Shipping Terms - INCOTERMSThe point at which sellers have fulfilled their obligations so the goods in a legal sense could be said to have been delivered to the buyer. They are shorthand expressions that set out the rights and obligations of each party when it comes to transporting the goods. Following, are the thirteen terms of sale in international trade as Terms of Sale reflected in the recent amendment to the International chamber of Commerce Terms of Trade (INCOTERMS). | Term | Description | Service | CFR
C&F | Cost & Freight | All | | Seller must clear goods for export and pay costs and freight to bring goods to nominated destination in sales contract. Buyer assumes risk of loss or damage, along with any cost increases, once goods pass ships rail in port of shipment. Another term properly used only for transport by water (sea or inland). CPT (Carriage Paid To) is closest equivalent for non-transport by water shipments.
| | | CIF | Cost, Insurance & Freight | All | | Similar to CFR except seller must insure goods against risk of loss or damage during transit. Also applies only to transport by water (sea or inland). CIP (Carriage, Insurance Paid To) is closest equivalent term for other modes of transport.
| | | CIP | Carriage, Insurance Paid To (location) | All | | As per CPT except seller must pay insurance.
| | | CPT | Carriage Paid To (location) | All | | Can be used with any form of transport, i.e., air, sea, road, rail. Seller must clear goods for export and pay costs and freight necessary to carry to named destination. Buyer assumes risk of loss or damage to goods, plus any cost increases, once first carrier has received goods.
| | | DAF | Delivered At Frontier (location) | Land | | Term designed for rail or road transport but can be used when goods shipped by any method. (Useful when shipping to bonded Customs Warehouse or Free Trade Zone). Seller fulfils obligations once goods, cleared for export, are made available at named point, which will be before destination Customs border. Buyer must clear goods through Customs.
| | | DDP | Delivered Duty Paid | All | | Same as DDU except for fact that seller is responsible for Customs clearance and seller is responsible for payment of duties/taxes. Common alternative is "DDP exclusive of duties/taxes" whereby shipper pays for clearance but not for paying duties/taxes.
| | | DDU | Delivered Duty Unpaid to (location) | All | | Seller handles everything necessary to deliver goods to nominated point (usually buyers premises) including Customs clearance at destination country. Buyer pays duties/taxes.
| | | DEQ | Delivered Ex-Quay | Sea | | Also normally used for commodity shipments by sea. Buyer assumes risk and costs on quay at named destination. Seller responsible for discharge costs. Buyer responsible for import clearance.
| | | DES | Delivered Ex-Ship | Sea | | Term normally used for commodity shipments by sea. Buyer assumes risks and costs once ship reaches named destination, but before goods cleared for import.
| | | EXW | Ex-Works | All | | Seller's only responsibility is to make goods available at their premises. No responsibility for loading goods on buyer's vehicle or clearing them for export unless agreed with buyer. Buyer bears full cost and risk of taking goods from seller's works to destination. This is the minimum obligation of seller.
| | | FAS | Free Alongside Ship | Sea | | Properly used only for ocean or inland water transport. Seller responsible for placing goods alongside ship on the quay or in lighters at nominated port. Buyer bears all costs and risks of loss or damage to goods from this point. Unlike FOB, FAS requires buyer to clear goods for export.
| | | FCA | Free Carrier (location) | All | | Used with any form of transport, i.e., air, sea, road, rail etc. Similar to FOB except seller fulfils obligations by delivering into the custody of the carrier at named point. Seller must hand goods, cleared for export, over to carrier at point nominated in the shipping terms. Where delivery takes place at seller's premises, seller is responsible for loading.
| | | FOB | Free On Board | All | | Properly used only for ocean or inland water transport (but commonly used for airfreight as well). Seller required to place goods on board ship at nominated port in contract. Buyer assumes risk of loss/damage to the goods once they pass ships rail. In other modes of transport, or if ships rails are not point at which seller transfers ownership to buyer, i.e., with container or roll-on/roll-off cargo-FCA is closest equivalent term. | |
Conditions
1. It is the seller's primary duty to deliver the goods on board the vessel named by the buyer at the named port of shipment on the date or within the period stipulated and in the manner customary at the port. The reference "the manner customary as the port" highlights the problem of using the passing of the ship's rail as the guiding factor in practice. The parties in these circumstances will have to follow the custom of the port regarding the actual measures to be taken in delivering the goods onboard. Usually stevedoring companies perform the task, and the practical problem normally lies in deciding who should bear the costs of their services. 2. An agreement has to be made to establish who is responsible for 'trimming' or 'lashing and securing'. 3. An agreement has to be made to establish who actually is to pay import duty and/or other import taxes. Note: Whilst all precautions are taken to ensure accuracy, no responsibility is accepted for errors or omissions < /p> |
