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2 Disclaimer and Copyright Notice This publication contains information, documents, pages and images (Information) prepared by XDOC for education and education only. It is not legal advice; if you wish to obtain legal advice, you should consult a legal, financial or tax practitioner in your jurisdiction. At the time of going to press, the publishers believe that all information submitted for publication is accurate. However, the publishers take no responsibility for any information contained in this publication. No warranty, expressed or implied, is given and no liability is accepted by XDOC. Copyright XDOC - ABN All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or be transmitted to any other person by any material means, electronic, mechanical, photocopying, facsimile, recording or otherwise, without the prior written approval of the publisher. Incoterms is a trade mark of the International Chamber of Commerce (ICC). This publication, our comments, opinions or other content, are not sponsored, affiliated or tested by the ICC; we recommend you refer to the ICC official publication of Incoterms 2010 ICC rules 715. The International Chamber of Commerce, the world business organization based in Paris, is the global leader in the development of standards, rules and reference guides for international trade. ICC Publications available: ICC Business Bookstore FOB / FCA V Page 1

3 CONTENTS 1. SCOPE OF BOOK Guide format Remarks How to use the E-Guide AUTHOR WHAT ARE INCOTERMS RULES ICC PUBLICATION INCOTERMS RULES CHANGES WHAT THEY DO COVER: WHAT THEY DON T COVER: INSTITUTE CARGO CLAUSES CATEGORIES Rules for Any Mode of Transport Rules for Sea and Inland Waterway Transport Only OBLIGATIONS ICC BOOK CATEGORIES LEGEND: Legend for chart Legend for remarks FREE CARRIER- FCA (named place of delivery) FCA Responsibilities FCA Checklist FCA Remarks FCA Case Study FCA Chart FCA Case Study FCA Chart FCA Case Study FCA Chart FCA Case Study FCA Chart FREE ON BOARD FOB (Named Port of Shipment) FOB Responsibilities FOB Checklist FOB Remarks FOB Case Study FOB Chart IN CONCLUSION AUTHORS CONTACT DETAILS Author s acknowledgments FOB / FCA V Page 2

4 1. SCOPE OF BOOK This electronic guide to the 2010 version of Incoterms rules covers: Description of the FOB and FCA terms Rules governing use of the terms and what they cover Buyer and Seller Responsibilities Rules for International and Domestic contracts of sale How to use the rules correctly Risks associated with each term 1.1 Guide format The format of this guide has been designed for ease of use. Each individual Incoterms rule is explained in easyto- follow sections: Description Responsibilities Checklist Case studies Charts 1.2 Remarks The guide has a list of remarks divided into 5 categories for each specific Incoterms rule. This is designed to allow you to consider the Incoterms rules best suited to your requirements. Positives What are the best practices Concerns When usage is not recommended Considerations What to consider Negotiables What to include in your negotiations and contracts Insurance What to consider with Insurance 1.3 How to use the E-Guide This E-guide is recommended to be used in conjunction with the ICC Incoterms 2010 rules publication no It has been intended as a guide only. FOB / FCA V Page 3

5 2. AUTHOR CORINNE CAMPBELL: Corinne Campbell has over twenty-five years international experience in the import and export of goods. She has developed a detailed and comprehensive understanding of international business documentation such as letters of credit, the legislation and international agreements, and their generally accepted usage. As the Principal of XDOC, Corinne has first hand experience of starting and running a business. Corinne is also the author of the Australian Comprehensive Import Export Manual which is a 132 pages reference manual of documentation examples and information about Import / Export. This manual is used in various Colleges and Business Centres in Australia, selling over 1000 copies a year. Corinne has also written many publications for various international organisations. FOB / FCA V Page 4

3. WHAT ARE INCOTERMS RULES They are International Commercial Terms undertaken

They provide buyers and sellers with the basis of determining how certain

Under a sale contract, the Incoterms rules define: Tasks Costs Risks Incoterms

6 3. WHAT ARE INCOTERMS RULES They are International Commercial Terms undertaken by buyers and sellers when delivering goods. They provide buyers and sellers with the basis of determining how certain tasks, costs and risks are allocated between the parties. Under a sale contract, the Incoterms rules define: Tasks Costs Risks Incoterms rules also serve as a useful checklist regarding risks, responsibilities and obligations for sellers and buyers. FOB / FCA V Page 5

