BLW20103 - INTERNATIONAL BUSINESS LAW

Management & Science University (MSU)

INTERNATIONAL BUSINESS LAW

BLW20103

ASSIGNMENT 1

Prepared by

TEH CHI SHENG (2072021070069)

JOCELYN ONG YI QING (2072021020034)

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Management & Science University (MSU)

OO XUAN PEI (2072021020024)

Prepared for

MOHAMED SIRAJUDIN

Deadline

9 October 2022

ASSIGNMENT 1

ALL details MUST BE COMPLETED or the assignment will be rejected!

Students name/ID 1. TEH CHI SHENG 2072021070069

2. JOCELYN ONG YI QING 2072021020034

3. OO XUAN PEI 2072021020024

BLW20103
Subject Name & Code
INTERNATIONAL BUSINESS LAW

Lecturer MOHAMED SIRAJUDIN

Program BACHELOR OF INTERNATIONAL BUSINESS (BIB)

Semester
 BLW20103 - INTERNATIONAL BUSINESS LAW

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Topic
INCOTERMS
(as per assignment brief)

Date submitted 9/10/22 Due date 09 OCTOBER 2022

If lodged after the due date:

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Table of Content

Summary of Report..............................................................................................................1

Definition of INCOTERMS....................................................................................................2

Timeline of INCOTERMS......................................................................................................3

Importance of INCOTERMS.................................................................................................4

The INCOTERMS Rules........................................................................................................6

-Ex Works (EXW)...................................................................................................................6

-Free Carrier (FCA)................................................................................................................7

-Carriage Paid To (CPT)........................................................................................................8

-Carriage and Insurance Paid To (CIP).................................................................................9

-Delivered At Terminal (DAT)...............................................................................................10

-Delivered At Place (DAP)....................................................................................................11

-Delivered Duty Paid (DDP)..................................................................................................11

Special Sea & Inland Waterway

-Free on Board (FOB)..........................................................................................................12

-Cost & Freight (CFR)..........................................................................................................12

-Cost, Insurance & Freight (CIF) .........................................................................................13

-Free Alongside Ship (FAS) ................................................................................................13

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Conclusion.........................................................................................................................14

References.........................................................................................................................15

Summary of Report

To encourage worldwide trade, the International Chamber of Commerce (ICC) compiles a list of INCOTERMS, sometimes referred to as international business terms.

By defining the duties of both buyers and sellers, INCOTERMS, which are universally acknowledged, prevent misunderstandings in contracts for international trade.

ICC developed the INCOTERMS rules to promote global trade. Each nation has its viewpoint on trade words and concepts with its methods, aside from variations in

languages and currencies. By combining related words and enabling element comparison with each INCOTERMS rule, INCOTERMS makes it simple to choose the

most relevant terms. INCOTERMS include all forms of transport that specifically deal with shipping across inland and maritime waterways. By using INCOTERMS,

parties may choose the solution that best serves their needs and interests and prevents awkward circumstances. INCOTERMS specify who is in charge of the cargo

during transportation and offer manufactured goods insurance. This includes fulfilling the buyer's duty if the products are lost or damaged during transit. The

INCOTERMS rules included: Ex Works (EXW), Free Carrier (FCA), Carriage Paid To (CPT), Carriage and Insurance Paid To (CIP), Delivered At Terminal (DAT),

Delivered At Place (DAP), Delivered Duty Paid (DDP). For special sea and inland waterways, it included Free on Board (FOB), Cost and Freight (CFR), Cost,

Insurance and Freight (CIF), and Free Alongside Ship (FAS). When INCOTERMS are correctly used, people can cooperate more efficiently, move and deliver items

more successfully, and be paid more quickly. Businesses may use INCOTERMS standards as a supply chain enabler to increase productivity and cut costs once their

latent potential is realised.

Definition of INCOTERMS

The International Chamber of Commerce (ICC) produces a list of INCOTERMS, often known as international commercial terms, to promote global trade.

INCOTERMS, which are widely accepted, eliminate misunderstandings in international commerce contracts by outlining the responsibilities of both buyers and sellers.

