CUSTOMS
VALUATION
SYSTEM
MODULE 1
INCOTERMS
Incoterms, transaction between who?
▪ Seller- (merchant/shipper/exporter)
-in charge for the delivery of the goods
-risk originates
▪ Buyer- (purchaser/importer)
-in charge for taking the delivery of goods
-risk is transfer
2
INCOTERMS
Significance of Delivery in Incoterms
1. Risk is transferred from the seller to the buyer
a. Loss, damage, deterioration
2. Buyer assumes all expenses to bring goods to final place of destination
depending on contract price which is expressed in INCOTERMS 2020
a. Most basic Ex works: ready for pick up by the buyer
b. Most complete DDP: Delivery is made by the seller to the named place of
destination ready for unloading at buyer`s expense and risk
3. Except “C” terms: Point of transfer of risk different from starting point
buyer assumes cost
3
INCOTERMS
Incoterms, transaction between who?
▪ Seller- (merchant/shipper/exporter)
-in charge for the delivery of the goods
-risk originates
▪ Buyer- (purchaser/importer)
-in charge for taking the delivery of goods
-risk is transfer
4
Multimodal
▪ EXW
▪ FCA
▪ CPT
▪ CIP
▪ DAP
▪ DPU
▪ DDP
5
EXW
EX-WORKS = COST OF GOODS
1. Delivery and risk :
EXW means that seller delivers the goods to the buyer:
A. When it places the goods at the disposal of the buyer at a named place (like factory or warehouse)
B. That named place may or may not be seller`s warehouse
2. Export place
- Prepared by the buyer
6
7
FCA – FREE CARRIER
FCA= EXW+ OC
Named place of delivery
1. Delivery and risk
- Free carrier means that the seller delivers the goods to the buyer in one or other of the two ways.
1. Seller`s premises
They are located in the means of transport arranged by the buyer
2. Other than the seller`s premises
Loaded by the seller, however the unloading is on the account of the buyer
Export clearance
Prepared by the seller
Delivery is at the seller`s warehouse – (EXW+ loading charges +export formalities)
Delivery is up to the carrier- (EXW+ loading charges + pre-carriage to terminal+ export formalities)
8
9
CPT = FCA + FREIGHT CPT- Carriage paid to
Named place of destination
1. Delivery and Risk:
Carriage Paid to means the seller delivers the goods – and transfer the risk to the buyer
- By handling them over to the carrier
* Contracted by the seller
- Or by procuring the goods so be delivered
- The seller may do so by giving the carrier physical possession of the goods in
the manner and at the place appropriate to the means of transport used.
2. Export clearance
- Prepared by seller
3. Place of delivery vs. place of destination
- Place of delivery- transfer of risk
- Place of destination- the point to which the seller promises to contract for
carriage
NOTE: BL must show “freight prepaid”
- Delivery should be at the nominated carrier
10
CPT = FCA + FREIGHT CPT- Carriage paid to
11
CIP= FCA+ INSURANCE+ FREIGHT
Named Place of Destination
1. Delivery and Risk:
Carriage Paid to means the seller delivers the goods- and transfers the risk to the
buyer.
- By handling them over to the carrier
Contracted by the seller
- Or by procuring the goods so delivered
The seller may do so by giving the carrier physical possession of the goods in the manner and
at the place appropriate to the means of transport used.
2. Export clearance
- Prepared by the seller
3. Insurance
- Seller should insure the goods from point of delivery to at least the point of destination
CIP- Carriage and Insurance Paid to
- The insurance under CIP is from point of delivery to at least the point of destination
- Delivery should be at the nominated carrier. 12
DAP= FCA/FOB + FREIGHT + DEST. OC
Named place of destination
1. Delivery and Risk:
- Means that seller delivers the goods and transfer risk- to the buyer.
• When goods are placed at the disposal of the buyer
• On the arriving means of transport ready for unloading
• At the named place of destination
• At the agreed point within that place, if any such point is agreed
- Seller bears all the risks involved in bringing the goods to the named place of destination or
to the agreed point within that place.
