Incoterm description

Draft
Bonn, 2014
Contents

 Incoterms 2010
– Introduction to Incoterms
– Definition of Incoterms and
key differences

– Changes in Incoterm 2010

– Complete overview and
additional trainings

 Incoterms in context of NFE

11 Incoterms are defined to clarify the rules agreed between
the parties of a contract DRAFT

What are Incoterms?

 Incoterms are rules agreed by parties of a contract. They are not laws enacted
by government
 In Incoterm 2010 different scenarios are combined into 11 rules, based on
common industry practice, clarifying along the stages of the transportation process
especially responsibilities between buyer and seller regarding
– Carriage selection / ordering
– Cost coverage
– Risk handover
 These 11 rules have a 3 letter abbreviation which is referred to as “Incoterm”
 The starting letter of the abbreviation differentiates which Incoterm group an
incoterm belongs to
 The Incoterm is always followed by a place or port to specify the location it refers to

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Incoterms are grouped into departure, main carriage unpaid, Detailed in the following

main carriage paid and arrival terms DRAFT

Starting Included
letter Incoterm group Main differenciator between incoterm groups Incoterms
 Seller is only responsible to provide goods at the defined named place, EXW
where also the risk transfer happens
E Departure term
 Buyer has to arrange all transport stages, import and export formalities
and bears all risks

 Seller hands over goods prior to main carriage (from seller perspective FCA, FAS, FOB
Main carriage
F “main carriage unpaid”)
unpaid term
 Buyer responsible as of main carriage, risk transfers at same stage as
responsibility shift

 Only incoterm group with different hand-overs of responsibility and risk CFR, CIF, CPT,
 Risk transfer from seller to buyer happens prior to main carriage with CIP
handover to carrier, while seller is still responsible to order and pay for
Main carriage main carriage (from seller perspective „main carriage paid“)
C
paid term  As risk is transferred prior to responsibility hand-over, buyer would has to
bear risks for transport contracted and paid for by seller, therefore two
incoterms are defined that include obligation for seller to contract and
pay insurance for main leg

 Seller is responsible and bears risk of goods throughout main carriage DAT, DAP, DDP
until delivery or arrival at agreed terminal or place
D Arrival term

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Contents

 Incoterms 2010
– Introduction to Incoterms
– Definition of Incoterms and
key differences

– Changes in Incoterm 2010

– Complete overview and
additional trainings

 Incoterms in context of NFE

Incoterms include a referred to location DRAFT

(place, port or terminal) X Detailed in the following

Starting
Incoterm group Incoterm Description Referred location
letter
E Departure term EXW EX Works Named place of delivery

FCA Free CArrier Named place of delivery

Main carriage
F FAS Free Alongside Ship Named port of shipment
unpaid term
FOB Free On Board Named port of shipment
CFR Cost and FReight Named port of destination
CIF Cost Insurance and Named port of destination
Main carriage paid Freight
C
term CPT Carriage Paid To Named place of destination
CIP Carriage and Insure Paid Named place of destination
to
DAT Delivered At Terminal Named terminal at port or
place of destination
D Arrival term
DAP Delivered At Place Named place of destination
DDP Delivered Duty Paid Named place of destination

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 DRAFT
E If main carriage is responsibility of buyer, Incoterm group Responsibility of
Seller

F is either departure (EXW) or main carriage unpaid (Fxx) Buyer

Delivery
Ready for Import
Seller Export Pre- at Loaded On Dis- Delivery Onward Buyer/
loading Formali-
Exporter Formali- Carriage Named On Main Board charge Terminal Carriage Importer
alongside ties
Not ties and Not Un- Place Board Carriage1 Ship or at Port of Un- Not Un- Un-
Ship/ and
Loaded Fees loaded Un- Ship Vessel Arrival loaded loaded loaded
Vessel Duties
loaded

EXW - EXWorks Carriage

(...named place of and costs
delivery) Risks

FCA - Free Carrier Carriage

(...named place of and costs
delivery) Risks

FAS - Free Alongside Carriage

Ship (...named port of and costs
shipment) Risks

FOB - Free On Board Carriage

(...named port of and costs
shipment) Risks

How to distinguish between shown incoterms

Starting

letter Incoterm group Incoterm Description Criteria for selection

Departure EXW EX Works If seller is only responsible to provide the goods at the named place of delivery, from there on buyer responsible for all
E
term further steps including export and custom formalities

