INCOTERMS: ‘Mode of Payment’ guidelines for shipping trade
Thursday, 19 July 2007
FE Report
We are happy to produce shipping inco terms as per International Chamber of Commerce's last revision in 2000 . Pictures of " international shipment diagram" are inserted for better understanding of the terms .
Ex Works (EXW)
Seller agrees to place the goods at the disposal of the buyer packed for export at a named place of delivery on an agreed upon date, but not loaded on the collecting vehicle. The place of delivery is usually the seller's own place (e.g., factory, warehouse, etc.) and should be described in geographic terms, such as EXW Shanghai. The buyer pays all other charges, (e.g., loading onto the collecting vehicle, pre-carriage, export clearance, main-carriacie, iMDort clearance, on-carriaae).
Free Carrier (FCA)
Free Carrier, to a named place on the seller's side. This term has been updated with the 2000 revisions. It may be used for multimodal transport, container stations, and any mode of transport, including air. The seller agrees to deliver the goods, cleared for export, to the carrier, forwarder, or other party nominated by the buyer at the named place. The chosen place of delivery determines who pays for the loading and unloading of the goods.
a) Named place = seller's premises Seller is responsible for loading the means of transport at the seller's premises. Buyer is responsible for all other charges- pre-carriage, main-carriage, import clearance, oncarriage.
b) Named place = any other place Seller is not responsible for unloading the means of transport at the terminal of the buyer-appointed carrier, forwarder, or other party. Buyer is responsible for all other charges: main-carriage, import clearance, on-carriage.
Free Alongside Ship (FAS)
Free Alongside Ship, at a named ocean port of shipment on the seller's side. This incoterm is restricted to ocean shipments. Under this term, the seller quotes a price for the goods that includes charges for delivery of the goods alongside a vessel at the port, and export clearance. The buyer arranges loading onto the vessel, main-carriage, import clearance, and on-carriage.
Free On Board (FOB)
Free On Board Vessel, at a named ocean port of shipment on the seller's side. This incoterm is restricted to ocean shipments. The seller is responsible for delivering the goods on an agreed upon date at the named port of shipment on board the vessel nominated by the buyer. The seller is responsible for loading the goods onto the vessel at a port location on the seller's side as well as export clearance. The buyer is responsible for main-carriage, import clearance, and on-carriage.
Cost and Freight (CFR)
Cost and Freight to a named ocean port of destination on the buyer's side. This incoterm is restricted to ocean shipments. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named port of destination on the buyer's side,, however, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the freight is on board the vessel are the buyer's responsibility.
The seller agrees to pay for the delivery of the goods on board the vessel, export clearance, main-carriage, unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else, additional port of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
Cost, Insurance and Freight (CIF)
Cost Insurance and Freight to a named ocean port of destination on the buyer's side. This incoterm is restricted to ocean shipments. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named port of destination on the buyer's side-, however, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the freight is on board the vessel are for the account of the buyer.
The seller agrees to pay for the delivery of the goods on board the vessel, export clearance, main-carriage, and minimum cover marine cargo insurance so the buyer can make a claim, and unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else- additional port of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
CIF is only one of 2 incoterms that require insurance. You might think this means the seller is responsible for the condition of the goods while in main-carriage transit. That is not the case. The risk transfers when the goods pass the ship's rail. The seller is responsible for any incident on the pier side of the rail and the buyer is responsible for any incident on the shipside of the rail. The seller is required to purchase insurance on behalf of the buyer if anything happens in transit. If something happens after the cargo passes the ship's rail, the buyer can make a claim directly to the insurance company. Be aware that only minimum cover marine cargo insurance is required, also known as "free of particular average." This may not be sufficient coverage for the buyer or seller.
Carriage Paid To (CPT)
Carriage Paid To a named place of destination on the buyer's side. It may be used for multimodal transport, container stations, and any mode of transport, including air. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named place of destination on the buyer's side. However, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after delivery to the first carrier on the seller's side are the buyer's responsibility.