They are frequently used by parties engaged in domestic and international trade as a type of shorthand to comprehend better one another and the details of their

business agreements. While certain INCOTERMS apply to all modes of transportation, others only to sea transit. INCOTERMS offer a standard set of norms and

regulations that aid trade facilitation. They essentially provide dealers with a uniform language to utilise when defining the details of their deals. Buyers and sellers can

use INCOTERMS in a variety of business-related activities. Filling out a purchase order, labelling a package for delivery, finishing a certificate of origin, or establishing

a free carrier agreement are examples of everyday tasks involving using INCOTERMS (FCA).
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Timeline of INCOTERMS
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Management & Science University (MSU)

Importance of INCOTERMS
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Management & Science University (MSU)

The International Chamber of Commerce (ICC) created the INCOTERMS rules to facilitate international trade. Aside from languages and currency differences, each

country has its perspective on trade terms and concepts with its procedures. INCOTERMS makes it easy to select the most relevant terms by grouping similar terms

together and allowing comparison of the elements with each INCOTERMS rule. For example, "EXW: Ex Works", "DDP: Delivered Duty Paid", "CIP: Carriage and In-

surance Paid To", and so on. These codes have brought the benefits of the transfer of risk from seller to buyer, the allocation of expenses, and the obligation to pack

or organise shipment during the processes.

In addition, INCOTERMS including to all types of transportation that specially deal with shipping using sea and inland waterways via codes. The adoption of IN -

COTERMS allows the parties to select the alternative that best suits their position and interests to avoid unpleasant situations. These codes utilised by INCOTERMS

are explicit where they specialised international under-training material for shippers, which have never been used in 29 nations, including German, Estonian, and

Spanish.

Despite that, INCOTERMS also provide convenience to that trader on Cost and Liability Management by providing clear terms and conditions for each party's financial

and legal obligations. INCOTERMS define who is responsible for cargo during shipping and provide insurance coverage for manufactured goods. This includes cover -

ing the buyer's obligation in case of goods loss or damage during transportation. However, carriers frequently fail to provide adequate protection for manufactured

goods regarding financial responsibility for a loss that does not meet the buyer's cargo protection requirements. For example, there has been an increase in container

ship fires and other total loss events. Indeed, all of these responsibilities are intended to reduce friction between buyers and sellers during the shipment to other coun-

tries and ensure that trustable carriage companies and partners are monitoring the products intended for resale.

Apart from that, INCOTERMS can enter into a trade of agreements with the suppliers who may impact the cargo due to Supply Chain Control. When suppliers take on

the responsibility for shipping or loading, they choose which carriers and possibly which ports will handle their cargo. Considering congestion and port fees are in -

creasing, the buyers can benefit from changing their route by reducing unnecessary costs from the terminal depot.
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The INCOTERMS rules

a) Ex Works (EXW)

An EX-WORKS Incoterm maximises the buyer's risk and responsibility by restricting the seller to only make the items available to the buyer at their warehouse or

dock. After picking up the goods, the buyer is responsible for all further obligations, including transportation to the final port. EXW places minor obligations on the

seller, as the buyer must bear all costs and risks involved in removing the goods from the seller's premises.

The seller is responsible for properly packaging the products and making them accessible at his location for the customer to pick up at the scheduled time. In the

absence of a specific site inside the seller's premises being agreed upon, the seller may choose the area that best suits his needs. As soon as the seller fulfils the

delivery obligation, or when the products are made available to the buyer, the risk of loss or damage to the goods falls to the buyer. The buyer is responsible for

obtaining all necessary export and import documents and paying for any export and import customs formalities.

In certain circumstances, if buyers want to keep their suppliers' identities secret. They can use a different exporter name on the shipping documents and ship under

the EXW incoterm. Although EXW has lower unit costs than other INCOTERMS, the buyer's disadvantage is much more significant. The buyer ultimately takes charge

of all risks and expenses related to the cargo's export, transportation, and import. The bulk of International Commercial Trade Agreements permit some division of

labour in this process; EXW is the only word that exempts the seller from being responsible for loading, delivering, and exporting the cargo to the terminal.
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b) Free Carrier (FCA)

According to the FCA (Free Carrier) rule, the seller must deliver the goods to the buyer or its carrier at their location, loaded onto the collecting vehicle, or at another

location (usually a forwarder's warehouse, an airport, or a container terminal), not unloaded from the seller's vehicle. The seller must handle any export-related

formalities, and the buyer must take any import-related procedures.

The seller is now responsible for physically transferring the goods, with risk passing to the buyer only after delivery. This rule works well for land transportation within

the Europe/Central Asia landmass because it is frequently the case that the truck picking up the goods will also be the truck taking the goods to their destination. The

buyer assumes risk at delivery when the products have been put into the buyer's provided mode of transportation at the named location on the seller's property. In

other circumstances, when loaded and prepared for unloading into the seller's vehicle and made available to the carrier or another individual designated by the buyer.