FCA Free CArrier If seller responsibility ends after the pre-carriage to the named place (not unloaded)
Main carriage FAS Free Alongside If seller responsibility ends after pre-carriage including unloading and provisioning alongside ship ready for loading
F
unpaid term Ship
FOB Free On Board If seller responsibility ends after pre-carriage including loading of goods onto the ship

1 by Air, Road, Rail, or Ocean

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 DRAFT
C Cxx Incoterms are used if main carriage is paid by seller, Responsibility of
Seller

but risk transfers from seller to buyer before main carriage Buyer

Delivery
Ready for Import
Seller Export Pre- at Loaded On Dis- Delivery Onward Buyer/
loading Formali-
Exporter Formali- Carriage Named On Main Board charge Terminal Carriage Importer
alongside ties
Not ties and Not Un- Place Board Carriage1 Ship or at Port of Un- Not Un- Un-
Ship/ and
Loaded Fees loaded Un- Ship Vessel Arrival loaded loaded loaded
Vessel Duties
loaded

CFR - Cost and Freight Carriage

(...named port of and costs
destination) Risks

CIF - Cost, Insurance Carriage Seller to obtain

and Freight (...named and costs and pay for
port of destination) Risks insurance

CPT - Carnage Paid To Carriage

(...named place of and costs
destination) Risks

CIP – Carnage and Insu- Carriage Seller to obtain

rance Paid To (..named and costs and pay for
place of destination) Risks insurance

How to distinguish between shown incoterms

Starting

letter Incoterm group Incoterm Description Criteria for selection

CFR Cost and  Seller is responsible for main carriage until shipment arrives at named port (discharge and unloading with buyer).
FReight  Risk transfer for goods happens prior to main carriage but after goods are loaded on board
CIF Cost Insurance  If seller is explicitly obliged to obtain insurance, Incoterm CIF has to be used, otherwise CFR
and Freight
C Main carriage
paid term CPT Carriage Paid  Seller is responsible for main- and on-carriage until shipment arrives at named place (unloading and import
To formalities with buyer).
 Risk transfer for goods happens with handover to carrier after unloading, prior to loading on board and main
CIP Carriage and carriage
Insure Paid to  If seller is explicitly obliged to obtain insurance, Incoterm CIP has to be used, otherwise CPT

1 by Air, Road, Rail, or Ocean

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 DRAFT
D Dxx Incoterms are used if main carriage is responsibility of Responsibility of
Seller

seller and risk transfers at same place as responsibility Buyer

Delivery
Ready for Import
Seller Export Pre- at Loaded On Dis- Delivery Onward Buyer/
loading Formali-
Exporter Formali- Carriage Named On Main Board charge Terminal Carriage Importer
alongside ties
Not ties and Not Un- Place Board Carriage1 Ship or at Port of Un- Not Un- Un-
Ship/ and
Loaded Fees loaded Un- Ship Vessel Arrival loaded loaded loaded
Vessel Duties
loaded
DAT - Delivered At Carriage
Terminal (...named and costs
terminal at port or place
of destination) Risks

DAP - Delivered At Place Carriage

(...named place of and costs
destination) Risks

DDP - Delivered Duty Carriage

Paid (...named place of and costs
destination) Risks

How to distinguish between shown incoterms

Starting

letter Incoterm group Incoterm Description Criteria for selection

DAT Delivered At  Seller is responsible for pre- and main carriage including unloading at named terminal. Buyer is responsible for
Terminal oncarriage and import formalities.
DAP Delivered At  Seller is responsible for pre-, main and on-carriage to named place but excluding uloading of goods and import
D Arrival term
Place formalities, which are responsibility of the buyer.
DDP Delivered Duty  Seller is responsible for the complete end-to-end transport, pre-, main- and oncarriage, including unloading at named
Paid place and all import formalities and duties.

