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Roadmap to Incoterms (1990)

EDITOR: Albert H. Kritzer

The provisions of the CISG on delivery obligations "only appl[y] in the absence of contrary agreement between the parties. In practice, the agreement will spell out the seller's delivery obligations quite precisely by adopting an established shipment term (e.g., FOB, CIF). . . ." Jacob Ziegel, "Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods" (July 1981) 81.

The Convention does not purport to define such terms. Honnold explains: "One difficulty is the need to modernize and revise detailed trade terms more frequently than the life-span one may expect from a basic international convention." John O. Honnold, "Uniform Law and Uniform Trade Terms -- Two Approaches to a Common Goal", in: Horn & Schmitthoff eds, Transnational Law of International Commercial Transactions (Kluwer 1982) 170-171.

A Roadmap is presented to help parties who wish to apply the Convention in tandem with Incoterms. The Roadmap should be used in conjunction with the complete text of Incoterms. Whether or not you refer to Incoterms in your international contract, it is good to have a set of these terms at hand for use as a checklist of items that should not be overlooked. The Roadmap identifies the delivery points, elements of export transportation and other costs and responsibilities associated with Incoterms.

Typical Elements of Export Transportation and Responsibilities Under Incoterms (1990)

 
1. Loading On Vehicle 9. Forwarding Fees
2. Domestic Inland Transportation (including pier delivery) 10. Ship Unloading Costs *
3. Truck Unloading 11. Marine Insurance
4. Wharfage (if not included in ocean rate) 12. War Risk Insurance
5. Pier Handling (if not included in ocean rate) 13. Consular Fees
6. Lighterage 14. Import Duties, Taxes, Fees
7. Ship Loading Costs * 15. Customs Clearance
8. Ocean transportation + Surcharges
(Bunker Fuel, Currency, Congestion) 
16. Foreign Inland Transportation


Incoterms Responsibilities


EXW Export license, 1 through 16 -- Buyer
Ex Works
Risk passes: When goods placed at buyer's disposal at seller's premises



GROUP F (main carriage unpaid)


Incoterms Responsibilities


FCA [any mode of transport] Export license and delivery to carrier at named place -- Seller
Free Carrier Remaining responsibilities -- Buyer
Risk passes: When goods placed in custody of carrier at named place


FAS [transport by ship] 1 through 6 -- Seller
Free Alongside Ship [NB: Buyer responsible for the export license] Export license, 7 through 16 -- Buyer
Risk passes: When goods placed alongside vessel at port of shipment


FOB [transport by ship] Export license, 1 through 7 -- Seller
Free on Board 8 through 16 -- Buyer
Risk passes: When goods pass over ship's rail at port of shipment



FOB [transport by ship] Export license, 1 through 7 -- Seller
Free on Board 8 through 16 -- Buyer
Risk passes: When goods pass over ship's rail at port of shipment
GROUP C (main carriage paid)


Incoterms Responsibilities


CFR [transport by ship] Export license, 1 through 10(a)  -- Seller
Cost & Freight 10(b) through 16 -- Buyer
Risk passes: When goods pass over ship's rail at port of shipment

CIF [transport by ship] Export license, 1-10(a),** 11 -- Seller
Cost Insurance & Freight [Insurance = minimum cover] 10(b),** 12-16 -- Buyer
Risk passes: When goods pass over ship's rail at port of shipment

CPT [any mode of transport] Export license and passage to named point -- Seller
Carriage Paid to Remaining responsibilities -- Buyer
Risk passes: When goods have been handed over for carriage

CIP [any mode of transport] Export license and passage to named point + insurance -- Seller
Carriage & Insurance Paid to [Insurance = minimum cover] Remaining responsibilities -- Buyer
Risk passes: When goods have been handed over for carriage



GROUP D (arrival)


Incoterms Responsibilities

DAF [primarily used for rail transport] Export license and delivery at frontier -- Seller
Import license and Remaining responsibilities -- Buyer
Risk passes: When goods placed at named place of delivery at frontier.

DES [transport by ship] Export license, 1-9, 11, 12 -- Seller
Delivery Ex Ship Import license and 10, 13, through 16 -- Buyer
Risk passes: When goods placed at named place in country of importation.***

DDU [any mode of transport] Export license, import license and 1 through 12, 16 -- Seller
Delivered Duty Unpaid 13 through 15 -- Buyer
Risk passes: When goods placed at named place in country of importation.***

DEQ [any mode of transport] Export license, import license and 1 through 15 -- Seller
Delivered Ex Quay 16 -- Buyer
Risk passes: When goods placed on quay (wharf) at port destination.

DDP [Any mode of transport] Export license, import license and 1 through 16 -- Seller
Delivered Duty paid
Risk passes: When goods placed at named place in country of importation.***

FOOTNOTES

* Ship loading and unloading costs are normally part of the ocean freight for material carried on regular scheduled vessels. Additionally, there is a heavy lift tariff schedule for individual pieces in excess of three to four tons which is expressed as a single combined rate for the loading and unloading, and normally can not be separated. Ship loading and unloading costs may also be subject to "customs of the port" which can represent an exception to normal responsibilities.

** 10(a) = ship's unloading costs (including lighterage and wharfage charges) to the extent included in freight; 10(b) = ship's unloading costs (including lighterage and wharfage charges) that are not included in freight.

*** For DDU and DDP, the precise demarcation of responsibility is dependent upon location of named placed in country of importation.


Pace Law School Institute of International Commercial Law - Last updated Ocotber 5, 1999
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