller
Yes
Yes
Yes
Yes
Yes
No
Buyer
No
No
No
No
No
Yes
DAT / DAP / DDP
6. Import Clearance
7. Insurance
53
Seller
DDP
Buyer
Yes
No
No
DAT / DAP / DDP
More obligations for seller than FAS, FOB, CFR, CIF,
EXW, FCA, CPT & CIP
“Delivery” and Risk of Loss Transfer:
 DAT: When Seller delivers goods to named
destination terminal on Buyer’s side, packaged
appropriately and unloaded
 DAP: When Seller delivers goods to Buyer at
named place on Buyer’s side, appropriately
packaged but not unloaded
54
DAT / DAP / DDP
“Delivery” and Risk of Loss Transfer: (cont’d)
 DDP:
when seller places goods at
buyer’s disposal on transport arrival
at destination place
» Seller is not required to unload goods
but must clear goods for import
55
DAT / DAP / DDP
Inappropriate for “routed transactions”
(because Seller is controlling shipping)
Appropriate for USML exports
DAT / DAT / DDP: Export Clearance by Seller
• US seller can obtain DSP-5 export license
DSP-5 license requires end destination control
• Destination control requirements in ITAR
123.9
56
DAT / DAP / DDP
Appropriate for Haz Mat shipments
 Seller has control over carrier’s
performance
 Seller has control over safety conditions
during transport
 Seller in better position because:
to the environment.
57
INCOTERMS 2010
Seller / Exporter
Tasks
Costs in
Pricing
EXW
Export Packaging
$
FAS / FOB / FCA
Export Packaging
Pre-Carriage
$$
CFR / CIF
CPT / CIP
Export Packaging
Pre-Carriage
Main Carriage
(Insurance = I)
58
$$$
INCOTERMS 2010
DAT / DAP
DDP
Seller / Exporter
Tasks
Costs in
Pricing
Export Packaging
Pre-Carriage
Main Carriage
On Carriage
$$$$
Export Packaging
Pre-Carriage
Main Carriage
On Carriage
Foreign Import
Duties
(but NOT VAT / GST…)
$$$$$
59
INCOTERMS 2010
• All INCOTERMS require “named place” – the more
specific, the better
– ExW and “F” terms, place is on seller’s side of pond
– “C” terms and “D” terms, place is on buyer’s side of pond
• Only two Incoterms deal with insurance – look for “I”
– CIF
– CIP
• Only one INCOTERM makes export clearance a buyer’s
responsibility (all others assign task to seller)
– ExW
60
INCOTERMS 2010
• Only one INCOTERM makes import clearance a
seller’s responsibility (all others assign task to buyer)
– DDP
• Routed Transactions
– Buyers “control” shipment & freight
– ExW
– All “F” Terms
• INCOTERMS = International Standard / Default terms
61
Tips for Using
INCOTERMS
62
Incoterms Tips
Tip #1
• Understand Incoterm of choice and
make sure you use properly
– Stick with official meaning to the
greatest extent possible
– Employ additional provisions sparingly
63
Incoterms Tips
Tip #2
• Use individual Incoterms with named
point as required
– Seller’s side vs. Buyer’s side
64
Incoterms Tips
Tip #3
• Observe transport mode limitations
– Marine restricted
– All modes
65
Incoterms and Transport Modes
Marine Restricted
Omni-Modal
FAS named shipment port
EXW seller’s premises
FOB named shipment port
FCA named place / seller
CFR named destination port
CPT named destination place
CIF named destination port
CIP named destination place
DAT named place / buyer
DAP named place / buyer
DDP named place / buyer
66
Incoterms Tips
Tip #4
• For shipments subject to USML export
license requirements and for HAZMAT
shipments, use either Main Carriage Paid
terms (CFR, CIF, CPT or CIP) or Arrival
Terms (DAT, DAP, DDP)
– Stay away from routed transactions
– Refrain from use of EXW, FAS, FOB, FCA
67
Incoterms Tips
Tip #5
• Be very careful in using DDP Incoterm
– Recognize differing opinions on HTS
codes and applicable duties
– If use, make sure to exclude VAT
68
Incoterms Tips
Tip #6
• Don’t forget about insurance
– Not just a concern for CIF and CIP
– Coordinate insurance with payment
method and risk of loss
69
Incoterms Tips
Tip #7
Shipment terms allow for earlier revenue
recognition than delivery terms
Based on recognition of revenue occurring
with delivery and risk of loss transfer
Shipment terms: Departure, Main Carriage
Unpaid & Main Carriage Paid Terms
Delivery terms: Arrival Terms
70
Morgan, Lewis & Bockius
Margaret M. Gatti
Louis K. Rothberg
Philadelphia, PA
tel. 215.963.5569
Washington, DC
tel. 202.739.5281
Washington, DC
tel. 202.739.5409
Timothy M. Rolland
Washington, DC
tel. 202.739.5829
71
international presence
Almaty Beijing Boston Brussels Chicago Dallas Frankfurt Harrisburg Houston Irvine
London Los Angeles Miami Moscow New York Palo Alto Paris Philadelphia Pittsburgh
Princeton
San Francisco Tokyo Washington 72 Wilmington

incoterms 2010

Transcription

Similar documents

By Eric Overmyer - Princeton University

GCVI Alumni Association

NuFloTM Liquid Turbine Flowmeter User Manual

Enfield Auction Bill

[email protected] CAMPBELL FAMILY

snookie`s cookies

Home Buyer Guide

View a PDF of the printed invitation.

Flier - Triland Realty Partners, LLC

Title goes here