1 by Air, Road, Rail, or Ocean

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 DRAFT
F Out of 11 defined incoterms, only 7 are applicable for non sea or inland
C waterways
Leading to a reduced set of 7 incoterms to
Out of total 11 incoterms, 4 are only to be used for
be applied for all modes of transport
sea and inland waterway transports and not
including multimodal and also
recommended for not containerized goods…
recommended for containerized goods
Incoterm Description Incoterm Description
EXW EX Works EXW EX Works
FCA Free CArrier Sea and FCA Free CArrier
FAS Free Alongside Ship inland water- CPT Carriage Paid To
way transport
FOB Free On Board only, not CIP Carriage and Insure Paid to
CFR Cost and FReight recommended DAT Delivered At Terminal
for DAP Delivered At Place
CIF Cost Insurance and
containerized
Freight DDP Delivered Duty Paid
goods
CPT Carriage Paid To
CIP Carriage and Insure Paid
to
DAT Delivered At Terminal
DAP Delivered At Place
DDP Delivered Duty Paid

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Contents

 Incoterms 2010
– Introduction to Incoterms
– Definition of Incoterms and
key differences

– Changes in Incoterm 2010

– Complete overview and
additional trainings

 Incoterms in context of NFE

4 Incoterms still used in DGF that were excluded in Incoterms 2010 DRAFT
Not part of Incoterm 2010 anymore
Incoterm Description Changes in Incoterm 2010
EXW EX Works -
FCA Free CArrier -
FAS Free Alongside Ship -
FOB Free On Board -
CFR Cost and FReight -
CIF Cost Insurance and Freight -
DES Delivered Ex Ship Replaced by DAP
DAT Delivered At Terminal -
DEQ Delivered Ex Quay Replaced by DAT
DAP Delivered At Place -
DDU Delivered Duty Unpaid Replaced by DAP
CPT Carriage Paid To -
DAF Delivered At Frontier Replaced by DAP
CIP Carriage and Insure Paid to -
DDP Delivered Duty Paid -

Source: Source

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Rationale of differences in Incoterm 2010 DRAFT

 DAP replaces what were DAF, DES and DDU and can be used in any situation
DAP where such terms were used previously
replaces
DAF, DES,  The rationale for this consolidation was that the INCOTERMS 2010 drafting
and DDU committee felt that DAF, DES and DDU were all similar in scope and that there
was often confusion about the appropriate D-term to use

 DAT replaces DEQ and should be used where DEQ would have been used
previously

 DAT is primarily for use in the sale of containerized goods, which are delivered
by unloading them from the arriving means of transport and placing them at the
DAT
disposal of the buyer at the named port or place of destination
replaces
DEQ  Note that "terminal" replaces "quay" as a global change and includes any place,
whether covered or not, such as quay, warehouse, container yard or road, rail
or air cargo terminal

 Both DAP and DAT may be used irrespective of the mode of transport employed

Source: Source

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Contents

 Incoterms 2010
– Introduction to Incoterms
– Definition of Incoterms and
key differences

– Changes in Incoterm 2010

– Complete overview and
additional trainings

 Incoterms in context of NFE

 DRAFT
Shipments by Air, Road,

Complete picture - incoterms define rules agreed Rail, Sea or multimodal

Seller
Shipments by Sea and
between seller and buyer end-to-end inland waterways only Buyer

Seller Pre- Delivery at Ready for Onward

Export Loaded On Board Discharge Delivery Import Buyer/
Exporter Carriage Named loading Main Carriage
Formalities On Board Ship or at Port of Terminal Formalities Importer
Not Not Place alongside Carriage1 Not
and Fees Ship Vessel Arrival Unloaded and Duties Unloaded
Loaded Unloaded Unloaded Ship/Vessel Unloaded
Carriage
EXW - EXWorks and costs
(...named place of delivery) Risks
Carriage
FCA - Free Carrier and costs
(...named place of delivery) Risks
Carriage
FAS - Free Alongside Ship and costs
(...named port of shipment) Risks
Carriage
FOB - Free On Board and costs
(...named port of shipment) Risks
Carriage
CFR - Cost and Freight and costs
(...named port of destination) Risks