FCA INCOTERMS gives purchasers more control and lessens the cost of documentation. The desired carrier or mode of transportation is up to the buyer. This may

help avoid delays while also saving money. Additionally, the buyer is not responsible for managing the exporting-related paperwork. This is because these are the

FCA agreement's requirements for the seller. The seller may also profit from the arrangement. The transportation of the goods will restrict the seller's responsibility to

the buyer's designated location within his nation. The seller's obligation is relatively minimal in terms of price. He is responsible for only the transportation charges to

get the goods to the agreed-upon location for delivery to the shipper or shipping firm. His responsibility and expenditure end there.

In terms of downsides, the buyer is still a participant at the place of origin, which is a significant drawback. This indicates that the buyer must pay for loading and

terminals. Due to this process, the delivery may be delayed if there are problems. The buyer would have to wait for the seller to decide in this situation.

c) Carriage Paid To (CPT)

An international commercial term (Incoterm) known as "Carrying Paid To" (CPT) designates that the seller bears the risks and expenses related to delivering the

goods to a carrier to a specified location. Risks and costs associated with multiple pages are transferred to the customer upon delivery to the first carrier.

According to the CPT rules, the seller must clear the goods and arrange for transportation (by one or more modes of transport) to the specified location. No insurance

must be purchased or paid for by the seller. As soon as the products are delivered to the carrier, the risk of damage or loss to the items is transferred from the seller to

the buyer. The seller is alone in charge of setting up shipping to the destination; the shipment of the items during the transportation is not covered by insurance.
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The freight cost includes any export taxes or fees imposed by the nation of origin. However, even if various modes of transportation are used (for example, land, then

air), the risk is shifted from the seller to the buyer as soon as the items are delivered to the first carrier. Because the products had already been transferred to the first

carrier, a truck transporting a shipment to the airport, the seller is not liable for damages if the accident results in product damage if the buyer does not have product

insurance.

The benefit of CPT for the buyer is that it drastically lowers the risk associated with shipping goods. Contrarily, the seller is responsible for any loss or damage until the

goods have the carrier, which raises the risk of shipping goods for the seller. The buyer benefits from CPT since it eliminates all paperwork and bureaucracy

inconvenience. The seller would take care of all the legal requirements of shipping the products, including choosing a carrier, managing taxes, duties, and other

export-related procedures.

d) Carriage and Insurance Paid To (CIP)

CIP (or Carriage and Insurance Paid To) is an Incoterm that states that the seller is responsible for delivering the products to a specified location in the buyer's country

and is required to cover the associated transportation costs. In the CIP INCOTERMS rule, delivery of the goods is the moment of handing over the goods to the

carrier.

According to the CIP INCOTERMS norm, the time the items are turned over to the carrier constitutes delivery of the products. If there are many couriers, the seller is

only responsible for the items until the first carrier receives them. For example, when the products are loaded onto a ship or train, the risk of damage or loss passes

from the seller to the buyer. The seller should note that the seller does not guarantee that the items will arrive at the destination in good condition, in the indicated

quantity, or at all once the goods are delivered to the carrier. However, the seller must agree on the products' transportation from the delivery site to the designated

location.

The ICC has separated the 11 INCOTERMS s into categories that can be applied to all modes of transportation and those that should only be applied to "sea and

inland waterway" transit. CIP is acceptable for use with all modes of transportation under INCOTERMS 2020. The utilisation of multiple modes of transportation falls

under this as well.

CIP is a widely used Incoterm developed by the International Chamber of Commerce (ICC) to control the cost of transporting goods in commercial transactions. It

requires the seller to cover the costs of freight and insurance when sending products to a buyer they choose at a mutually agreed upon place. The risk of loss or

damage passes to the buyer as soon as the items are delivered.

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e) Delivered At Terminal (DAT)

Delivered At Terminal (DAT) refers to the act of the seller delivering the goods after they have been removed from the incoming vehicle. At the designated terminal,

port, or location, the buyer is given the goods for their use. No matter the mode of transportation chosen, DAT is employed and can even be used when more than one

mode of transportation is used. It is essential to correctly specify the agreed-upon location within the terminal at the final destination. Where appropriate, DAT requires

the seller to clear goods for export only; there is no requirement to remove the products for import, pay import duty, or complete import customs procedures.

