incoterms 2018 – Shipup Magazine

5 Essential Notes about: DDP Incoterms (Delivered Duty Paid)

jaber ebrahimi — Mon, 22 Oct 2018 11:30:26 +0000

DDP Incoterms means that the seller delivers the goods cleared for import ready for unloading on the means of transport at the named place of destination. Under this term the seller bears all the risk and cost up to the named place of destination. The seller arrange all the task and the entire shipment to deliver the goods to the buyer.

1. Is the DDP Incoterms useful in all over the world?

– In some countries only the importer companies can clear the goods for import. In such countries freight forwarders can not do custom clearance. The seller to this countries will face many problems for custom clearance under DDP Incoterms. It is recommended to use the DAP Incoterms term instead.

2. Which party is responsible for unloading the goods from the means of transport under DDP Incoterms?

– The buyer is only responsible for unloading the goods from the arriving means of transport at the named place of destination. The seller arrange the entire shipment and deliver the goods ready for unloading to the buyer.

3. Which costs are advisable to be excluded from the seller account under DDP incoterms?

– It may be advisable to exclude the payment of any charges relating to the “internal” fiscal system in the country of import (such as VAT levied upon import) from the seller’s obligation to pay. The charges intended to be excluded should then be identified in conjunction with the DDP term in the contract of sale, for example, by using a phrase such as “DDP VAT unpaid”.

4. What are the consequences of buyer’s failure to give notice?

– While the seller under EXW and all D-terms can transfer the risk by his own act of placing the goods at the buyer’s disposal, he may be prevented from doing so by the buyer’s failure to give notice.
– The buyer must give the seller sufficient notice about the time within an agreed period and/or the point of taking delivery within the named place of destination.
– The failure to perform these tasks results in a premature passing of the risk: it is not acceptable that the buyer should be able to delay the delivery and the passing of the risk longer than contemplated when the contract of sale was made. Therefore, his failure to notify will cause the risk to pass “from the agreed date or the expiry date of the agreed period for delivery”

5. What is the difference between importing under DDP Incoterms or domestic sourcing?

– When you get a quotation based on DDP term you can find the total cost of a product from the factory floor to your door. Accordingly you can evaluate whether to source domestically or import.

To read the full obligation of the seller and the buyer in DDP Incoterms read the book “ICC Guide to Incoterms 2010”

Other useful links:
Free On Board (FOB) Incoterms
Free Carrier (FCA) Incoterms
Ex Works (EXW) Incoterms
CPT Incoterms (Carriage Paid To)
CIP Incoterms (Carriage and Insurance Paid To)
CFR Incoterms (Cost and Freight)
CIF Incoterms (Cost, Insurance and Freight)
FAS Incoterms (Free Alongside Ship)
DAT Incoterms (Delivered At Terminal)
Incoterms: Shipping Guide Every Trader Must Know

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5 Essential Notes About: DAP Incoterms (Delivered At Place)

jaber ebrahimi — Mon, 01 Oct 2018 11:30:21 +0000

DAP Incoterms means that the seller delivers the goods at the buyer disposal ready for unloading at the named place of destination. The seller is responsible and liable for any cost and risk up to the named place of delivery. The buyer must take the responsibility from that point onward.

1. Who is responsible for unloading the goods from arriving vehicle at the named place of destination?

– Under DAP Incoterms the buyer is responsible and pays for unloading the goods at the named place of destination. Under DAT Incoterms the seller is responsible and liable for unloading the goods at the named terminal.

2. When to use the DAP Incoterms?

– Under this term the seller must take most of the risk of the shipment. As a seller to secure a high potential it is recommended to use this term in the first contracts. As a buyer it is recommended to use this term when there is a high risk in purchasing from a new supplier.

3. Must the seller arrange the import custom formalities in the import country under DAP Incoterms?

– Under this term the seller arrange every step except the import custom formalities. The seller almost does every task in import country up to the named place of delivery except the custom clearance.

4. What is the diferences between DAT and DAP Incoterms?

– There is two main differences. One is that in DAT the goods must be delivered at named terminal while in DAP at the name place of destination not terminal. The second difference is the unloading charges. If the terminal is selected as the named place, DAP is exactly the same as DAT, excepting the seller pays for unloading. the

5. Why EXW Incoterms and D-terms are like each other in delivery?

– The seller transfer the risk by placing the goods at the buyer’s disposal under EXW and all D-terms. It is highly important that the both parties well specify the time and point for delivery in place of destination.