CIF - Cost, Insurance and Carriage Seller to obtain

Freight (...named port of and costs and pay for
destination) Risks insurance
CPT - Carnage Paid To Carriage
(...named place of and costs
destination) Risks
CIP – Carnage and Carriage Seller to obtain
Insurance Paid To (..named and costs and pay for
place of destination) Risks insurance
DAT - Delivered At Terminal Carriage
(...named terminal at port or and costs
place of destination) Risks
DAP - Delivered At Place Carriage
(...named place of and costs
destination) Risks
DDP - Delivered Duty Paid Carriage
(...named place of and costs
destination) Risks

1 by Air, Road, Rail, or Ocean

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 DRAFT
Shipments by Air, Road,
Correct incoterms can be distinguished by 4 questions on Rail, Sea or multimodal

responsibilities of seller and buyer (shipper and consignee) Shipments by Sea and
inland waterways only

Questions Incoterm
Consignee
EXW
Consignee Who pays for pre-carriage
and export formalities?

Recommendation for
containerized goods
Consignee Who pays for FCA
Shipper
unloading at
named place? Consignee
FAS1
Who pays for loading on
Shipper ship?
FOB1
Shipper
Who pays
Yes
for mainleg CIF1
Consignee
Is seller required to
obtain insurance?

Recommendation for
containerized goods
Consignee Who pays for discharge at CFR1
port of arrival (and delivery at No
terminal)?
DAT
Shipper
Who pays for Yes
CIP
Shipper on-carriage Consignee
Is seller required to
obtain insurance?
CPT
Who carries the risk for main- No
Shipper carriage? Consignee
DAP
Who pays for import
Shipper formalities and duties?
DDP
Shipper

1 Sea and inland waterway transport only, not recommended for containerized goods
Source: World Trade Press Illustrated Guide to Incoterms® 2010

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Additional in depth e-learning training on Incoterms 2010 available via my
Talent World portal DRAFT

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Contents

 Incoterms 2010
 Incoterms in context of NFE
 DRAFT

In NFE Incoterms impact especially FWO and required FWA as well as

downstream documents x Detailed in the following

In NFE Incoterms have an influence on

A Required import and export FWA  Incoterms of a shipment decide whether import and/or export FWA
are required
B Selection of prepaid agreement  Depending on Incoterm different business partner has to be
party and collect agreement party in selected as bill-to-party and agreement-to-party for prepaid or
business partner tab and stages tab collect agreements
C Available service elements in  Incoterms together with matching movement type and traffic
service configurator direction define if a service is available for a certain shipment
D Incoterms in FWO for executed  The Incoterm defined in the FWA will be copied in the FWO (on
shipments header level)
 If a specific Incoterm is used, this cannot be changed in the FWO
 Either N/A has to be used or different FWA for each Incoterm
E Invoiced parts of shipment  E.g., for Incoterm DAT, no delivery will be invoiced
F Which stages a FWO will have  IFRS requires revenue and cost recognition to be correctly
revenue and cost recognition docs allocated based on executed stages, depending on responsibility
for of shipper/consignee for each stage (pre-, main-, on-carriage) as
defined in revenue and cost recognition
 This aspect will be covered in separate finance training on
revenue- and cost-recognition
A Forwarding Order Creation (FWA requirement as per INCOTERMS) DRAFT

NFE – Legacy NFE – NFE Legacy – NFE

Export FWO Import FWO Export FWO Import FWO Export FWO Import FWO

Export Import Export Import Export Import Export Import Export Import Export Import
Incoterm
FWA FWA FWA FWA FWA FWA FWA FWA FWA FWA FWA FWA

EXW NO YES N/A N/A NO YES NO YES N/A N/A NO YES

FCA YES YES N/A N/A YES YES NO YES N/A N/A NO YES

FAS YES YES N/A N/A YES YES NO YES N/A N/A NO YES

FOB YES YES N/A N/A YES YES NO YES N/A N/A NO YES

CFR YES NO N/A N/A YES NO NO YES N/A N/A NO YES

CIF YES NO N/A N/A YES NO NO YES N/A N/A NO YES

DAT YES NO N/A N/A YES NO NO YES N/A N/A NO YES

DAP YES NO N/A N/A YES NO YES YES N/A N/A YES YES

CPT YES NO N/A N/A YES NO YES YES N/A N/A YES YES

CIP YES NO N/A N/A YES NO YES YES N/A N/A YES YES

DDP YES NO N/A N/A YES NO YES NO N/A N/A NO NO

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B Incoterm overview and Agreement Party in FWO by Stage (DGF specific)
DRAFT