The seller agrees to pay for pre-carriage, export clearance, main-carriage, and unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else- additional place of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
Carriage & Insurance Paid (CIP)
Carriage and Insurance Paid to a named place of destination on the buyer's side. It may be used for multimodal transport, container stations, and any mode of transport, including air. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named port of destination on the buyer's side. However, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after delivery to the first carrier are for the account of the buyer.
The seller agrees to pay for pre-carriage, export clearance, main-carriage, minimum cover marine cargo insurance so the buyer can make a claim, and unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else* additional port of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
CIP is only one of two incoterms that require insurance. You might think that means the seller is responsible for the condition of the goods while in main-carriage transit. That is not the case. The risk transfers when the goods pass the ship's rail. The seller is responsible for any incident on the pier side of the rail and the buyer is responsible for any incident on the shipside of the rail. The seller is required to purchase insurance on behalf of the buyer if anything happens in transit. If something happens after the cargo passes the ship's rail, the buyer can make a claim directly to the insurance company. Be aware that only minimum cover marine cargo insurance is required, otherwise known as "free of particular average." This may not be sufficient coverage for the buyer or seller.
Delivered at Frontier (DAF)
Delivered at Frontier at a named place. The term may be used for all modes of transportation, provided that the delivery point is a land border. The seller fulfills his obligation when the goods have been delivered to the designated border place and cleared for export. The seller is not obligated to unload the arriving means of transport and the delivery place must be before the customs border of the adjoining country. The buyer is responsible for unloading the arriving means of transport, import clearance, and on-carriage.
Delivered Ex Ship (DES)
Delivered Ex Ship at a named port of destination on the buyer's side. This incoterm is restricted to ocean or inland waterway shipments. The seller fulfills her obligation when the goods have been made available to the buyer on board the ship, but not cleared for import at the named port of destination. The seller has to bear all costs and risks involved in bringing the goods to the named port of destination before discharging. The buyer is responsible for unloading the vessel, import clearance, and on-carriage.
Delivered Ex Quay (DEQ)
Delivered Ex Quay at a named port of destination on the buyer's side. This term has been updated with the 2000 revisions. This incoterm is restricted to ocean or inland waterway shipments. The seller fulfills his obligation when the goods have been made available to the buyer on the wharf or pier, but not cleared for import at the named port of destination. The seller has to bear all costs and risks involved in bringing the goods to the named port of destination and discharging (unloading). The buyer is responsible for import clearance and on-carriage.
Delivered Duty Unpaid (DDU)
Delivered Duty Unpaid to the named place of destination on the buyer's side. The named place can be the arrival point or any other location on the buyer's side, although it is usually the buyer's premises. The seller agrees to pay for the carriage of the goods to the buyer, not cleared for import, and not unloaded from the arriving means of transport. The seller bears the costs and risks involved in delivering the goods to the named place. The buyer is responsible for unloading and import clearance.
Delivered Duty Paid (DDP)
Delivered Duty Paid to the named place of destination on the buyer's side. The named place can be the arrival point or any other location on the buyer's side, although it is usually the buyer's premises. The seller delivers the goods to the buyer, cleared for import, and not unloaded from the arriving means of transport. The seller bears the costs and risks involved in delivering the goods to the named place. The buyer is responsible for unloading.
Note:
For CIP and CIF incoterms, the insurance charge clearly appears in the term definition. For the other incoterms, one party generally covers insurance although it is not part of the term definition. It just depends on the contract agreed between both parties.
These terms are understood as recognised terms and conditions according to which international shipping is governed . For example , FOB is Free on Board , and in this mode the seller is responsible for loading the goods onto the vessel at the port location on the seller's side as well as export clearance . Such clearance is undertaken by logaitics companies and they incur cost which is recovered as THC or Terminal Handling Charge . These charges are no longer allowed to be extracted from the seller or shipper in Bangladesh as per new directives . Bangladesh is the only country known not to allow this . The logistics companies are therefore billing the buyers who are going to deduct the same from the sellers due payment !