4. ICC PUBLICATION The International Chamber of

Paris, is the global leader in the development of

7 4. ICC PUBLICATION The International Chamber of Commerce, the world business organisation based in Paris, is the global leader in the development of standards, rules and reference guides for international trade. ICC Publications available: ICC Business Bookstore, FOB / FCA V Page 6

5. INCOTERMS RULES CHANGES From 1 January 2011, Incoterms rules 2000 have been revised and replaced by Incoterms 2010. Some rules change from Incoterms 2000 to Incoterms 2010 rules.

replaces DEQ. DAP replaces DAF, DES and DDU.

8 5. INCOTERMS RULES CHANGES From 1 January 2011, Incoterms rules 2000 have been revised and replaced by Incoterms Some rules change from Incoterms 2000 to Incoterms 2010 rules. CHANGES from INCOTERMS RULES 2000 to INCOTERMS 2010 RULES: New Number of INCOTERMS RULES Deleted terms New terms added Terms replaced 11 instead of 13 DAF, DES, DEQ and DDU DAT, DAP DAT replaces DEQ. DAP replaces DAF, DES and DDU. Change to Transfer of Risk Evidence of Insurance requirements for Cargo security The risk passes when the goods are on-board the vessel and the whole consignment has been loaded. Evidence of Insurance is only applicable under CIP and CIF terms. There is now an obligation to co-operate in order to satisfy cargo security regimes. FOB / FCA V Page 7

9 6. WHAT THEY DO COVER: Obligations of Sellers and Buyers: Which party pays for what When risk of the goods passes from Seller to Buyer When delivery occurs Who is responsible for Insurance Who is responsible for Export clearance Who is responsible for Import clearance FOB / FCA V Page 8

10 7. WHAT THEY DON T COVER: Does not guarantee ownership/title to the goods. Does not include payment terms. Does not include payment methods. Does not replace a contract of sale. Incoterms rules should be incorporated into your Contract of Sale FOB / FCA V Page 9

11 8. INSTITUTE CARGO CLAUSES There is a Marine Insurance obligation only under Incoterms rules CIF and CIP. RISKS A Clauses B Clauses C Clauses Fire or Explosion Vessel/Craft Being stranded, grounded, sunk or capsized Overturning or derailment of land conveyance Collision or contact of vessel, craft or conveyance with external object Discharge of cargo at a port of distress Earthquake, Volcanic eruption or lightning General Average Sacrifice Jettison Washing Overboard Entry of sea, lake or river water into vessel, craft, hold, conveyance, container or place of storage Total loss of any package lost overboard or dropped whilst loading on to or unloading from vessel or craft General Average and Salvage Charges Pirates, Thieves and Non-delivery Rough Handling Contamination Covered = Not Covered or excluded = FOB / FCA V Page 10

9. CATEGORIES Incoterms rules 2000 had four categories; Incoterms 2010 rules has only two categories. Incoterms 2010 rules are arranged in two categories as follows: 9.

12 9. CATEGORIES Incoterms rules 2000 had four categories; Incoterms 2010 rules has only two categories. Incoterms 2010 rules are arranged in two categories as follows: 9.1 Rules for Any Mode of Transport EXW FCA CPT CIP DAT DAP DDP Ex Works Free Carrier Carriage Paid To Carriage and Insurance Paid Delivered At Terminal Delivered At Place Delivered Duty Paid 9.2 Rules for Sea and Inland Waterway Transport Only FAS FOB CFR CIF Not recommended for container shipment Free Alongside Ship Free On Board Cost and Freight Cost, Insurance and Freight FOB / FCA V Page 11

