An Export Sales Contract is a formal agreement between the Importer (buyer) and Exporter (seller) to exchange goods and services. It has many constituents like price quotations, mode of payment, delivery terms, date and time, credit terms, etc. Among these terms, one of the crucial terms is International Commercial Terms, also known as 'INCO Terms'. The new 'INCO terms 2020' have been announced by the International Chamber of Commerce which is coming into effect from 1 January 2020. So let's have a look at these, one by one.
1) EXW (Ex Works)- The sellers make the goods available at their premises. This term places the maximum obligation on the buyer and minimum obligations on the seller.
2) FCA (Free Carrier)- The seller delivers the goods, cleared for export, at a named place. This can be to a carrier nominated by the buyer, or to another party nominated by the buyer.
3) CPT (Carriage Paid To)- The seller pays for the carriage of the goods up to the named place of destination.
4) CIP (Carriage and Insurance Paid To)- This term is broadly similar to the above CPT term, with the exception that the seller is required to obtain insurance for the goods while in transit. CIP requires the seller to insure the goods for 110% of their value.
5) CNI (Cost and Insurance)- The risk of transport would be transmitted from the seller to the buyer at the port of departure.
6) DAT (Delivered At Terminal)- This term means that the seller covers all the costs of transport (export fees, carriage, unloading from main carrier at destination port and destination port charges) and assumes all risks until destination port or terminal.
7) 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.
8) DDP (Delivered Duty Paid)- The seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible for unloading.
9) FOB (Free on Board)- Under FOB terms, the seller bears all costs and risks up to the point the goods are loaded on board the vessel. The seller must also arrange for export clearance.
10) CFR (Cost and Freight)- The seller pays for the carriage of the goods up to the named port of destination.
11) CIF (Cost, Insurance & Freight)- This term is broadly similar to the above CFR term, with the exception that the seller is required to obtain insurance for the goods while in transit to the named port of destination.
As these INCO terms are coming into effect from 1 Jan 2020, these are likely to have an impact on your strategies to negotiate with foreign buyers. Ximpex helps you in preparing the right strategies for the International Sales Contracts. We support the MSME's initiatives to sell their products outside India.
Author: Sachin Yadav Co-Author: Lisa Goel