Any discharged containers for ocean cargo or goods shipped by sea are subsequently carried to a container yard, where containers are stored before being moved to

their final destination. The buyer alone pays for customs clearance, tariffs, and taxes; any destination terminal handling fees are the seller's obligation.

The ease and lower risk to the importer are the main benefits of delivery at the terminal. The importer is not responsible for these fees as the supplier delivers the

products to the location. Once the items have been shipped and unloaded at a specific location at the destination, the risk is shifted from the supplier to the importer.

Most of the carriage and transit of the items from the origin to the destination is the seller's responsibility.

f) Delivered At Place (DAP)

With this term, the seller is responsible for delivering the goods to the buyer at a predetermined destination. As mentioned in the earlier INCOTERMS, the seller must

utilise the proper packaging. The risk is transferred from the seller to the buyer under DAP when the cargo is ready (or able) to be unloaded. Therefore, the buyer

assumes all risk for the unloading. Of course, the buyer must also cover the expense of unloading. The buyer must pay local taxes or import charges and obtain the

import clearance. If the seller unloads the items, they are entitled to payment from the buyer for the necessary costs. The buyer's wishes, however, determine how

much to pay. The seller must complete all relevant export formalities for the consignment. The seller's obligation is complete after unloading the products at the

intended location. The risk of the items remains with the seller up until that moment. Up to the specified location, the seller is responsible for paying all transportation

costs, including any terminal fees and insurance. The seller is responsible for paying for all necessary export documents and completing all the required export

customs procedures. The buyer is responsible for paying for all necessary import documents and completing all import customs requirements.

g) Delivered Duty Paid (DDP)

A shipping arrangement known as Delivered Duty Paid (DDP) places the most significant obligation on the seller. The vendor must make arrangements for import

clearance, tax payment, and import duty in addition to shipping fees. Once the products are made available to the buyer at the destination port, the risk passes to the

buyer. Before the transaction is complete, the buyer and seller must agree on all financial terms and identify the destination. DDP is most frequently used in
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international shipping transactions because it was created by the International Chamber of Commerce (ICC), which aimed to standardise shipping worldwide. The

advantages of DDP skew in favour of the buyer because they incur less risk and expense during the shipping process; this puts a heavy load on the seller.

Transporting the products to the specified destination port is the seller's responsibility, and they must also be paid for. Additionally, the seller must get an insurance

policy for the products. This INCOTERM is unique because the seller is the only one responsible for getting the goods through customs. He must acquire the required

export and import paperwork, as well as any required registration for the products.

Special Sea & Inland Waterway

a. Free on Board (FOB)

It is a process when responsibility for and ownership of items pass from a seller to a buyer. It indicates whether the supplier or buyer is responsible for damaged or

destroyed goods during delivery. For example, the seller is responsible for insurance coverage from the production site to a given location, whereby the buyer has an

obligation. In international shipping throughout the destination, the majority follow the standard and are used frequently when the seller is the owner of the goods

during delivery and will bear the expense of any damages that occur after delivery. Besides, customs formalities will be applied in the rules themselves, where the

seller is responsible for obtaining all required export documents and completing all export customs formalities. Likewise, the purchaser is responsible for acquiring all

import documents and completing all import customs processes at their own expense.

b. Cost & Freight (CFR)

It refers to an agreement in which the seller is responsible for export clearance, loading the cargo on the vessel at the port of origin, and paying for the primary cargo

to the destination port. For example, bulk cargo or non-containerized cargo. In practice, there are additional export regulations where the seller must supply the

necessary documentation, ship the goods to the port, and cover the transport cost to the final destination to prevent any losses. When the seller delivers the items on

board the ship, the risk will be passed to the purchaser directly. However, the buyer is not financially responsible until the goods have been shipped and unloaded at

the final port. There will also be included all additional shipping charges from the destination port, as well as import clearance and customs duties, will be covered by

the buyer. Indeed, the seller will cover all these damages if the buyer purchases this insurance under the INCOTERMS with terms and conditions.

c. Cost, Insurance & Freight (CIF)

It describes situations where the seller has direct access to the vessel for loading during the goods transported. Once the commodities are aboard the ship, the danger

of losing or damaging them passes. The cost and freight to deliver the products to the specified destination port should be contracted for and paid for by the seller. The

seller also agrees to insurance coverage against the risk of the buyer losing or damaging the items during transportation. The buyer should be aware that under CIF,

only minimum cover insurance is required from the supplier. The buyer must agree with the seller or make alternative insurance arrangements if they want extra

coverage.
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d. Free Alongside Ship (FAS)