13 10. OBLIGATIONS Obligations Seller Buyer Export Licenses, Authorizations, Security Clearances FCA,CPT,CIP,DAT,DAP,FAS,FOB,CFR, CIF EXW, Assistance in Export EXW FCA,CPT,CPT,CIP,DAT,DAP,DDP, Contract of Pre main-carriage in Seller s Country FCA*,CPT,CIP,DAT,DAP,DDP,FAS,FOB, CFR,CIF FAS,FOB,CFR,CIF EXW,FCA* Contract of Main Carriage in Seller s Country CPT,CIP,DAT,DAP,DDP,FOB,CFR,CIF EXW,FCA,FAS Packing cost Loading goods at agreed place EXW,FCA,CPT,CIP,DAT,DAP,DDP,FAS,F OB,CFR,CIF FCA*,CPT,CIP,DAT,DAP,DDP,FOB,CFR, CIF EXW,FCA*,FAS Loading goods at Terminal/Place CPT,CIP,DAT,DAP,CIF FCA,FAS Loading cost Contract of Insurance Obligation Provide information to obtain insurance Pre main Transport risk FCA*,CPT,CIP,DAT,DAP,DDP,FOB,CFR, CIF CIP,CIF EXW,FCA,CPT,DAT,DAP,DDP,FAS,FOB, CFR FCA*,CPT,CIP,DAT,DAP,DDP,FAS,FOB, CFR,CIF EXW,FCA*,FAS EXW,FCA,CPT,CIP,DAT,DAP,DDP, FAS,FOB,CIF EXW,FCA* Main Transport Risk DAT,DAP,DDP EXW,FCA,CPT,CIP,FAS,FOB,CFR, Unloading at Terminal/ Place at Seller s country CPT,CIP,DAT,DAP,DDP,CFR FCA,FAS CIF Export Duties, Taxes and Customs formality costs FCA,CPT,CIP,DAT,DAP,DDP,FAS,FOB,C FR,CIF EXW, Import Licenses, Authorizations, Security Clearances DDP EXW,FCA,CPT, CIP,DAT,DAP,FAS,FOB,CFR,CIF Assistance in Import EXW,FCA,CPT,CIP,DAT,DAP,FAS,FOB,C FR,CIF Contract of Carriage in Buyer s Country DAT**,DAP,DDP EXW,FCA,CPT,CIP,DAT**,FAS,FOB,C FR,CIF Unloading goods at agreed place DAT EXW,CPT,CIP,DAP,DDP,FAS,FOB,CF R,CIF Unloading at Buyer DAT EXW,FCA,CPT,CIP,DAP,DDP,FAS, DDP FOB,CFR Unloading costs DAT** EXW,FCA,CPT,CIP,DAP,DDP,FAS,FO B,CFR,CIF Transport cost in Country of Buyer DAT**,DAP***,DDP EXW,FCA,CPT,CIP,DAT**,DAP***,F AS,FOB,CFR,CIF Final Delivery Document CPT,CIP,DAT,DAP,DDP,FAS,FOB,CFR, CIF *First transport is handled by Seller, but if there are more than one transport in Seller s country, then the second loading is handled by buyer. Eg: FCA Seller s premises or FCA consolidator or Port. FOB / FCA V Page 12

14 **If agreed terminal is not final destination in Buyer s country, Buyer is responsible for subsequent transport. If more than one unloading, Buyer unloads ***Seller s cost to agreed place; if there is a second final destination, Buyer s cost. FOB / FCA V Page 13

15 11. ICC BOOK CATEGORIES The International Chamber of Commerce has defined the Incoterms 2010 obligations in the following 10 categories: A The Seller s obligations B The Buyer s obligations A1 General obligations of the seller B1 General obligations of the buyer A2 Licences, authorizations, security, clearances and other formalities B2 Licences, authorizations, security, clearances and other formalities A3 Contracts of carriage and Insurance B3 Contracts of carriage and Insurance A4 Delivery B4 Taking delivery A5 Transfer of risks B5 Transfer of risks A6 Allocation of costs B6 Allocation of costs A7 Notice to the buyer B7 Notice to the seller A8 Delivery document B8 Proof of delivery A9 Checking Packing Marking B9 Inspection of goods A10 Assistance with information and related costs B10 Assistance with information and related costs FOB / FCA V Page 14

