Performing the foreign economic operations, concerning buying and selling of goods, IBU Customer can deal with some uncertainties that are related to unlike counteragents’ interpretation of mutual rights and obligations, to the point of realization of goods delivery from the place of departure to the place of destination. It can be connected to inequality of existing rules and customs in different countries worldwide. Deal with a subject is possible only by using of counteragents an unambiguous international ruleset of terms interpretation used in foreign trade. In order to remedy these problems the International Chamber of Commerce first published in 1936 a set of international rules for the interpretation of trade terms. These rules were known as “Incoterms 1936”. Amendments and additions were later made in 1953, 1967, 1976, 1980, 1990, 2000 and 2010 by the International Chamber of Commerce. Incoterms rules are permanently undergoing alterations.

Specified rules are used in foreign trade agreements (contracts) to define the terms of goods delivery that allows avoiding an uncommon interpretation of the enterprises-counteragents’ liabilities, as for goods delivery from seller to buyer.

Terms of delivery define seller’s duties as for goods delivery to the destination and determine the transition moment of the risk of loss or damage. At the same time, the Incoterms rules assume away the point of passing of property from Seller to Buyer in the sales contract. Moreover, for resolving the problem of the counteragents’ partnerships, it should be eventually refer to the provisions of UNO Convention dated in 1980, concerning the contract for the international sale of goods.

INCOTERMS version consists of 13 terms – basis of delivery, which can be combined in four principal categories: ЕFCD (see the table1)

 Table 1

DEFINED TERMS IN INCOTERMS
Letter denotation of group Е F C D
Chief matter of terms in group Departure
(placing of minimal duties on seller )
The main transport without payment
(placing of duties on seller on goods delivery for carriage, according to buyer’s instructions)
The main transport with payment
(placing of duties on seller on signing of transport agreement on usual terms

on own-account)

Arrival
(placing of duties on seller on all brought risks and expenses on delivery of goods in approved delivery facility)
Trade terms EXW
Ex works
(… named place of delivery)
FCA
Free carrier
(…named place of delivery)
CFR
Cost and freight (…named port of destination)
DAF
Delivered At Frontier
(…named place of delivery)
  FAS
Free Alongside Ship
(…named port of shipment)
CIF
Cost Insurance and Freight
(…named port of destination)
DES
Delivered Ex Ship
(…named port of destination)
FOB
Free on Board

(…named port of shipment)

CPT
Carriage Paid (…named place of destination)
DEQ
Delivered Ex Quay
(…named port of delivery)
  CIP
Carriage and Insurance Paid to
(…named place of destination)
DDU
Delivered Duty Unpaid
(…named place of destination)
  DDP
Delivered Duty Paid
(…named place of destination)

 

 

 

Table 2

Modes of transport, to which can be termed the trade terms Trade term
For any mode of transport EXW
FCA
CPT
CIP
DDU
DDP
Exclusively  sea and inland water transport FAS
FOB
CFR
CIF
DES
DEQ
Railway and Road Transportations DAF

 

The risks of loss or damage to goods, and also the obligations arising from carrying out the expenses for the goods are passing from Seller to Buyer in a certain place. In light of this the basis terms of delivery should prevent necessary indication of location, where the delivery of goods is realized (e.g. ЕХW KyivСPТ Berlin )

 

Basic terms of delivery are used for calculation of the goods price in contract (invoice cost) play an essential part in the definition of customs commodity cost. (see the section “CUSTOMS COST”)

 

At the moment of importation of goods in Ukraine (see table 3) which customs commodity cost defines presence of the customs invoice cost method.

 

If the goods are purchased on terms confirming the delivery, which realized to the destination point, located beyond the customs territory of Ukraine (e.g. EXW-BudapestFOB-TokyoCIF-RigaDAF-Brest),thus the expenses are added on goods delivery on specified terms.

 

If on terms the delivery of goods is prevented to the destination point, located on the customs territory of Ukraine (e.g. CIP-MykolaivDDP-L’viv), thus the expenses were taken away from the invoice cost, prevailed after the customs Ukrainian border crossing.

Table 3
The customs cost definition, depends on terms of delivery, as for goods imported in Ukraine.

1 2 3 4 5 6 7 8 9 10 11 12 13 14
  EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP
1. Packing                          
2. Loading on a transport mode +                        
3. Delivery to first-level carrier + +                      
4. Export duty                          
5. Shipment insurance + + + +                  
6. Delivery on main transport mode + + +                    
7. Payment of main transport mode * + + + +                  
8. Offloading                    
9. Import duty                      
10. Delivery through main transport mode                        
11. Offloading in  warehouse of enterprise                        

Appendixes:

1. In the rows 1 — 7 are covered by expenses, suffered till the moment of customs border crossing of Ukraine.
2. In the rows 8 — 11 are covered by expenses, suffered on the territory of Ukraine.
3. — Only till the moment of the customs border crossing of Ukraine.
4.   — Expenses, including the goods cost, according to Incoterms.
5. «+» — Expenses are increasing, evaluating customs cost.
6. —Evaluating customs cost, expenses are decreasing in spite of one’s responsibility.

