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Secrets of International Trading © copyright
INCOTERMS
2000
describe the
responsibilities of
seller and buyer in international trade. The full Special International Trade Terms The first INCOTERMS - uniform rules for the interpretation of international trade terms were published in 1936, by the International Chamber of Commerce (ICC) used in buying and selling on a world wide scale. Since then, ICC has amended and modernized these rules in 1953, 1967, 1980, 1990 and Incoterms 2000 INCOTERMS 2000 stands for International Commercial Terms to provide a set of rules to interpret the most commonly used trade terms in international trade. This set of rules defines the precise obligations of buyer and seller to reduce the possibility of misunderstanding between the exporter and importer. The purpose of these terms is to clarify who is responsible (seller or buyer) for: 1. The cost of transporting the goods from one point to the other. 2. The risk of loss if the transportation cannot take place. 3. The risk of loss or damage to goods in transit. In other words, Incoterms 2000 aim is to set out the rights and obligations of the seller and the buyer when it comes to transporting the goods. Each term means a different division of costs, risks, and responsibilities between the seller and the buyer. |
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CIF COST, INSURANCE AND FREIGHT CIP CARRIAGE AND INSURANCE PAID TO
EXW EX WORKS (... named place)
FCA FREE CARRIER (... named place) This term has been designed to meet the requirements of multimodal transport, such as container or roll-on, roll-off traffic by trailers and ferries. It is based on the same name principle as FOB. (free on board), except that the seller fulfills its obligations when the goods are delivered to the custody of the carrier at the named place. If no precise place can be named at the time of the contract of sale, the parties should refer to the place where the carrier should take the goods into its charge. The risk of loss or damage to the goods is transferred from seller to buyer at that time and not at the ship's rail. The term "carrier" means any person by whom or in whose name a contract of carriage by road, rail, air, sea, or a combination of modes has been made. When a seller has been furnished a bill of lading, way bill or carrier's receipt, the seller duly fulfills its obligation by presenting such a document issued by a carrier.
FAS FREE ALONGSIDE SHIP (... named port of shipment) FAS or "free alongside ship" requires the seller to deliver the goods alongside the ship on the quay. From that point on, the buyer bears all costs and risks of loss and damage to the goods. Unlike F.O.B., F.A.S. requires the buyer to clear the goods for export and pay the cost of loading the goods. FOB FREE ON BOARD (... named port of shipment) Under FOB the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement. The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ship's rail (i.e., off the dock and placed on the ship). The seller pays the cost of loading the goods.
CFR COST AND FREIGHT (... named port of destination) CFR requires the seller to pay the costs and freight necessary to bring the goods to the named destination, but the risk of loss or damage to the goods, as well as any cost increases, are transferred from the seller to the buyer when the goods pass the ship's rail at the port of shipment (i.e. off the dock and placed on the ship). Insurance is the buyer's responsibility as well as stevedore charges at the named port of destination.
CIF COST, INSURANCE AND FREIGHT (... named port of destination) CIF is CFR with the additional requirement that the seller procure transport insurance against the risk of loss or damage to goods. The seller must contract with the insurer and pay the insurance premium. Insurance is generally more important in international shipping than domestic shipping, because U.S. laws generally hold a common carrier to be liable for lost or damaged goods.
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CPT CARRIAGE PAID TO (... named place of destination) This term means the seller pays the freight for the carriage of the goods to the named destination. The risk of loss or damage to the goods and any cost increases transfers from the seller to the buyer when the goods have been delivered to the custody of the first carrier, and not at the ship's rail. Accordingly, "freight/carriage paid to" can be used for all modes of transportation, including container or roll-on roll-off traffic by trailers and ferries. When the seller is required to furnish a bill of lading, way bill, or carrier receipt, the seller duly fulfills its obligation by presenting such a document issued by the person contracted with for carriage to the main destination. CIP CARRIAGE AND INSURANCE PAID TO (... named place of destination) This term is the same as "freight/carriage paid to (CPT)" but with the additional requirement that the seller has to procure transport insurance against the risk of loss or damage to the goods during the carriage. The seller contracts with the insurer and pays the insurance premium.
DAF DELIVERED AT FRONTIER (... named place) "Delivered at frontier" means that the seller's obligations are fulfilled when the goods have arrived at the frontier but before the customs border of the country named in the sales contract. The term is primarily used when goods are carried by rail or truck. The seller bears the full cost and risk in delivering the goods up to this point, but the buyer must arrange and pay for the goods to clear customs.
DES DELIVERED EX SHIP (... named port of destination) Means the seller shall make the goods available to the buyer on board the ship at the place named in the sales contract. The seller bears the full cost and risk involved in bringing the goods there. The cost of unloading the goods and any customs duties must be paid by the buyer.
DEQ DELIVERED EX QUAY (... named port of destination) Means the seller has agreed to make the goods available to the buyer on the quay or wharf at the place named in the sales contract. The seller bears the full cost and risks in delivering the goods to that point including unloading.
DDU DELIVERED DUTY UNPAID (... named place of destination) Under these terms, the seller fulfills his obligation to deliver when the goods have been available to the buyer "not cleared" for import at the point or place of the named destination. The seller bears all costs and risks involved in bringing the goods to the point or place of named destination. There is no obligation for import clearance. DDP DELIVERED DUTY PAID (... named place of destination) Represents the seller's maximum obligation. The term "DDP." is generally followed by words indicating the buyer's premises. It notes that the seller bears all risks and all costs until the goods are delivered. This term can be used irrespective of the mode of transport. If the parties wish to make clear that the seller is not responsible for certain costs, additional word should be added (for example, "delivered duty paid exclusive of VAT and/or taxes").
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"...inevitably, disputes arise in the execution |
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