2. INCOTERMS
Incoterms have been grouped into four different categories.
Group E-Departure
EXW: Ex Works (named place). The seller/exporter makes the goods available at
his or her premises and the buyer assumes all costs and risks from the seller’s
“named place” of business.
Group F-Main Carriage Unpaid:
FAS: Free Alongside Ship (named port of shipment). The seller clears the goods
for export and places them alongside the vessel for loading.
FCA: Free Carrier (named place). The seller clears the goods for export and
delivers them to the carrier specified by the buyer or by seller on behalf of buyer
at the named location, where the buyer takes possession. The “named place” is
domestic to the seller and the carrier can be a shipping line, an airline, a trucking
firm, a railway or an individual or firm that undertakes to procure carriage by way
of these methods of transport, including intermodal, such as an international
freight forwarder. The buyer assumes all risk of loss or damage from the time the
goods have been delivered to the carrier.
FOB: Free on Board (named port of shipment). The seller clears the goods for
export and is responsible for the costs and risks of delivering the goods past the
rail at the named port of export. ,
3. FOB Term
Payment
of
Freight
charges
Bears
Freight
charge
Owns
Goods
in Transit
Files
Claims
(if any)
Explanation
FOB origin or FOB
freight collect
Buyer Buyer Buyer Buyer Title and control of goods passes to
buyer when sign for goods at point
of origin
FOB origin, freight
prepaid
Seller Seller Buyer Buyer
FOB origin, freight
prepaid & charged
back
Seller Buyer Buyer Buyer Seller pays freight charges and adds
to invoice
FOB destination,
freight collect
Buyer Buyer Seller Seller Title remains with seller until goods
are delivered
FOB destination,
freight prepaid
Seller Seller Seller Seller Seller pays freight charges and adds
to invoice
FOB destination,
freight prepaid &
charged back
Seller Buyer Seller Seller Seller pays freight charges and adds
to invoice
FOB destination,
freight collect and
allowed
Buyer Seller Seller Seller Buyer pays freight charges and
deducts from seller’s invoice
FOB TERMS AND INCOTERMS
The term FOB stands for free on board, meaning that goods are delivered to a specified point with all transport charges paid.
There are several variations in FOB terms.
FOR Terms and Responsibilities:
4. INCOTERMS
Group C-Main Carriage paid by Seller.
CFR: Cost and freight (named port of destination). The seller is responsible for
clearing the goods for export, delivering the goods past the ship’s rail at the
port of shipment, and paying the costs to transport the goods to the named port
of destination. CFR, cost and freight is similar to FOB origin, with freight charges
paid by the seller. However, under CFR the buyer assumes all risk and should
provide for insurance.
CIF: Cost, insurance and Freight (named port of destination). The seller clears
the goods for export, is responsible for delivering the goods past the rail at the
port of shipment, pays the costs associated with transport of the goods to the
port of destination, and procures and pays the marine insurance in the buyer’s
name for the shipment. This is similar to FOB destination, freight prepaid.
CIP: Carriage and Insurance Paid (named place of destination). The seller clears
the goods for export, delivers them to the carrier and is responsible for paying
for carriage and insurance to the named port of destination.
CPT: Carriage Paid To (named place of destination). The seller clears the goods
for export and delivers them to the carrier and is responsible for paying carriage
to the named port of destination.
5. INCOTERMS
Group D-Arrival:
DAP: Delivered at Terminal (named place). The seller clears the goods for export
and is responsible for making them available to the buyer at the “named place”,
not unloaded or cleared for import. The buyer is responsible procuring insurance,
unloading and customs clearance for import and assumes all risks from the time
the goods have been delivered to the named point. DAT –unloaded at Buyer’s
cost
DDP: Delivered Duty Paid (named place of destination). The seller clears the
goods for export and is responsible for making them available to the buyer at the
named place of destination, including customs clearance for import. Therefore,
the seller assumes all responsibilities for all costs associated with transportation
to the named place of destination, including duties and other costs payable upon
import.
DDU: Delivered Duty unpaid (named place of destination). The seller clears the
goods for export and is responsible for making them available to the buyer at the
named place of destination. The buyer is responsible for customs clearance for
import, duties, transportation costs to the final destination and any other costs.
6. INCOTERMS
Incoterms do not
(1) apply to contracts for services;
(2) define contractual rights and obligations other than for
delivery;
(3) specify details of the transfer, transport and delivery of
the goods;
(4) determine how title of the goods will be transferred;
(5) protect either party from risk of loss;
(6) cover the goods before or after delivery; and
(7) define the remedies for breach of contract.
Although many Incoterms do not obligate either the buyer
or the seller to procure insurance, both parties should
recognize the risks and make arrangements for suitable