 

In the process of goods importing beyond the customs territory of Ukraine (see table 3), their customs cost defines through the invoice cost introduction, in compliance with price base FOB –Ukrainian port, DAF –the border of Ukraine (the destination point on the Customs border of Ukraine) or CIP – the destination point on the Customs border of Ukraine.

 

If the goods are sold on terms, which indicate that delivery takes place in the shipment point, located in the customs territory of Ukraine (e.g., EXW- Kyiv or FCA-Chernihiv), so the expenses on the delivery of goods are added to the invoice cost, before the crossing of customs border of Ukraine.

 

If according to the terms of goods delivery, – is prevented to the point of destination, located beyond the territory of Ukraine (e.g. CIF– Istanbul, DAF – Polish-German border), thus confirmed expenses on goods delivery are deducted from the invoice cost, in a certain way, after the moment of customs border crossing of Ukraine.

 

 

Table 4
The customs cost definition depends on terms of delivery, as for goods exported from Ukraine.

1 2 3 4 5 6 7 8 9 10 11 12 13 14
  EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP
1. Packing                          
2. Loading on a transport mode +                        
3. Delivery to first-level carrier + +                      
4. Export duty    
5. Shipment insurance + +                      
6. Delivery on main transport mode + + +                    
7. Payment of main transport mode * + +              
8. Offloading                    
9. Import duty                      
10. Delivery through main transport mode                        
11. Offloading in  warehouse of enterprise                        

Appendixes:

1. In the rows 1 — 7 are covered by expenses, suffered till the moment of customs border crossing of Ukraine.
2. In the rows 8 — 11 are covered by expenses, suffered on the territory of the country-importer.
3. * — Till the moment of the customs border crossing of Ukraine.
4.   — Expenses, including the goods cost, according to Incoterms.
5. «+» — Expenses are increasing, evaluating customs cost.
6. —Evaluating customs cost, expenses are decreasing in spite of one’s responsibility.

 

On 1st January, 2011, the Incoterms 2010 rules came into force, as reported on the official website of the International Chamber of Commerce (ICC).

According to the report a new edition of the rules was published, where for the last decades the trade practice is indicated which includes the variety of innovations:

—the general amount of terms decreased from 13 to 11, at that 2 of them – are absolutely new;

 

— the new Incoterms rules structure includes 2 groups of terms: terms, used in delivery by any mode of transport (EXW, FCA, CPT, CIP, DAT, DAP, DDP); terms used in sea and inland water delivery (FOB, CFR, CIF).

 

In the document are included also:

—security of goods issue including the legal framework distinction;

—detailed introduction to each term of new rules that allows, without problem, choosing a correct term for the contract;

  • modern demand of a cargo container ship.

Two new terms: DAT (Delivered at Terminal) и DAP (Delivered at Place) substitute often complicated terms DDU (Delivered Duty Unpaid), DAF (Delivered Ex Ship), DEQ (Delivered Ex Quay), DES (Delivered Ex Ship).

Such terms as FOB, CFR and CIF were added.

 

The new Incoterms rules 2010 can be introduced in the table.

Category E
Offloading
EXW any mode of transport EX Works (… named place)
Category F
main carriage is

not paid by buyer

FCA sea and inland water transport Free Carrier (…named place)
FAS sea and inland water transport Free Alongside Ship (… named port of shipment)
FOB sea and inland water transport Free On Board (… named port of shipment)
Category C
main carriage

is paid

by buyer

CFR any mode of transport Cost and Freight (… named port of destination)
CIF any mode of transport Cost, Insurance and Freight (… named port of destination)
CIP any mode of transport Carriage and Insurance Paid Тo (… named place of destination)
CPT any mode of transport Carriage Paid To (… named place of destination)
Category D
Delivery
DAT any mode of transport Delivered At Terminal (… named terminal of destination)
DAP any mode of transport Delivered At Point (… named point of destination)
DDP any mode of transport Delivered Duty Paid (… named place of destination)

Classifier of letter code of delivery terms is approved by the Ministry of Finances d.d. 20.09.2012 N 1011.

The issue, concerning the edition of the foreign economic contract, is left to the discretion of the Ukrainian enterprise or its foreign counteragent, according to the active legislation of Ukraine.

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