It refers to shipping rules that a seller must deliver goods acquired by the buyer after selecting a vessel. For example, on a quay or a loading port prepared for transfer

to the waiting ship. If the goods are not delivered close to the boat, the carrier may not be able to reach the cargo. When using FAS, the buyer and seller must also

agree on who pays the freight costs and insurance costs. It specifies the port of delivery, the expected time of delivery of goods, import taxes and documentation, and

the party responsible for risks and losses. Once the agreed-upon is at the vessel location, the seller transfers duty and risk to the buyer directly. However, the buyer

and seller usually agree on who is responsible for shipping and insurance charges when using FAS.

Conclusion

In conclusion, the terms should be understood by everyone who participates in international transactions within a company. If they export, that also applies to their

global sales team. If they are importers, this refers to their buyers and purchasing representatives. It supports their accounting, logistics, transportation departments,

senior managers, and others, whether they are the selling or the buyer. Each accepts the relevant obligations and responsibilities as clearly set down and specified by

the specific INCOTERMS when a seller and a buyer agree to use those particular INCOTERMS. By providing buyers and sellers with a single point of reference for

business procedures, INCOTERMS lower the danger of legal issues. People may work together more peacefully, move and deliver things more successfully, and

receive payment more rapidly by appropriately using INCOTERMS. Once the INCOTERMS standards' hidden potential is understood, businesses may utilize them as

a supply chain enabler to boost productivity and save costs.

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References

1. Incoterms DDP - Delivered Duty Paid. (2022). Retrieved 3 October 2022, from https://www.aitworldwide.com/incoterms-ddp

2. Incoterms® 2020 - ICC - International Chamber of Commerce. (2022). Retrieved 3 October

2022, from https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/

3. Incoterms® 2020 Explained - The Complete Guide | IncoDocs. (2020). Retrieved 3 October 2022, from

https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide/

4. Trade Terms in International Sale of Goods and International Commercial Terms (INCOTERMS)| Lorenz & Partners. (2020). Retrieved 3 October 2022, from

https://lorenz-partners.com/incoterms/

5. From EXW to DDP: Incoterms 2020 Plain and Simple - Shipping Solutions. Retrieved 3 October 2022, from https://www.shippingsolutions.com/blog/from-exw-to-

ddp-incoterms-plain-and-simple
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Written Report Rubric

Name: ____TEH CHI SHENG________________ ID: ____2072021070069_______    Date: _5/10/22___

Name: ____JOCELYN ONG YI QING___________ ID: _____2072021020034______    Date: __5/10/22__

Name: ____OO XUAN PEI___________________ ID: _____2072021020024______    Date: __5/10/22__

SKILLS CRITERIA SCORE

4 3 2 1

Organization (Overall Information is presented in effective Information is logically Information is scattered Details and examples are

order, flow and order.  Excellent structures of paragraphs ordered with paragraphs and and needs further not organized, are hard to

transitions) and transitions enhances readability and transitions development follow and understand

10% understandability

Quality of information Supporting details are specific to topic and Some details don’t support Details are somewhat Unable to find specific

20% provide the necessary information the report topic sketchy details

Introduction Introductory paragraph is clearly stated, Introductory paragraph is Introductory paragraph is Introductory paragraph is

15% has a sharp, distinct focus and enhances clearly stated with a focus vague not apparent

the impact of the report

Conclusion Concluding paragraph summarizes and Concluding paragraph follows Concluding paragraph is Concluding paragraph is not

15% draw a clear, effective conclusion and and summarizes report only remotely related to the apparent

enhances the impact of the report discussion, and draw a report topic

conclusion.

Originality The proposed project contains many The project contains no or It is not clear that the The project is not creative

significantly original, innovative, or few original, innovative, or project is creative or or innovative.

20% creative aspect(s). creative aspect(s). innovative.

Format  Report follows all the given guidelines Report follows most of the Report follows few Report lacks many elements

5% given guidelines elements of the given of the given guidelines.

guidelines.

Neatness Very neat  Neat Natural Bad

5%

Grammar & Spelling No spelling or grammatical errors Fewer than 3 grammatical or Three to five grammatical Numerous grammatical

5% spelling errors or spelling errors and/or spelling errors

Timeline On the submission date Late submission one to two Late submission three or Late submission five days

5% days four days and more

Total