To read the full obligation of the seller and the buyer in DAP Incoterms read the book “ICC Guide to Incoterms 2010”

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5 Essential Notes about: DAT Incoterms (Delivered At Terminal)

jaber ebrahimi — Wed, 26 Sep 2018 11:30:03 +0000

DAT Incoterms means that the seller delivers the goods, once unloaded from the arriving means of transport, placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes any place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal.

1. Which party must arrange the carriage under DAT Incoterms?

– The seller must contract for the carriage up to the named terminal or agreed place of destination. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

2. Which party is responsible for unloading the goods at the named place of destination under DAT Incoterms?

– The seller is responsible for unloading the goods at the named terminal or agreed place of destination. After unloading, all the risks and costs transfers to the buyer account.

3. When it is recommended to use DAT Incoterms?

– When the parties are stranger and don’t have any agent in other country, DAT Incoterms are recommended. It is mainly because that each party arrange the custom formalities in his own country. The seller also contract for the carriage to send the goods to the buyer.

4. Where is the place for transferring the risks and costs from the seller to the buyer?

– The risk of loss of or damage to the goods is transferred from the seller to the buyer when the seller has fulfilled his delivery obligation as explained in above questions.

5. When should we use other D terms instead of DAT incoterms?

– If the parties intend the seller to bear the risks and costs involved in transporting and handling the goods from the terminal to another place, then the DAP or DDP rules should be used.

To read the full obligation of the seller and the buyer in DAT Incoterms read the book “ICC Guide to Incoterms 2010”

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5 Essential Notes about: CIF Incoterms (Cost, Insurance & Freight)

jaber ebrahimi — Mon, 24 Sep 2018 11:30:20 +0000

CIF Incoterms means that the seller delivers the goods on board of the vessel. In addition to cost and freight to destination port, the seller must contract for the insurance. However, the risk of loss or damage during the carriage is for the buyer account.

It is highly recommended to read the post about CFR Incoterms on Shipup Blog in addition to current post.

1. Who is responsible for Contacting the carriage and Insurance in CIF Incoterms?

– The seller must contract for the carriage to the named place at destination. He also is obliged to contract for the insurance cover against the buyer risk of loss or damage during the carriage. The seller is required to obtain insurance only on minimum cover under CIF Incoterms.

2. What is the main difference between CFR and CIF Incoterms and which one is preferable?

– The only difference is the insurance. Under CIF term the seller is obliged to contract for the insurance against the goods.

– As all the risk transfers to the buyer once the goods are loaded, CIF is recommended.

3. Which type of insurance is mandatory in CIF Incoterms?

– The seller is only required to provide the insurance on minimum coverage. If the buyer expect more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

4. How about the duration of insurance Under CIF Incoterms?

– The duration of the insurance cover must coincide with the carriage and must protect the buyer from the moment he has to bear the risk of loss of or damage to the goods (i.e., from the moment the goods are loaded on board at the port of shipment). It must extend until the goods arrive at the agreed port of destination.

5. How much is the amount of insurance in CIF Incoterms?

– The amount of the insurance should correspond to the price provided in the contract, plus 10 per cent.

To read the full obligation of the seller and the buyer in CIF Incoterms read the book “ICC Guide to Incoterms 2010”

Other useful links:
Free On Board (FOB) Incoterms
Free Carrier (FCA) Incoterms
Ex Works (EXW) Incoterms
CPT Incoterms (Carriage Paid To)
CIP Incoterms (Carriage and Insurance Paid To)
CFR Incoterms (Cost and Freight)
FAS Incoterms (Free Alongside Ship)
Incoterms: Shipping Guide Every Trader Must Know

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5 Essential Notes about: FAS Incoterms (Free Alongside Ship)

jaber ebrahimi — Mon, 10 Sep 2018 11:30:29 +0000

FAS Incoterms (Free Alongside Ship) means that the seller must place the goods alongside the ship nominated by the buyer. The seller is obliged to arrange all the steps in export country up to alongside the ship. The buyer have to arrange the rest. This terms is to be used only for sea or inland waterway shipments.

