Get your import & export processes right by understanding the key elements of Incoterms, Ex Works (EXW), common mistakes & best practices.
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Business-to-business (B2B) transport and delivery practices are governed by Incoterms®, published by the International Chamber of Commerce (ICC). A typical contract for export/import is based on the Incoterms® rules and the contracts that surround it.
Incoterms® are the international terms which determine business-to-business practice in the transport and delivery of goods published by the International Chamber of Commerce (ICC). They set out the important fundamentals of the Incoterms® rules, and the contracts surrounding a typical contract of sale for export/import.
With the seller not only contracting for carriage to the buyer’s country but also contracting for delivery to occur there – the difference between the C rules and the D rules – the seller not only bears the transit risk but potentially puts itself in jeopardy of breaching the sales contract.
In the D rules delivery does not occur until a named destination place. How it gets there, what origin port or place it left and when it left are all irrelevant. This puts the D rules completely at odds with the typical LC that requires a port of shipment, port of destination and a latest shipment date.
Certified Documentary Credit Specialist Ravi Jinugu explains the motivations and rationale for variation of Incoterms® rules.
The usual answer is because delivery occurs, and risk transfers, when the goods leave the seller’s direct control, such as when the goods are loaded into the container at the seller’s premises or at the CFS or CY, long before the goods go on board. This would be the case with FCA, CPT and CIP.
Traditionally each rule has repeated all ten of the obligations for each of the seller and buyer. Most of them are identical or near-identical across each rule, and for some, the variations hang off the delivery obligation.
For FAS, delivery is when the goods are placed alongside a vessel which must logically be present at that point. This can be on the quay beside the vessel, or on a barge beside the vessel.
We have DAP Delivered At Place (not unloaded) and DPU Delivered at Place Unloaded with in both cases the buyer import clearing. Then we have a step beyond DAP with DDP Delivered Duty Paid, with identical delivery but the seller is responsible for import clearance and VAT/GST.
Delivery is identical to that in DAP. The danger of DDP is in the requirement that the SELLER must import clear.