12. LEGEND: Symbols have been used throughout the book for ease of comprehension. 12.

16 12. LEGEND: Symbols have been used throughout the book for ease of comprehension Legend for chart SYMBOL MEANING SYMBOL MEANING SYMBOL MEANING AIR COST PORT RAIL RISK TERMINAL ROAD INSURANCE PLACE SEA SELLER S LOGISTICS OBLIGATIONS BUYER S LOGISTICS OBLIGATIONS SELLER S NOMINEE BUYER S NOMINEE SELLER BUYER S BORDER OBLIGATIONS SELLER S BORDER OBLIGATIONS BUYER 12.2 Legend for remarks What are the best practices When usage is not recommended What to consider What to include in your negotiations and contracts What to consider with Insurance FOB / FCA V Page 15

17 13. FREE CARRIER- FCA (named place of delivery) Seller delivers goods, cleared for export (if required) to carrier or other party nominated by the Buyer, in the country of Seller. It can be at Seller s premises or another named place in the Seller s country. Recommended for Full Container load (FCL) & Less Than a Container Load (LCL)/Consolidation. Can be used for any mode of transport FCA Responsibilities RESPONSIBILITY OF SELLER RESPONSIBILITY OF BUYER Pack and mark as agreed and required Supply goods and documents as agreed For FCA seller s premises, Seller must load onto transport provided by Buyer. Deliver goods at agreed place within agreed time when not contracted at seller s premises Give Buyer sufficient notice that goods have been delivered to agreed point Advise Buyer if goods have not been collected as agreed Clear for export if required Give sufficient time for Seller to deliver the goods as agreed Notify Seller when goods will be collected Confirm mode of transport Collect goods as agreed Clear for import if required Pay for all transport of goods from named place of delivery agreed with Seller RISKS Transfer from Seller to Buyer when goods have been delivered to party nominated by Buyer FOB / FCA V Page 16

18 13.2 FCA Checklist Obligations Seller Buyer Provide Commercial Documents Export Licenses, Authorizations, Security Clearances & other formalities Assistance in Export Contract of Pre main-carriage in Seller s Country * * Contract of Main Carriage in Seller s Country Packing Marking Packing cost Loading goods at agreed place * * Loading goods at Terminal/Place Loading cost * * Contract of Insurance Obligation Provide information to obtain insurance Pre main Transport risk * * Main Transport risk Unloading at Terminal/ Place at Seller s country Export Duties, Taxes and Customs formality costs Import Licenses, Authorizations, Security Clearances & other formalities Assistance in Import Contract of Carriage in Buyer s Country Unloading goods at agreed place Unloading at Buyer Unloading costs Taking delivery Transport cost in Country of Buyer Final Delivery Document *First transport is handled by Seller, but if there are more than one transport in Seller s Country, then the second loading is handled by Buyer. eg: FCA Seller s premises or FCA consolidator or Port FOB / FCA V Page 17

19 13.3 FCA Remarks Delivery place can be any place, point or Port where the goods are being collected To be used instead of Ex Works when Seller has to provide equipment for loading Very flexible and versatile term Appropriate when Seller wants to only handle logistics in Seller s Country Risk for Seller in using letter of credit : Buyer organises the main carriage, therefore, Seller risks non compliance to L/C in regards to shipment date Equivalent charges to FOB: FCA Port/airport +including all origin charges to load on board Specify, if any, which party insures the goods Specify precise point of delivery and taking delivery Agree on which party, if any, arranges marine insurance Both parties have an obligation to provide information to enable other party to arrange marine insurance Consider covering pre and post shipment risk Consider warehouse insurance FOB / FCA V Page 18

20 13.4 FCA Case Study 1 Scenario: Manufacturer of Teddy Bears with own loading facilities and staff in San Francisco, USA sells to a toy retailer in New York, USA Terms of Sale: FCA Teddy Inc, 191 Hill Street, San Francisco, USA. Mode of Transport For Main Carriage: Rail Type of Trade: Domestic Insurance Obligations: Nil for Buyer and Seller. If agreed, specify in contract of sale which party insures the goods. Export Country Obligations including Duties and Taxes: Domestic tax issues only Import Country Obligations including Duties and Taxes: Domestic tax issues only Seller s Risk: Up to delivery on board truck at Seller s premises San Francisco. Seller s Costs: All costs until loaded on board Buyer s truck San Francisco. Buyer s Risk: From when loaded on board truck at Seller s premises. Buyer s Costs: Cost of road transport from Seller s premises to Rail, loading onto train and all main carriage and subsequent transport costs including unloading costs to Buyer s premises 13.5 FCA Chart 1 FOB / FCA V Page 19