Applicable in scenario NFE-NFE and End to End business is owned by DGF:

Incoterm Pre-Carriage Mainleg On-Carriage
EXW Collect Agreement Party

FCA Prepaid Agreement Party Collect Agreement Party

FOB Prepaid Agreement Party Collect Agreement Party

FAS Prepaid Agreement Party Collect Agreement Party

CFR Prepaid Agreement Party Collect Agreement Party

CIF Prepaid Agreement Party Collect Agreement Party

CPT Prepaid Agreement Party Collect Agreement Party

CIP Prepaid Agreement Party Collect Agreement Party

DAF Prepaid Agreement Party Collect Agreement Party

DES Prepaid Agreement Party Collect Agreement Party

DEQ Prepaid Agreement Party Collect Agreement Party

DAT Prepaid Agreement Party Collect Agreement Party

DAP Prepaid Agreement Party

DDU Prepaid Agreement Party

DDP Prepaid Agreement Party

N/A EITHER EITHER EITHER

For charge calculation the relevant party’s FWA-item will be applied for the corresponding stage
All header level charges (charge types not assigned to a stage category) are sourced from Export FWA on Export FWO and from Import FWA on Import FWO

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B Forwarding Order Creation (Agreement & Bill to parties
as per INCOTERMS) DRAFT

Incoterms
Business partners
DES/DAF/CFR/CIF/CIP/
DDP/DDU/DEQ DAP/DAT FOB/FAS/FCA EXW
CPT

Same as Agreement party if Same as Agreement party if Same as agreement party if Same as agreement party if
Billing to party Blank
not otherwise required not otherwise required not otherwise required not otherwise required
Prepaid
Export Agreement to Ordering party of the Export Ordering party of the Export Ordering party of the export Ordering party of the export
FWO Blank
party FWA FWA FWA FWA

In special BP secenario (co- In special BP secenario (co-

ex corss trade or multiple ex corss trade or multiple
Billing to party Blank Blank Blank entity) populate special BP entity) populate special BP
only in case of N-L only in case of N-L
Collect
Agreement to Ordering party of import Ordering party of import
Blank Blank Blank
party FWA only in case of N-L FWA only in case of N-L

Incoterms
Business partners
DES/DAF/CFR/CIF/CIP/
DDP/DDU/DEQ DAP/DAT FOB/FAS/FCA EXW
CPT

Billing to party Export country sales org BP Blank Blank Blank Blank

Prepaid
Import Agreement to
FWO Export country sales org BP Blank Blank Blank Blank
party

Same as agreement party if Same as agreement party if Same as agreement party if Same as agreement party if
Billing to party Blank
not otherwise requried not otherwise requried not otherwise requried not otherwise requried
Collect
Agreement to Ordering party of import Ordering party of import Ordering party of import Ordering party of import
Blank
party FWA FWA FWA FWA

N-L – NFE to LOGIS

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C Incoterm and Movement type FWA/ FWO DRAFT

 During Service Product configuration the user will enter the Incoterm and Movement type.
– This controls in Service Configurator (IPC) the available service elements available.
– Each Service Product has pre-defined which Incoterms can be chosen for a particular Movement Type.

 The Incoterm defined in the FWA (on Service Product level) is copied in the FWO (on header level).
– If a specific Incoterm is used in FWA (e.g. FOB), this can not be changed in the FWO.
– If N/A Incoterm is used in FWA, this can be changed in FWO. The Incoterm entered in the FWO will be
validated against the Movement Type entered in the FWA.
 The Movement Type entered in the FWA will not be copied in the FWO, as they can be different.
 Is it correct that we should always configure any shipment as Door-to-Door that has pre-carriage and on-
carriage services but not pickup and delivery ?
– From a service configuration point of view this can be done; however, there is a check in FWO of the
Incoterm against the Movement Type of the FWA (item). This check will restrict the Incoterm that can
be entered on the FWO.

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