1. Which shipments FAS incoterms is suited for?

– FAS Incoterms is designed for bulk and break bulk shipments. It is highly recommended not to use this term in containerized shipments.

2. Which party is responsible for loading the goods onboard?

– Once the seller place the goods alongside the ships, any further risks and costs in loading the goods onboard are for the account of the buyer.

3. What is differences between FOB and FAS Incoterms?

– The only difference in FOB and FAS is that in FOB the seller is responsible and liable for loading the goods onboard. In FAS term, the seller only delivers the goods alongside the nominated ship. From that point onward, all the risks and costs are for the buyer account.

4. Which party contract for the carriage in FAS Incoterms?

– The buyer is obliged to contract for the carriage from the nominated port of shipment. This term is used mostly for bulk shipments then bulk carriers are used for this shipments. Most of the bulk carrier have cranes for loading the goods onboard. Maybe that is why this terms is well suited for bulk shipments.

5. Why parties must well coordinate about time and location of loading?

– As in wharf available time is restricted and also costly, it is highly recommended that the parties clearly specify the time and location of loading. Also it is noticeable that all the facilities must be provided prior to loading process.

To read the full obligation of the seller and the buyer in FAS Incoterms read the book “ICC Guide to Incoterms 2010”

Other useful links:
5 Essential Notes about: Free On Board (FOB) Incoterms
5 Essential Notes about: Free Carrier (FCA) Incoterms
5 Essential Notes about: Ex Works (EXW) Incoterms
Incoterms: Shipping Guide Every Trader Must Know

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5 Essential Notes about: CIP Incoterms

jaber ebrahimi — Wed, 05 Sep 2018 11:30:35 +0000

Carriage and Insurance Paid To (CIP Incoterms) means that the seller delivers the goods to the carrier at an agreed place (if any such place is agreed between the parties). The seller must contract and pay the costs of carriage to bring the goods to the named place of destination. The seller contracts for insurance cover against the buyer’s risk of loss or damage to the goods during the carriage.

It is highly recommended to read the post about CPT Incoterms on Shipup Blog in addition to current post.

1. Who is responsible for Contacting the carriage and Insurance in CIP Incoterms?

2. What is the main difference between CPT and CIP Incoterms and which one is preferable?

– The only difference is that under CIP the seller must obtain and pay for cargo insurance. This is particularly important for the buyer, since under CIP the risk of loss of or damage to the goods will pass from the seller to the buyer when the goods have been delivered to the carrier at the place of delivery.

3. How about the duration of insurance Under CIP Incoterms?

– The insurance must cover the buyer risks and protect him from the moment the goods have been delivered to the carrier at the place of delivery. It must extend until the goods arrive at the agreed place of destination or an agreed point within that place.

4. Which type of insurance is mandatory in CIP Incoterms?

– The seller is obliged to obtain cargo insurance at its own expenses at least with the minimum cover as provided by Clauses (C) of the Institute Cargo Clauses (LMA/IUA) or any similar clauses. Some particular risks require additional insurance. If the buyer requests it, the seller must arrange this additional cover at the buyer’s expense. For example, insurance against the risks of war, strikes, riots and civil commotion – if this cover can possibly be arranged.

5. How much is the amount of insurance in CIP Incoterms?

– The amount of the insurance should correspond to the price provided in the contract, plus 10 per cent. The additional 10 per cent is intended to cover the average profit which buyers of goods expect from the sale. The insurance should be provided in the same currency as stipulated in the contract for the price of the goods. Consequently, if the price of the goods is to be paid in convertible currency, the seller may not provide insurance in other than convertible currency

To read the full obligation of the seller and the buyer in CIP Incoterms read the book “ICC Guide to Incoterms 2010”

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5 Essential Notes about: CPT Incoterms (Carriage Paid To)

jaber ebrahimi — Mon, 03 Sep 2018 11:30:57 +0000

Carriage Paid To (CPT Incoterms) means that the seller delivers the goods at agreed place in origin country. The seller is obliged to contract for the carriage of the goods to named destination and pay its costs. it is used in all mode of transports. Costs and Risks of the shipment transfer at different places under this term.

1. Who is responsible for arranging the shipment from named place of delivery to named destination?

– The seller is responsible to contract for the carriage, unless otherwise agreed, “on usual terms” and “by the usual route”. The seller is obliged to pay all of shipment costs. Although the seller fulfills his delivery obligation upon handing over the goods for carriage, He is obliged to pay for the carriage up to the agreed point in the country of destination.

