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Incoterms® 2020 Explained for Import Export Global Trade - YouTube
Channel: Inco Docs
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(upbeat music)
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- [Narrator] Understanding Incoterms®
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is a vital part of International Trade.
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When exporting products internationally
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you must agree to sell your
goods based on 11 Incoterms®.
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Incoterms® is short for
International Commercial Terms,
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which are published by the
International Chamber of Commerce
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and relate to International
Commercial Law.
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They are accepted by governments
and legal authorities
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around the world.
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The International Chamber
of Commerce have published
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the latest version of
Incoterms®, Incoterms® 2020
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which have come into effect
on the 1st of January 2020.
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Put simply, Incoterms®
are the selling terms
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that the buyer and seller
of goods both agree to
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for the International
sale and supply of goods.
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Incoterms® clearly states
which tasks, costs and risks
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are associated with the buyer
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and which are associated with the seller.
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The Incoterm® states when
the seller's costs and risks
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are transferred onto the buyer.
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This chart displays Incoterms® 2020
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in an easy to understand format.
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Note this chart should
be used as a guide only,
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for a full and complete description,
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you should refer to the
full version of Incoterms®
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published by the ICC.
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The blue section displays
the different types
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of Incoterms® beginning from left to right.
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The green section shows the groups,
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Any Mode or modes of transport,
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and Sea and Inland Waterway Transport.
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The yellow section shows
the Freight Collect Terms
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and the Freight Prepaid Terms.
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Starting from the left
side is the exporter
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or the seller of the goods,
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beginning at the seller's
location or warehouse.
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As you move along to the right,
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the products leave the warehouse,
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get loaded on board a vessel or aircraft
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at the port of loading,
get shipped through
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to the port of destination,
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pass through customs at
the arriving country,
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and then get delivered further through
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to the buyer's location.
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Along the way there are set Incoterms®
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to establish which risks
and costs are agreed
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to be paid by the seller and which are
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to be transferred to the buyer.
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The left side of the chart displays
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the different obligations and charges,
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and displays which are
covered by the seller,
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and which are covered by the buyer.
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So starting from the left
is the first Incoterm® EXW,
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which means Ex-Works, or Ex-Warehouse.
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If the buyer and seller agree
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to sell goods on Ex-Works terms,
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then then seller's obligations are simple.
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The seller will only cover
the cost of the goods
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and the export packaging Ex warehouse.
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So the seller will manufacture the goods
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and have them packaged and ready
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for collection from their warehouse.
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From then on all
additional costs and risks
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involved in transport
away from the warehouse
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is covered by the buyer.
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Moving further along the supply chain,
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there are FCA, FAS and FOB Incoterms®.
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Under FCA, Free-To-Carrier the seller
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will cover export duties,
taxes and customs clearance
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to get the products prepared for export.
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Under FAS, Free-Alongside-Ship,
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the seller will cover the origin terminal
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port handling charges.
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Then it moves onto FOB, Free-On-Board.
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FOB is generally the most popular Incoterm®
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that is used for containerized trade.
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When FOB terms are agreed upon,
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the seller's obligation
is to supply the goods
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and also to pay for all
of the additional charges
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involved to get the goods actually
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loaded on board the vessel for export.
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That means the seller will cover
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all previously mentioned charges
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and pay for the loading charges
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to get the goods loaded on
board the vessel for export.
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As soon as the goods are loaded on board,
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all further associated costs
and risks are transferred
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onto the buyer.
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The buyer will pay for
the international freight
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and all charges thereafter.
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If the seller agrees to pay
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for the cost of freight and carriage,
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then they can choose to sell the goods
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on CFR, CIF, CPT or CIP Incoterms®.
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Note that CFR and CIF
are similar Incoterms®
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that cover Sea and inland
waterway transport.
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If the seller agrees to
cover the cost of insurance
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during international sea freight,
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then they can sell on the CIF Incoterm®.
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CPT and CIP are similar Incoterms®
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that relate to any mode
or modes of transport,
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where the seller will agree to pay
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for the destination
terminal/port handling charges.
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If the seller agrees to
cover the cost of insurance
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during transport, they can sell goods
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under the CIP Incoterm®.
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Moving further along, DAP, DPU and DDP
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are Incoterms® involved with
getting goods delivered,
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unloaded and customs cleared
at the country of destination.
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Under DAP, Delivered-At-Place,
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the seller will cover the costs
of delivery to destination.
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If DPU, Delivered-at-Place-Unloaded
is agreed,
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then the seller will also
pay for the unloading costs
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at the destination.
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Finally, if DDP,
Delivered-Duty-Paid is agreed
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then the seller will also pay
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for the import duties,
taxes & customs clearance
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at the country of destination.
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If you have any detailed questions
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relating to Incoterms® you should refer
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to your freight forwarder,
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the International Chamber of Commerce
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or other professional advice.
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Before products can be
shipped internationally,
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the buyer and seller must agree
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on the Incoterm® that the
goods are sold under.
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The Incoterm® must be cleared
stated in sales contracts
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and counter-signed by both parties
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to avoid any misunderstandings.
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Should any disputes arise
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then the details included
in the documentation
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will be referred to.
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IncoDocs is documentation software
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used by importers and
exporters all over the world.
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It allows importers and exporters
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to connect to easily
create all of the sales
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and shipping documentation
required for global trade.
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Join the future of global trade.
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Try it yourself at incodocs.com
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