II Special INCOTERMS for sea transport
FAS (Free Alongside Ship)
Seller |
Buyer |
delivers the goods placing them alongside the ship chosen by the buyer
export clearance must be covered by the seller
responsible for loading the goods on the ship
must have very good knowledge of the practices in the port of shipment
only used for certain commodities and materials that are not packed and cannot be individualised (grain, timber, minerals, etc.)
delivery is done in ports with specialised terminals
FOB (Free on Board)
Seller |
Buyer |
delivers goods by placing them on board of the ship named by the buyer
covers the terminal costs and export clearance
assumes the transportation risk after the goods have been delivered on board of the ship
oldest Incoterm and one of the most widely used
preferably used with bulk, heavy loads and in case of complex goods (machinery) whose loading involves certain risks
CFR (Cost and Freight)
Seller |
Buyer |
delivers the goods on board of a ship but he also pays the cost of freight to the destination point
covers terminal cost and export clearance
the risk is transferred to the buyer after the goods had reached the board of the ship
must hire an insurance for transport from the port of shipment to the destination, as the seller is not obliged to do this
used mainly for large volumes of general cargo
CIF (Cost, Insurance and Freight)
Seller
same obligations that CFR implies
+ seller is obliged to hire insurance for transport covering at least the way from the port of shipping to the port of destination
insurance shall cover the price of the contract + 10%
Buyer
he might want to hire additional insurance, as the seller is only obliged to purchase a minimum coverage insurance
used for general cargo of consumer or industrial products of high value
CIF value is used in most of the customs to apply tari s and import taxes, facilitating the clearance of goods for export
After so many types of terms...
Here is a simple diagram summarising the extent of costs & risks covered by each of the 11 INCOTERMS that have just been presented :
And a more detailed Bar Chart :
Using INCOTERMS correctly
by...
Following the three letters of the appropriate chose term with the exact destination place to which the delivery of goods is to be made, and afterwards the expression 'Incoterms 2010'
Such as : FCA Port of New Orleans, USA, Incoterms 2010
Or
CIP Tianjin airport, China, Incoterms 2010
will certainly...
Benefit all the parties involved
as
INCOTERMS have become an essential framework in daily language of trade, providing clear rules and guidance to importers, exporters, lawyers, forwarders, insurers, carriers and mainly e v e r y b o dy
taking part in international trade transactions.
leading to
However, if used incorrectly
Your contract may be ambiguous, lacking some important details or even impossible to perform, causing lots of misunderstandings and prejudices
which can turn into...
and eventually
cause...