INCOTERMS
Incoterms may be categorized into four groups, designated by the first letter of the acronym:
These terms regulate the passage of responsibility and risk, as well as the performance (place and mode) of delivery, the obligations of carriage and shipment, the payment of costs (of transport, insurance, customs duties, taxes, charges etc.) and the completion of formalities.
EXW = Ex Works"E" clauses indicate the minimum obligation of the seller and the maximum involvement of the buyer in the arrangement of shipping. By way of this designation, the seller merely has to make the goods available to the buyer at a named location, which is - as a rule - his own premises, namely Ex works.FCA = Free Carrier
FAS = Free Alongside Ship
FOB = Free on Board
“F” prefix Incoterms indicate that the seller arranges and pays for the pre-carriage and thus delivers the goods for actual shipping as contractually agreed with the buyer. The “FCA” term frequently presents difficulties for parties due to the many different circumstances that may be governed by a contract including such a clause. Thus, depending on the actual definition and domain of the locale, it may imply that goods are to be loaded onto a vehicle that has been sent by the buyer, or, conversely, unloaded from a truck sent by the seller.CFR = Cost and Freight
CIF = Cost, Insurance and Freight
CPT = Carriage Paid to
CIP = Carriage and Insurance Paid to
“C” prefix Incoterms indicate that the seller arranges and pays for the main carriage and names the location at which his responsibility for transportation shall end. Under the “CIF” and “CIP” terms, the seller also has to bear the cost of insurance cover.
"CIF" clause
"CIF" - Cost, Insurance and Freight - is most commonly used in contracts prescribing shipment by sea or inland waterway. In this instance, the seller is responsible for all costs and charges necessary to ship the goods to the named port of destination and unload (debark) them; at which point his responsibilities end. As regards insurance, the following provisions are pertinent with a view to the obligations of the seller:
Contract of carriage
The seller is obliged to conclude, at his own cost, a contract on the carriage of goods to be shipped by the usual route and in the accustomed manner to the named port of destination. Shipment may be accomplished by an oceangoing or inland vessel of the type normally used in such circumstances for the carriage of the goods identified in the contract.
Insurance contract
The seller is obliged to take out, at his own cost, insurance cover as determined in the sales contract. By way of such a policy, the buyer - or indeed any other person having an insured interest in the goods - shall be entitled to assert any claim directly with the insurer. The seller must also submit the actual insurance policy, or other evidence of insurance cover, to the buyer. Said insurance must be taken out with a reliable insurer and provide the minimum cover as prescribed by the Institute Cargo Clauses or a similar such framework of conditions. If specifically requested by the buyer, the seller is obliged to provide - at the buyer’s expense, and only in the event that such is possible - insurance corresponding Institute Cargo Clauses (A) or (B) and/or against the risks of war and strike. The minimum insurance cover is defined as the purchase price plus 10% (i.e. 110% of the actual purchase price) and shall be in the currency of the contract.
Delivery
The seller is obliged to deliver the goods by placing them on board the vessel, at the agreed (specified) time or within the agreed timeframe.
Passage of risk
The seller bears all risks of damage or loss of the goods until they have placed them on board the vessel at the port of shipment.
Costs
The seller is obliged to bear all pre-carriage costs, the costs of loading, shipment and unloading, together with all costs in connection with the export of the goods (export customs formalities, taxes and any other charges), including pertaining insurance costs.
DAP = Delivered at Place
DDP = Delivered duty paid
Incoterm acronyms beginning with “D” indicate that the seller shall arrange for the carriage of the goods to the stipulated location. The seller bears all risks and costs prior to the arrival of the goods at this point. “D” prefix Incoterms can be thus defined as delivery contracts, in much the same way as the “C” terms may be thought of as carriage (shipment) contracts.
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