Manual & Documentation of incoterms
Incoterm: As regards quoting the prices to the overseas buyers. The some are quoted in the following international accepted terms. For example.
‘Ex-works’ means that the seller’s responsibility is to make the goods available to the buyer at works or factory. The full cost and risk involved in bring the goods form this place to the desired destination will be borned in by the buyer.
This term thus represents the minimum obligation for the seller. It is mostly used for sale of plantation commodities such as tea, coffee and cocoa.
Free Career (FCA).
‘Free Carrier ‘means the seller’s obligations are fulfilled when the goods are delivered to the carrier named by the buyer of the named place. The term may be used for all the modes of transport including multimodal transport.
Free Alongside Ship (FAS).
Once the goods have been placed alongside the ship. The seller’s obligations are fulfilled and the buyer notified. The seller has to contract with the sea carrier for the carriage of the goods to be destination and pay the freight.
The buyer has to bear all the costs and risks or loss or damage to the goods hereafter.
Free on Board (FOB).
The seller’s responsibility ends the moment the contracted goods pass the ship’s rail at the port of shipment named in the sales contract.
This means that the buyer that the buyer has to bear all costs and risks of loss or damages to the goods from that point. The seller is required to clear the goods for export.
Cost and Freight (C & F).
The ‘Cost and Freight ‘means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must on his own risk contract for the carriage of the goods to the port of destination named in the sale contract and pay the freight.
The being a shipment contract. The point of delivery is fixed to the ship’s rail and the risk of loss or to damage to the goods it transferred from the seller to the buyer at the very point as will be seen though the seller bears the cost of carriage to the named destination.
The risks is already transferred to the buyer at the port shipment itself.
Cost insurance freight (CIF).
The terms is basically the same as CIF, but with the addition that the seller has to obtain insurance at his cost against the risks of loss or damage to the goods during the carriage is most commonly quoted price and it helps both exporter as well as importer to know exact amounts for receipts and payments. Under CIF it is important to mention the name of destination city.
Carriage paid to (CPT).
‘CPT’ means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all risks and any other costs after the point of delivery.
The seller is required to clear the goods for export.
Carriage and insurance paid to (CIP).
CIP is the same as CPT, with the addition that the seller is also required to procure insurance against the buyer’s risk of loss of or damage to the goods during the carriage.
Delivered at frontier (DAF).
The term is primarily intended to be used when the goods are to be carried by rail or road. The seller’s obligations are fulfilled when the goods have arrived at the frontier, but before the ‘Custom Border’ of the country named in the sales contract.
Delivered Ex-ships (DES).
This is an arrival contract and means that the seller makes the goods available to the buyer in the ship at the name port of destination as per the contract.
The seller has to bear the full cost and risk involved in bringing the goods there. The seller’s obligation is fulfilled before the customs border of the foreign country and it is for the buyer to obtain necessary import licence at his own risk and expenses.
Delivered Ex-Quay (DEQ).
Ex-Quay means that the seller makes the goods available to the buyer at a named quay. As in the term ‘Ex-ship ‘ the points of division of costs and risks coincide, but they have now been moved one step further from the ship into the quay of wharf i.e. after crossing the Customs border at destination.
Therefore, in addition to arranging for carriage and paying freight and insurance the seller has to bear the cost of discharging the goods on the quay.
The buyer is required to clear the goods for import and to pay for all formal formalities, duties, taxes and other charges upon import.
Delivered Duty Unpaid (UDP).
‘DDU’ means that the seller delivers the goods to the buyer, at the port of destination. The seller has to bear the cost and risks involved in bringing the goods thereto. The buyer has to get the goods unloaded and cleared for import, by paying the applicable duty.
Delivered Duty Paid (DDP).
This term may be used irrespective of the type of transport involved and denotes the seller’s maximum obligation as opposed to ‘Ex-Works’ The seller has not fulfilled his obligation till such time that the goods are made available at his risk and cost to the buyer at his premises or any other named destination.
In the latter case necessary documents (e.g. transport document or Warehouse warrant) will have to be made available to the buyer to enable him to take delivery of the goods.