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Incoterms
2000
Incoterms
2000 are worldwide accepted commercial terms defining the
respective roles of the buyer and seller in the arrangement
of transportation and other responsibilities and clarify
when the ownership of the merchandise takes place. They
are used in conjunction with a sales contract or other method
of transacting the deal.
EX-Works
One of the simplest and most basic shipment arrangements
places the minimum responsibility on the seller with greater
responsibility on the buyer. In an EX-Works transaction,
goods are basically made available for pickup at the shipper/seller's
factory or warehouse and "delivery" is accomplished
when the merchandise is released to the consignee's freight
forwarder. The buyer is responsible for making arrangements
with their forwarder for insurance, export clearance and
handling all other paperwork.
FOB
(Free On Board)
One of the most commonly used-and misused-terms, FOB means
that the shipper/seller uses his freight forwarder to move
the merchandise to the port or designated point of origin.
Though frequently used to describe inland movement of cargo,
FOB specifically refers to ocean or inland waterway transportation
of goods. "Delivery" is accomplished when the
shipper/seller releases the goods to the buyer's forwarder.
The buyer's responsibility for insurance and transportation
begins at the same moment.
FCA
(Free Carrier)
In this type of transaction, the seller is responsible for
arranging transportation, but he is acting at the risk and
the expense of the buyer. Where in FOB the freight forwarder
or carrier is the choice of the buyer, in FCA the seller
chooses and works with the freight forwarder or the carrier.
"Delivery" is accomplished at a predetermined
port or destination point and the buyer is responsible for
Insurance.
FAS (Free Alongside Ship)
In these transactions, the buyer bears all the transportation
costs and the risk of loss of goods. FAS requires the shipper/seller
to clear goods for export, which is a reversal from past
practices. Companies selling on these terms will ordinarily
use their freight forwarder to clear the goods for export.
"Delivery" is accomplished when the goods are
turned over to the Buyers Forwarder for insurance and transportation.
CFR (Cost and Freight)
This term formerly known as CNF (C&F) defines two distinct
and separate responsibilities-one is dealing with the actual
cost of merchandise "C" and the other "F"
refers to the freight charges to a predetermined destination
point. It is the shipper/seller's responsibility to get
goods from their door to the port of destination. "Delivery"
is accomplished at this time. It is the buyer's responsibility
to cover insurance from the port of origin or port of shipment
to buyer's door. Given that the shipper is responsible for
transportation, the shipper also chooses the forwarder.
CIF (Cost, Insurance and Freight)
This arrangement is similar to CFR, but instead of the buyer
insuring the goods for the maritime phase of the voyage,
the shipper/seller will insure the merchandise. In this
arrangement, the seller usually chooses the forwarder. "Delivery"
as above, is accomplished at the port of destination.
CPT (Carriage Paid To)
In CPT transactions the shipper/seller has the same obligations
found with CIF, with the addition that the seller has to
buy cargo insurance, naming the buyer as the insured while
the goods are in transit.
CIP (Carriage and Insurance Paid To)
This term is primarily used for multimodal transport. Because
it relies on the carrier's insurance, the shipper/seller
is only required to purchase minimum coverage. When this
particular agreement is in force, Freight Forwarders often
act in effect, as carriers. The buyer's insurance is effective
when the goods are turned over to the Forwarder.
DAF (Delivered At Frontier)
Here the seller's responsibility is to hire a forwarder
to take goods to a named frontier, which usually a border
crossing point, and clear them for export. "Delivery"
occurs at this time. The buyer's responsibility is to arrange
with their forwarder for the pick up of the goods after
they are cleared for export, carry them across the border,
clear them for importation and effect delivery. In most
cases, the buyer's forwarder handles the task of accepting
the goods at the border across the foreign soil.
DES (Delivered Ex Ship)
In this type of transaction, it is the seller's responsibility
to get the goods to the port of destination or to engage
the forwarder to the move cargo to the port of destination
uncleared. "Delivery" occurs at this time. Any
destination charges that occur after the ship is docked
are the buyer's responsibility.
DEQ (Delivered Ex Quay)
In this arrangement, the buyer/consignee is responsible
for duties and charges and the seller is responsible for
delivering the goods to the quay, wharf or port of destination.
In a reversal of previous practice, the buyer must also
arrange for customs clearance.
DDP (Delivered Duty Paid)
DDP terms tend to be used in intermodal or courier-type
shipments. Whereby, the shipper/seller is responsible for
dealing with all the tasks involved in moving goods from
the manufacturing plant to the buyer/consignee's door. It
is the shipper/seller's responsibility to insure the goods
and absorb all costs and risks including the payment of
duty and fees.
DDQ (Delivered Duty Unpaid)
This arrangement is basically the same as with DDP, except
for the fact that the buyer is responsible for the duty,
fees and taxes.
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