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Introduction (The incoterms 2010 rules were written to provide standard…
Introduction
The incoterms 2010 rules were written to provide standard solutions for the division of costs, tasks and risks between seller and the buyer in relation to any sale of goods where the contract presupposes that the goods are to be transported from the seller to the buyer
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Under seven Incoterms rules, it is an obligation of the seller to contract for carriage.These ara:
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Cost, Insurance and Freight (CIF)
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Overview
International Commercial Terms (Incoterms) are internatinally recognsed standard trade terms used in sales contracts
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D
The seller must assume most costs, obligations and risks needed to bring the goods to the place of destination
EXW
The seller makes the goods available to be colleted at their premises and the buyer is responsible for all other riks, taxes and duties from that point onwards. This term is commonly used when quoting a price
FCA
The seller gives the goods, cleared for export, to the buyers carrier at a specified place. The seller is responsible for getting them to the specified place of delivery
CPT
The seller pays to transport the goods to the specified destination. Responsibility for the goods transfers to the buyer when the seller passes them to the first carrier
CIP
The seller pays for insurance as well as transport to the specified destination. Responsability for the goods transfers to the buyer when the seller passes them to the first carrier
DAT
The seller pays for transport to a specified terminal at the agreed destination. The buyer is responsible for the cost of importing the goods
DAP
The seller pays for transport to the specified destination, but the buyer pays the cost of importing the goods. The seller takes responsability for the goods until they are ready to be unloadesd by the buyer
DDP
The seller is responsible for delivering the goods to the named destination in the buyers country, including all costs involved
FAS
The seller puts the goods alongside the ship at the specified port they are going to be shipped from. The seller must get the goods ready for export, but the buyer is responsible for the cost and risk involved in loading them
FOB
The seller must get the goods ready for export and load them onto the specified ship. The buyer and seller share the costs and risks when the goods are on board. This term is not used for goods transportted in containers by more than one mode of transport.
CFR
The seller must pay the costs of bringing the goods to the specified port. The buyer is responsable for risks when the goods are loaded onto the ship. This ter is not used for goods transported in containers by more than one mode of transport
CIF
The seller must pay the costs of bringing the goods to the specified port. They also pay for insurance. The buyer is responsible for risks when the goods are loaded onto the ship. This term is not used for goods transported in containers by more than one mode of transport
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NOTE OF INSURANCE
Except for the CIP and CIF Incoterms rules, all the Incoterms rules stipulate by law that the seller and the buyer have no obligation towards the other party to conclude a contract of insurance against the risk of loss of or damage to the goods during the carriage
This absence of contractual obligation to provide for insurance cover is not intended to suggest that the parties have no interest in making such a contract of insurance
CARRIERS LIABILITY, TRANSPORTERS INSURANCE AND CARGO INSURANCE
Carriage is often a shared undertaking with goods being passed from one carrier to another and manipulated by terminal operators, stivadores...
Mareover, the carrier may have made reservations on the transport document when receiving the goods from the consignor(e.g. regarding the packaging)
And last but not lest, the international transport conventions and the laws defining the duties and obligations of the parties to a contract of carriage have limited the liability of the carrier to a maximum amount
IMPORTANT
When a carrier claims that it has insurance, it is often understood that the carrier has contracted an insurance policy covering its mandatory liability under the applicable transport conventin or law
It is important to note that a transport document, although evidence of the contract of carriage, is not evidence of the carriers insurance for its liability to cargo. The carriers insurance is evidenced only by the contract of insurance agreed by the carrier and its insurer
Sellers and buyers should therefore always consider a cargo insurance, covering full damage to the goods while in transit, independent of the liability of the carrier and covering the liability they may incur as merchant
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IN CONCLUSION
Incoterms can make international trade easier but one should consider a number of issues when choosing an incoterm. Incoterms should be used only for sales of goods and not for services.
As mentioned above, Incoterms offer parties an opportunity to clarify their roles by using internationally accepted contractual standards
The FCA, FAS and FOB rules also allow for the possibility that the seller contracts for carriage at the risk and expense of the buyer
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Although the new Incoterms 2020 rules will become available for use as of December, 2020, Incoterms 2010 rules continue to be available for one more year.
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It is very important to keep in mind at all times that the contract of sale and the contract of carriage are separate contracts involving different parties as well as an entirely different set of obligations
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