21 13.6 FCA Case Study 2 Scenario: Publisher of books in Paris, France sells a LCL container shipment of 5 pallets 5M3 measurement to a wholesale book warehouse in Montreal, Canada. Terms of Sale: FCA Le Havre Packing Depot, 35 Rue De L Amour, Le Havre, France. Mode of Transport For Main Carriage: Sea (container vessel) Type of Trade: International Insurance Obligations: Nil for Buyer and Seller. If agreed, specify in contract of sale which party insures the goods. Export Country Obligations including Duties and Taxes: Seller Import Country Obligations including Duties and Taxes: Buyer Seller s Risk: Up to delivery to Seller s LCL packing depot Le Havre. Seller s Costs: All costs up to delivery to Seller s LCL packing depot Le Havre. Buyer s Risk: From receipt and unloading Seller s truck at LCL packing depot Le Havre. Buyer s Costs: Cost of unloading from Seller s truck at Seller s packing depot, packing goods into consolidation container, loading onto vessel and all subsequent costs to Buyer s premises FCA Chart 2 FOB / FCA V Page 20

13.8 FCA Case Study 3 Scenario: Grower of bananas in Philippines packs FCL refrigerated container for sale to Hong Kong fruit wholesaler. Terms of Sale: FCA No.

22 13.8 FCA Case Study 3 Scenario: Grower of bananas in Philippines packs FCL refrigerated container for sale to Hong Kong fruit wholesaler. Terms of Sale: FCA No. 3 Container Terminal, Manila, Philippines. Mode of Transport For Main Carriage: Sea (container vessel) Type of Trade: International Insurance Obligations: Nil for Buyer and Seller. If agreed, specify in contract of sale which party insures the goods. Export Country Obligations including Duties and Taxes: Seller Import Country Obligations including Duties and Taxes: Buyer Seller s Risk: Up to delivery to Seller s FCL container terminal (not unloaded). Seller s Costs: All costs up to delivery to Seller s FCL container terminal. Buyer s Risk: From receipt and unloading container from Seller s truck at Seller s FCL container terminal. Buyer s Costs: Cost of unloading container from Seller s truck at Seller s terminal, loading container onto vessel and all subsequent costs to Buyer s premises FCA Chart 3 FOB / FCA V Page 21

23 13.10 FCA Case Study 4 Scenario: Swedish fishing company sells fresh seafood to a hotel in London, UK by air freight. Terms of Sale: FCA ScanFresh Carriers, Unit B Air Cargo Terminal Stockholm Airport, Sweden. Mode of Transport For Main Carriage: Air Type of Trade: International Free Trade Block (EU) Insurance Obligations: Nil for Buyer and Seller. If agreed, specify in contract of sale which party insures the goods. Export Country Obligations including Duties and Taxes: Seller Import Country Obligations including Duties and Taxes: Buyer Seller s Risk: Up to delivery to Seller s air cargo terminal. Seller s Costs: All costs up to delivery to Seller s air cargo terminal. Buyer s Risk: From receipt and unloading Seller s truck at Seller s air cargo terminal. Buyer s Costs: Cost of unloading goods from Seller s truck at Seller s air cargo terminal, loading cargo onto aircraft and all subsequent costs to Buyer s premises FCA Chart 4 FOB / FCA V Page 22

24 14. FREE ON BOARD FOB (Named Port of Shipment) Seller delivers on board the vessel chosen by Buyer at an agreed port of shipment. To be used only for sea and inland waterway transport. Not advisable for container shipments (because with containers goods are handed over to carrier before being loaded) FOB Responsibilities RESPONSIBILITY OF SELLER RESPONSIBILITY OF BUYER Deliver goods on board vessel nominated by Buyer or procure goods already delivered for shipment (commodity trade) Deliver goods within the agreed dates Notify Buyer of delivery on board vessel Export clearance Bear cost of risks up to delivery in the vessel Arrange vessel and dates of shipment Pay for main carriage. Advise Seller of vessel details with enough notice Import clearance RISKS Risks transferred from the Seller to the Buyer when the goods are on board the vessel FOB / FCA V Page 23