- Delivery and arrival at the destination are the same
2. Export clearance DAP- Delivered at Place
-prepared by seller - Destination other charges are
treated as permissible
Import clearance deductions
-prepared by the buyer - It should be reflected in the
invoice
13
DAP= FCA/FOB + FREIGHT + DEST. OC
14
DPU= FCA/FOB+ FREIGHT+DEST. OC
1. Delivery and risk:
• Means that the seller delivers the goods and transfers risk to the buyer
• When the goods,
• Once unloaded from the arriving means of transport
• Are placed at the disposal of the buyer
• At the named of destination or
• At the agreed point within that place, if any such point is agreed
• Seller bears all the risk involved in bringing the goods and unloading them at the named
place of destination
• Delivery and arrival at the destination are the same
Export clearance- prepared by seller
Import clearance- prepared by buyer
DPU= DDP- (minus) customs
formalities, D&T
15
DDP= FCA/FOB+ FREIGHT+DEST. OC
Named place of destination
1. Delivery and Risk:
• Means that the seller delivers the goods to the buyer
• When the goods are placed at the disposal of the buyer
• Cleared for import
• On the arriving means of transport
• Ready for unloading
• At the named place of destination or at the agreed point within that place, if any such point
is agreed
• Seller bears all the risk involved in bringing the goods to the named place of destination or
to the agreed point within that place
• Delivery and arrival at the destination are the same DDP- Delivered duty paid
Maximum obligation
2. Export clearance - Prepared by seller Also known as “door to door
Import clearance – Prepared by seller service contract”
Or CIP/CIF ++ Contract
16
DDP= FCA/FOB+ FREIGHT+DEST. OC
17
SEA AND INLAND
WATERWAY ONLY
▪ FAS( Free alongside ship)
▪ FOB (Free on board)
▪ CFR (Cost and freight)
▪ CIF (Cost, insurance and freight)
18
FAS
Named place of delivery
1. Delivery and Risk:
• Free alongside ship means that the seller delivers the goods to the buyer
• When the goods are place alongside the ship (e.G on a quay or barge)
• Nominated by the buyer
• At the named port of shipment
• Or when the seller procures goods already so delivered
• That risk of loss or damage to the goods transfers when the goods are alongside the ship
and the buyer bears all cost from that moment onwards,
2. Export Clearance
• Prepared by the buyer
The seller`s obligation fulfilled
when goods have been place
longside the ship at the quay or
in the barge beside the ship.
19
FAS
20
FOB- Free on board
1. Delivery and Risk
• Free on board means that the seller delivers the goods to the buyer
• On board the vessel
• Nominated by the buyer
• At the named port of shipment
• Or procures goods already so delivered
• The risk or loss of or damage to the goods transfers when the goods are on board the
vessel, and the buyer bears all costs from that moment onwards
2. Export clearance
Prepared by the seller Seller`s obligation are fulfilled
when cargo is delivered
onboard
On board means when the
cargo pass ship`s rail
21
FOB- Free on board
22
CFR= FOB+ FREIGHT
1. Delivery and Risk:
• Cost and freight means that the seller delivers the goods to the buyer
• On board the vessel
• Or procures goods already so delivered
• The risk of loss or damage to the goods transfers when the goods are on board the vessel,
and the buyer bears all risk from that moment onwards. The buyer will be well-advised
therefore to purchase insurance for itself
2. Export clearance
Prepared by the seller CFR- Cost and freight
BL must show freight
prepaid
The delivery should be on
board vessel
23
CIF (Cost, insurance and freight)
1. Delivery and risk:
- Means that the seller delivers the goods to the buyer
- On board the vessel
- Or procures goods already so delivered
- The risk of loss of or damage to the goods transfers
when the goods are on board vessel, such that the seller
is taken to have performed its obligation to deliver the
goods whether or not the goods actually arrive at their
destination in sound condition, in the stated quality or,
indeed at all
CIF
- BL must show “freight prepaid”
2. Export clearance - Insurance policy must be before BL
- Prepared by the seller date
24
CIF (Cost, insurance and freight)
25
26