We are happy to produce shipping inco terms as per International Chamber of Commerce's last revision in 2000 . Pictures of " international shipment diagram" are inserted for better understanding of the terms .
Ex Works (EXW)
Seller agrees to place the goods at the disposal of the buyer packed for export at a named place of delivery on an agreed upon date, but not loaded on the collecting vehicle. The place of delivery is usually the seller's own place (e.g., factory, warehouse, etc.) and should be described in geographic terms, such as EXW Shanghai. The buyer pays all other charges, (e.g., loading onto the collecting vehicle, pre-carriage, export clearance, main-carriacie, iMDort clearance, on-carriaae).
Free Carrier (FCA)
Free Carrier, to a named place on the seller's side. This term has been updated with the 2000 revisions. It may be used for multimodal transport, container stations, and any mode of transport, including air. The seller agrees to deliver the goods, cleared for export, to the carrier, forwarder, or other party nominated by the buyer at the named place. The chosen place of delivery determines who pays for the loading and unloading of the goods.
a) Named place = seller's premises Seller is responsible for loading the means of transport at the seller's premises. Buyer is responsible for all other charges- pre-carriage, main-carriage, import clearance, oncarriage.
b) Named place = any other place Seller is not responsible for unloading the means of transport at the terminal of the buyer-appointed carrier, forwarder, or other party. Buyer is responsible for all other charges: main-carriage, import clearance, on-carriage.
Free Alongside Ship (FAS)
Free Alongside Ship, at a named ocean port of shipment on the seller's side. This incoterm is restricted to ocean shipments. Under this term, the seller quotes a price for the goods that includes charges for delivery of the goods alongside a vessel at the port, and export clearance. The buyer arranges loading onto the vessel, main-carriage, import clearance, and on-carriage.
Free On Board (FOB)
Free On Board Vessel, at a named ocean port of shipment on the seller's side. This incoterm is restricted to ocean shipments. The seller is responsible for delivering the goods on an agreed upon date at the named port of shipment on board the vessel nominated by the buyer. The seller is responsible for loading the goods onto the vessel at a port location on the seller's side as well as export clearance. The buyer is responsible for main-carriage, import clearance, and on-carriage.
Cost and Freight (CFR)
Cost and Freight to a named ocean port of destination on the buyer's side. This incoterm is restricted to ocean shipments. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named port of destination on the buyer's side,, however, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the freight is on board the vessel are the buyer's responsibility.
The seller agrees to pay for the delivery of the goods on board the vessel, export clearance, main-carriage, unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else, additional port of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
Cost, Insurance and Freight (CIF)
Cost Insurance and Freight to a named ocean port of destination on the buyer's side. This incoterm is restricted to ocean shipments. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named port of destination on the buyer's side-, however, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the freight is on board the vessel are for the account of the buyer.
The seller agrees to pay for the delivery of the goods on board the vessel, export clearance, main-carriage, and minimum cover marine cargo insurance so the buyer can make a claim, and unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else- additional port of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
CIF is only one of 2 incoterms that require insurance. You might think this means the seller is responsible for the condition of the goods while in main-carriage transit. That is not the case. The risk transfers when the goods pass the ship's rail. The seller is responsible for any incident on the pier side of the rail and the buyer is responsible for any incident on the shipside of the rail. The seller is required to purchase insurance on behalf of the buyer if anything happens in transit. If something happens after the cargo passes the ship's rail, the buyer can make a claim directly to the insurance company. Be aware that only minimum cover marine cargo insurance is required, also known as "free of particular average." This may not be sufficient coverage for the buyer or seller.
Carriage Paid To (CPT)
Carriage Paid To a named place of destination on the buyer's side. It may be used for multimodal transport, container stations, and any mode of transport, including air. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named place of destination on the buyer's side. However, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after delivery to the first carrier on the seller's side are the buyer's responsibility.
The seller agrees to pay for pre-carriage, export clearance, main-carriage, and unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else- additional place of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
Carriage & Insurance Paid (CIP)
Carriage and Insurance Paid to a named place of destination on the buyer's side. It may be used for multimodal transport, container stations, and any mode of transport, including air. Under this term, the seller must pay the costs and freight associated with bringing the goods to the named port of destination on the buyer's side. However, the risk of loss or damage to the goods, as well as any additional costs due to events occurring after delivery to the first carrier are for the account of the buyer.
