Incoterms

[1] Incoterms define the responsibilities of exporters and importers in the arrangement of shipments and the transfer of liability involved at various stages of the transaction.

[2] A series of three-letter trade terms related to common contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the global or international transportation and delivery of goods.

The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade.

Under the CIF Incoterms rule, which is reserved for use in maritime trade and is often used in commodity trading, the Institute Cargo Clauses (C) remains the default level of coverage, giving parties the option to agree to a higher level of insurance cover.

[12] Because of this it is common for contracts for exports to these countries to use these Incoterms, even when they are not suitable for the chosen mode of transport.

If this is the case then great care must be exercised to ensure that the points at which costs and risks pass are clarified with the customer.

However, in common practice the buyer arranges the collection of the freight from the designated location, and is responsible for clearing the goods through Customs.

In many respects this Incoterm has replaced FOB in modern usage, although the critical point at which the risk passes moves from loading aboard the vessel to the named place.

The policy should be in the same currency as the contract, and should allow the buyer, the seller, and anyone else with an insurable interest in the goods to be able to make a claim.

The terminal can be a port, airport, or inland freight interchange, but must be a facility with the capability to receive the shipment.

All charges after unloading (for example, import duty, taxes, customs and on-carriage) are to be borne by buyer.

Under DAP terms, the risk passes from seller to buyer from the point of destination mentioned in the contract of delivery.

The seller delivers when the goods are placed alongside the buyer's vessel at the named port of shipment.

Under FOB terms the seller bears all costs and risks up to the point the goods are loaded on board the vessel.

[21] Therefore, FOB contract requires a seller to deliver goods on board a vessel that is to be designated by the buyer in a manner customary at the particular port.

The shipper is not responsible for delivery to the final destination from the port (generally the buyer's facilities), or for buying insurance.

": he quotes the phrase "C. F. & I. by steamer to N.Y." used in a shipping contract addressed in the New York State case of Mee v. McNider (1886).

[26] In the case of E. Clemens Horst Co. v. Biddell Brothers, the UK House of Lords ruled in 1911 that "the sellers in a c.i.f.

[29] In a Ninth Circuit Court of Appeals case referencing the Arnhold Karberg case and also Manbre Saccharine v Corn Products (1919), it was explained that "under a c. i. f. contract the obligation of the seller is to deliver documents rather than goods, to transfer symbols rather than physical property".

[31] As an Incoterm, CIF is broadly similar to the term CFR, with the exception that the seller is required to obtain insurance for the goods while in transit.

The seller must also turn over documents necessary, to obtain the goods from the carrier or to assert claim against an insurer to the buyer.

Another point to consider is that CIF should only be used for non-containerized sea freight; for all other modes of transport it should be replaced with CIP.

This term means that the seller delivers the goods to the buyer to the named terminal in the contract of sale, unloaded from the main carriage vehicle.

The seller is responsible for making a safe delivery of goods to the named terminal, paying all transportation and export and transit customs clearance expenses.

The seller bears the risks and costs associated with supplying the goods to the delivery terminal and unloading them, where the buyer becomes responsible for paying the duty and taxes, as well as any further carriage to a destination.

Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port.

This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port of discharge.

This term means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale.

A transaction in international trade where the seller is responsible for making a safe delivery of goods to a named destination, paying all transportation and export and transit customs clearance expenses.

The seller bears the risks and costs associated with supplying the goods to the delivery location, where the buyer becomes responsible for paying the duty and taxes.