Question

Visit the International Chamber of Commerce (Links to an external site.)Links to an external site. website and report on the aspects of Incoterms that may not be covered in your reading material. Analyze steps involved in an international transaction that involves factoring.

Answer 1

The main objective of Incoterms® rules is to define criteria for the distribution of expenses and the assignment of risk between parties involved in international transactions.

Incoterms® rules serve to standardize the process of shipping and receiving merchandise. In addition, they determine the cost allocation of international commercial transactions and establish agreed responsibilities for exporters and importers.

Incoterms® 2010 rules are classified into two categories according to the mode of transport.

Incoterms® Definition

EXW	Ex Works	The seller's only obligation is to make the goods available at its premises or at another named place (works, factory, warehouse, etc.). The buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination. This term represents the minimum obligation for the seller.
FCA	Free Carrier	The seller’s obligation is to hand over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point. The parties are advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
CPT	Carriage Paid To	The seller pays the freight for the delivery of goods to the carrier or to another person nominated by the seller at the named destination. Once delivered, the risk of loss or damage to the goods is transferred from the seller to the buyer. This term requires the seller to clear the goods for export.
CIP	Carriage and Insurance Paid To	The seller has the same obligations as under CPT but has the responsibility of obtaining insurance against the buyer’s risk of loss or damage to goods during carriage. Insurance only needs to be obtained at minimum coverage and the seller is required to clear the goods for export.
DAT	Delivered At Terminal	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. “Terminal” includes quay, warehouse, container yard or road, rail or air terminal. The seller is responsible for the export clearance procedures and the importer is responsible for clearing the goods for import, arranging import customs formalities, and paying import duty.
DAP	Delivered At Place	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. The seller is required to clear the goods for export and the importer is responsible for effecting customs clearance, and paying any customs duties.
DDP	Delivered Duty Paid	The seller is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to import destination. This includes all export and import duties, taxes and customs formalities.