2. What if the parties do not agree on a specific place in named destination under CPT Incoterms?

– If a specific point is not agreed or is not determined, the seller may select the point the point at the named place of destination that best suit its purpose.

3. Who must pay the loading costs at delivery place and unloading costs at named destination?

– Obviously the loading costs at delivery place must be paid by the seller. The seller is not entitled to recover unloading at the named place of destination such costs from the buyer. Unless otherwise is agreed between the parties.

4. When and Where cost and risk of the shipment transfers to the buyer under CPT Incoterms?

– This term has two critical points, because risk passes and costs are transferred at different places. The place of delivery, where the risk passes to the buyer. The named place of destination to which the seller must contract for the carriage and pay its costs.

5. Which place must be mentioned after Carriage Paid To CPT incoterms in sale contract?

– Use the named place of destination following to carriage Paid To (CPT) term. Be sure to specify the named place of delivery elsewhere in the contract.

To read the full obligation of the seller and the buyer in FOB Incoterms read the book “ICC Guide to Incoterms 2010”

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5 Essential Notes about: Free On Board (FOB) Incoterms

jaber ebrahimi — Fri, 31 Aug 2018 11:30:25 +0000

Free On Board (FOB) as a most frequently used Incoterms globally, is only applied to sea and waterway shipments. In plain English FOB means, the seller will be free of costs and risks of shipment by loading the goods on board of the nominated vessel. In other words, once the shipment is loaded on board, all liability and responsibility transfers to the buyer.

1. Which party is obliged to pay the local charges (THC, BL fee, …) in Free On Board (FOB)?

– All the charges in origin is for the account of the seller. So the seller must pay all the local charges in the port of load. Local charges are Terminal Handling Charges (THC), Bill of lading fee, Load Off Load On(LOLO) charges and so on.

2. What if the differences between FOB and CFR?

– As you well know, the only difference between the FOB and CFR are the cost of the ocean freight. In FOB the buyer will make the contract of the carriage and pay the ocean freight from to the port of destination. In CFR the seller has to pay the freight to the carrier.

3. Is the Free On Board (FOB) preferable to Cost and Freight (CFR)?

– It depends on some factors like total freight of the shipment, risk of the shipment and possibility to find competitive freight rate.
– If total freight of your shipment is considerable, it is advisable for the buyer to use the FOB term. Because in FOB term the buyer pay the freight charges after the arrival the goods at the final destination.
– If the risk of shipment is high like reefer shipments, it is highly better for the buyer to make the contract of the carriage. As in both CFR and FOB the buyer bears all risks of shipment after loading on board, they are likely to make more accurate contract of carriage.
– If the seller can find better freight rate, it is advisable to use CFR or CIF term instead of FOB.

4. What are other costs that the seller is obliged to pay?

– In addition to local charges mentioned in question 2, there might be other charges in export country. Document fees, Entry Summary Declaration (ENS), Licence fee, Customs clearance, Transport costs, Telex release and Any other local charges.

5. What is Free On Board or “FOB Destination”?

– FOB destination means that the title for the goods transfers to the buyer upon delivery at the destination port. Although ocean freight will be paid by the buyer, the seller is responsible if anything happens to the goods during the journey to the destination port.

To read the full obligation of the seller and the buyer in FOB Incoterms read the book “ICC Guide to Incoterms 2010”

Other useful links:
5 Essential Notes about: Free Carrier (FCA) Incoterms
5 Essential Notes about: Ex Works (EXW) Incoterms
Incoterms: Shipping Guide Every Trader Must Know

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5 Essential Notes about: Free Carrier (FCA) Incoterms

jaber ebrahimi — Wed, 29 Aug 2018 11:30:06 +0000

Free Carrier (FCA) means that the seller delivers the goods at its own premises or another named place to the buyer or carrier or any other person nominated by the buyer. This delivery place is in the seller country and usually its premises. So a difference between this term and Ex Works (EXW) is the export formalities that in FCA is for the account of the seller with all costs and risks.

1. What is the main differences between Free Carrier (FCA) and Ex Works (EXW)?

– There are two main differences. The first one is that in FCA the seller is obliged to clear the goods for export, at its own costs and risks. The second difference is about the loading the goods on collecting vehicle.