25 14.2 FOB Checklist Obligations Seller Buyer Provide Commercial Documents Export Licenses, Authorizations, Security Clearances & other formalities Assistance in Export Contract of Pre main-carriage in Seller s Country Contract of Main Carriage in Seller s Country Packing Marking Packing cost Loading goods at agreed place Loading goods at Terminal/Place Loading cost Contract of Insurance Obligation Provide information to obtain insurance Pre main Transport risk Main Transport risk Unloading at Terminal/ Place at Seller s country Export Duties, Taxes and Customs formality costs Import Licenses, Authorizations, Security Clearances & other formalities Assistance in Import Contract of Carriage in Buyer s Country Unloading goods at agreed place Unloading at Buyer Unloading costs Taking delivery Transport cost in Country of Buyer Final Delivery Document FOB / FCA V Page 24

26 14.3 FOB Remarks If using containers FCA is more appropriate Ideal for Break and bulk shipments as cargo is loaded directly onto the ship If goods get damaged before being loaded on board the vessel, Seller is responsible If goods are lost at sea, Buyer is responsible FOB Not to be used for road/rail/air transport, FCA more appropriate Risk for Seller in using letter of credit : As Buyer organises the main carriage, Seller risks non compliance to L/C (Letter of Credit) in regards to shipment date Not recommended for containers as Seller delivers the goods to port but has NO control to load onto vessel Can be used for multiple sales down a chain and in string sales Common in Commodity Trading Agree on which party, if any, arranges marine insurance Both parties have an obligation to provide information to enable other party to arrange marine insurance Consider covering pre and post shipment risk FOB / FCA V Page 25

27 14.4 FOB Case Study 1 Scenario: A wheat export trading company has regular bulk shipments to Kuwait. Goods are loaded at grain terminal onto bulk carriers at the Port of Geraldton, WA, Australia. Terms of Sale: FOB Wheat Terminal, Geraldton, WA, Australia. Mode of Transport For Main Carriage: Sea (Bulk Carrier) Type of Trade: International Insurance Obligations: Nil for Buyer and Seller; If agreed, specify in contract of sale which party insures the goods. Export Country Obligations including Duties and Taxes: Seller Import Country Obligations including Duties and Taxes: Buyer Seller s Risk: Up to delivery on board vessel in Seller s Country. Seller s Costs: All costs up to delivery on board vessel in Seller s Country. Buyer s Risk: From receipt of wheat on board vessel in Seller s country. Buyer s Costs: Cost from receipt of wheat on board vessel in Seller s Country and all subsequent costs to Buyer s premises 14.5 FOB Chart 1 FOB / FCA V Page 26

28 15. IN CONCLUSION When choosing an Incoterms rule, remember: That the Incoterms rules are not the main contract To state the Incoterms rule in your sales contract To analyse your costing in relation to the Incoterms rule you are using To look at your method of payment in conjunction with your choice of Incoterms rules To make sure your logistics chain has been catered for To make sure you understand the Country regulations To make sure you have considered Tax issues To be aware of licences obligations To make sure the rules can be legally used in both Countries of trade To discuss your transport Insurance To consider your liability Insurance To consider the Incoterms rules according to your mode of transport To ensure your staff understands the Incoterms rules To purchase the ICC Incoterms 2010 rules book (ICC publication no. 715) FOB / FCA V Page 27

16. AUTHORS CONTACT DETAILS Details of the publishers of IMPORTEXPORTMADEEASY.COM: Corinne Campbell Founder Email: Web: Forum: corinnecampbell@xdoc.com.au www.xdoc.com.au www.xdoc.com.au/forum 16.

29 16. AUTHORS CONTACT DETAILS Details of the publishers of IMPORTEXPORTMADEEASY.COM: Corinne Campbell Founder Web: Forum: Author s acknowledgments Roland Killick for tireless technical support and editing. Various International Departments of Banks, Freight Forwarders and service providers for their invaluable insight. Adam Ruspandini of Hills Media & Design ( for designing our unique remarks buttons. FOB / FCA V Page 28

A guide to incoterms 2011

A guide to incoterms 2011 What is an incoterm? Sales term incorporated within the contract of sale It impacts on the contract of carriage Inco terms identify the obligations placed on the parties to the