The seller agrees to pay for pre-carriage, export clearance, main-carriage, minimum cover marine cargo insurance so the buyer can make a claim, and unloading at the agreed port of discharge under the contract of carriage. The buyer agrees to pay for everything else* additional port of destination costs that are not under the contract of carriage, import clearance, and on-carriage.
CIP is only one of two incoterms that require insurance. You might think that means the seller is responsible for the condition of the goods while in main-carriage transit. That is not the case. The risk transfers when the goods pass the ship's rail. The seller is responsible for any incident on the pier side of the rail and the buyer is responsible for any incident on the shipside of the rail. The seller is required to purchase insurance on behalf of the buyer if anything happens in transit. If something happens after the cargo passes the ship's rail, the buyer can make a claim directly to the insurance company. Be aware that only minimum cover marine cargo insurance is required, otherwise known as "free of particular average." This may not be sufficient coverage for the buyer or seller.
Delivered at Frontier (DAF)
Delivered at Frontier at a named place. The term may be used for all modes of transportation, provided that the delivery point is a land border. The seller fulfills his obligation when the goods have been delivered to the designated border place and cleared for export. The seller is not obligated to unload the arriving means of transport and the delivery place must be before the customs border of the adjoining country. The buyer is responsible for unloading the arriving means of transport, import clearance, and on-carriage.
Delivered Ex Ship (DES)
Delivered Ex Ship at a named port of destination on the buyer's side. This incoterm is restricted to ocean or inland waterway shipments. The seller fulfills her obligation when the goods have been made available to the buyer on board the ship, but not cleared for import at the named port of destination. The seller has to bear all costs and risks involved in bringing the goods to the named port of destination before discharging. The buyer is responsible for unloading the vessel, import clearance, and on-carriage.
Delivered Ex Quay (DEQ)
Delivered Ex Quay at a named port of destination on the buyer's side. This term has been updated with the 2000 revisions. This incoterm is restricted to ocean or inland waterway shipments. The seller fulfills his obligation when the goods have been made available to the buyer on the wharf or pier, but not cleared for import at the named port of destination. The seller has to bear all costs and risks involved in bringing the goods to the named port of destination and discharging (unloading). The buyer is responsible for import clearance and on-carriage.
Delivered Duty Unpaid (DDU)
Delivered Duty Unpaid to the named place of destination on the buyer's side. The named place can be the arrival point or any other location on the buyer's side, although it is usually the buyer's premises. The seller agrees to pay for the carriage of the goods to the buyer, not cleared for import, and not unloaded from the arriving means of transport. The seller bears the costs and risks involved in delivering the goods to the named place. The buyer is responsible for unloading and import clearance.
Delivered Duty Paid (DDP)
Delivered Duty Paid to the named place of destination on the buyer's side. The named place can be the arrival point or any other location on the buyer's side, although it is usually the buyer's premises. The seller delivers the goods to the buyer, cleared for import, and not unloaded from the arriving means of transport. The seller bears the costs and risks involved in delivering the goods to the named place. The buyer is responsible for unloading.
Note:
For CIP and CIF incoterms, the insurance charge clearly appears in the term definition. For the other incoterms, one party generally covers insurance although it is not part of the term definition. It just depends on the contract agreed between both parties.
These terms are understood as recognised terms and conditions according to which international shipping is governed . For example , FOB is Free on Board , and in this mode the seller is responsible for loading the goods onto the vessel at the port location on the seller's side as well as export clearance . Such clearance is undertaken by logaitics companies and they incur cost which is recovered as THC or Terminal Handling Charge . These charges are no longer allowed to be extracted from the seller or shipper in Bangladesh as per new directives . Bangladesh is the only country known not to allow this . The logistics companies are therefore billing the buyers who are going to deduct the same from the sellers due payment !