2. Should the delivery place be specified in Free Carrier (FCA)?

– It is highly advisable to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
– If no specific point is specified, the seller may select the point that best suits to deliver.

3. Is the seller responsible for loading goods at any named place?

– No. It depends on the named place for delivery as below:
a) if the named place is the seller’s premises, the seller must loads the goods on the means of transport provided by the buyer.
b) In any other case, the seller must place the goods at the disposal of the carrier or another person nominated by the buyer on the means of transport ready for unloading.

4. How the risk of the shipment is transferred in Free Carrier (FCA)?

– The buyer bears all risks of loss of or damage to the goods from the time they have been delivered.
– If a) the buyer fails to notify the nomination of a carrier or another person or to give notice to the seller;
or b) the carrier or person nominated by the buyer fails to take the goods into its charge, then, the buyer bears all risks of loss of or damage to the goods:
(i) from the agreed date, or in the absence of an agreed date,
(ii) from the date notified by the seller within the agreed period; or, if no such date has been notified,
(iii) from the expiry date of any agreed period for delivery,
“provided that the goods have been clearly identified as the contract goods”.

5. How and When the Buyer must notice the seller?

– The buyer must notify the seller of:
a) the name of the carrier or another person nominated within sufficient time as to enable the seller to deliver the goods in accordance with that article;
b) where necessary, the selected time within the period agreed for delivery when the carrier or person nominated will take the goods;
c) the mode of transport to be used by the person nominated; and
d) the point of taking delivery within the named place.

To read the full obligation of the seller and the buyer in FCA Incoterms read the book “ICC Guide to Incoterms 2010”

Other useful links:
Incoterms: Shipping Guide Every Trader Must Know

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5 Essential Notes about: Ex Works (EXW) Incoterms

jaber ebrahimi — Mon, 27 Aug 2018 11:30:10 +0000

Ex Works (EXW) means that the seller delivers the goods at the disposal of the buyer at a named place or seller’s premises( i.e. factory, warehouse, …). In other words the buyer arrange the shipment from the seller premises to the final destination. It is one of the frequently used Incoterms specially in containerized and full truck shipments.

1. Which party is responsible for loading the goods at delivery place?

– There is no obligation for the seller for loading the goods on collecting vehicle. If the seller does loads, then its at the buyer risk and costs.
– Usually, the seller assist the buyer for loading like bringing the goods onto a ramp or using a fork-lift truck for loading. If the buyer intends that the seller should be obliged to assist, this must be clear by adding “loaded upon departing vehicle” after EXW in the contract of sale.

2. Should the delivery place be specified in Ex Works (EXW)?

– Its highly advised that the point within the named place of delivery be specified as clearly as possible. Since it is the point exactly at which the liability and responsibility of shipment will be transferred.
– If no specific point is specified, the seller may select the point that best suits to deliver. This delivery must be arranged on agreed date or on within the agreed period.

3. What about risks of inadequate packing in Ex Works (EXW) Incoterms?

– Although all the risks and costs are passed to the buyer after placing the goods at the buyer disposal at the named place, it does not include damages or loses caused by inadequate packing or marking of the goods.
– The seller must, on its own expenses, package the goods in the manner appropriate for their transport. Packing is to be marked appropriately. The buyer should request the seller to pack thee goods appropriate to its type of transport as the seller may not know the mode of transport.
– It is advisable also to specify the required packing in the contract of sale.

4. What if the buyer don’t take the delivery in Ex Works (EXW) named place?

– The buyer must take delivery of the goods when they have been placed at his disposal at the agreed time and place. His failure to do so will not relieve him from his obligation to pay the price and could result in a premature passing of the risk of loss of or damage to the goods or make him liable to pay additional costs.

5. What if the goods are not identified as the contract defines?

– The risk, however, cannot pass until the goods have been duly identified as the contract goods. If the goods are unascertained, i.e. goods of a certain kind which the seller will deliver to his various buyers, passing of risk occurs only when the goods are “clearly identified as the contract goods”.

To read the full obligation of the seller and the buyer in EXW Incoterms read the book “ICC Guide to Incoterms 2010”

Other useful links:
Incoterms: Shipping Guide Every Trader Must Know

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