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

نوشته 5 Essential Notes about: DDP Incoterms (Delivered Duty Paid) اولین بار در Shipup Magazine. پدیدار شد.

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”

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)
Incoterms: Shipping Guide Every Trader Must Know

نوشته 5 Essential Notes about: DAT Incoterms (Delivered At Terminal) اولین بار در Shipup Magazine. پدیدار شد.

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

نوشته 5 Essential Notes about: FAS Incoterms (Free Alongside Ship) اولین بار در Shipup Magazine. پدیدار شد.

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?

– 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 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”

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

نوشته 5 Essential Notes about: CIP Incoterms اولین بار در Shipup Magazine. پدیدار شد.

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

نوشته 5 Essential Notes about: Free On Board (FOB) Incoterms اولین بار در Shipup Magazine. پدیدار شد.

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

نوشته 5 Essential Notes about: Free Carrier (FCA) Incoterms اولین بار در Shipup Magazine. پدیدار شد.

If you are engaged with foreign sale or purchase, you need to dive deep into the understanding of Incoterms. Incoterms are important in sales contract as they determine the responsibility and liability of shipment. How far the seller is responsible for the shipment and When and Where this responsibility is transferred to the buyer.

The major factors you have to be cautious of in each term are Cost and Risk. When we talk the liability, we are talking about the risk and cost. The place at which the liability is transferred is the point from there onward the buyer is responsible for any cost and risk of the shipment.

When we choose an Incoterms, we choose below items:

• How far along the shipment process we accept the Risk and Cost associated with the shipment?
• When and Where the Risk of the shipment will be transferred to the buyer?
• When and Where the buyer must accept the Cost of the shipment?

The main and frequently used terms are FOB(Free On Board) and EXW(Ex Work). But there are some other terms that might be useful. We will completely explain them in next posts under this category. In the rest of this post we have a few important notes you might find helpful.

Incoterms do not talk about:

• Payment term and ownership of the goods
• Contractual obligations and breach of contract
• Details of packing, stuffing, lashing and transporting of the goods
• …

You have to consider above and other important matters in your sale contract.

Incoterms List:

For Any Mode or Modes of Transport:

• EXW: Ex Work
• FCA: Free Carrier
• CPT: Carriage Paid To
• CIP: Carriage and Insurance Paid To
• DAT: Delivered at Terminal
• DAP: Delivered at Place
• DDP: Delivered Duty Paid

For Sea and Inland Waterway Transport:

• FAS: Free Alongside Ship
• FOB: Free On Board
• CFR: Cost and Freight
• CIF: Cost, Insurance and Freight

For any special question about the Incoterms please contact us or use our live chat at the right bottom of Shipup main pages. In order to find information about the publisher of Incoterms visit ICC(International Chamber of Commerce) website.

نوشته Incoterms : Shipping Guide Every Trader Must Know اولین بار در Shipup Magazine. پدیدار شد.