freight station, a container terminal, a yard
or some other kind of multiple-purpose
receiving facility. “Carrier” means any company that performs carriage by sea, rail,
road, air, inland waterway or by a combination of these modes.
Of course, under FAS (Free Alongside
Ship), the parties may stipulate that the seller
is to deliver the goods to the side of a vessel
or at least close enough that it can be loaded
on board. The buyer then bears the cost of
loading the goods, insurance, and so on.
As the name suggests, FOB (Free on
Board) takes the process a step further:
the seller pays to place the goods on the
vessel, and the buyer bears the costs from
that point on.
Older versions of the Incoterms indicated
FOB referred only to marine shipments, but
the term is used in airfreight as well.
FOB Origin and FOB Destination are
further wrinkles in the code’s definition.
The former obligates the buyer for the
freight and also for other costs and risks.
Under FOB Destination, those burdens
remain with the seller until the goods are
delivered to the buyer’s premises. A lot can
occur in between, including paying customs clearance. Specificity in the contract is
quite critical here.
FOB Origin and Destination are generally
found only in the U.S. and Canada. They are
not part of the official terminology issued by
the International Chamber of Commerce.
Cost and Freight, or CFR (sometimes
written as C&F), obligates the seller until
goods have been discharged at an agreed-upon port of destination. Cargo insurance
and other risks, however, are on the buyer.
CFR is another code that under previous
versions of the Incoterms was intended
solely for ocean carriage but is widely used
in airfreight transactions.
Cost, Insurance and Freight, or CIF, saddles the seller with those obligations until the
goods are discharged at the specified port of
destination. The buyer has to pay for customs
clearance and assumes responsibility from
that point on. CIF is also used in air cargo.
Carriage Paid To (CPT) stipulates that
the delivery of goods to the named place
of discharge is on the seller, but the
importer assumes the costs associated
with insuring the cargo, customs, taxes
and whatever arises.
Carriage and Insurance Paid To, or CIP, is
much like CPT, but the exporter is on the
hook for the insurance as well as the trans-
portation expense. The buyer assumes the
burden once the goods have been delivered.
Plainly stated, Incoterms are meant to end
confusion in international commerce not
only of buyers and sellers in such global
transactions but of governments and courts.
delivery a further step—all the way to the
buyer’s premises or even to a destination
the buyer does not own but where the
goods are to be used. Obviously, the code
means that the buyer pays the duties associated with the shipment: carrying out import
customs formalities, including duties, taxes
and other charges (unless, of course, the
contract specifies otherwise).
But with DDU, which is applicable to all
modes of transport, the seller’s risk is high
because it extends throughout the period of
transit. The seller, incidentally, cannot bill
the importer until delivery at the final destination has taken place. An exception occurs
when the goods are held up at a customs
station because the buyer failed to clear the
goods for import. In that case, the importer
may be assessed the cost of any loss and
demurrage charges.
DDP, or Delivered Duty Paid, is much
the same, but the seller usually assumes
most of the burden.
As a part of any company’s supply chain
risk mitigation strategy, any department that
“touches” an international shipment clearly
needs to be fully conversant with these
tion to the buyer of the goods. Similarly, an
agent for the buyer or importer is charged
with protecting the interests of his principal.
International Chamber of Commerce,
www.iccwbo.org
Resource Link
