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Roadmap to Incoterms (2000)

EDITOR: Albert H. Kritzer. Revised by Allison E. Butler.

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.

Practical Application: Use of Incoterms should include direct reference to "(INCOTERMS 2000)." A Roadmap to Incoterms (1990) can be found at <http://cisgw3.law.pace.edu/cisg/incoterms.html>.

Typical Elements of Export Transportation and Responsibilities Under Incoterms (2000)

1. Loading On Vehicle 9. Forwarding Fees
2. Domestic Inland Transportation (including pier delivery) 10. Ship Unloading Costs [1]
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 [2] 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 transportation] Export license and delivery to carrier at Seller's premises - Seller.
Seller responsible only for loading the goods and not responsible for inland freight.[3]
Risk passes: When goods delivered to carrier at the seller's premises

FAS [transport by ship] Export License, 1 and 7 -Seller
Free Alongside Ship [NB: Seller responsible for the export license][4] 7-16 - 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


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),[5] 11 - Seller
Cost Insurance & Freight [Insurance = minimum cover]10(b),[6] 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 to carrier

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 to carrier


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. [7]

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 are placed at the disposal of the buyer at named place in country of importation. [8]

DEQ [any mode of transport][9] Export license and 1 through 9 - Seller
Delivered Ex Quay Import license and 10 through 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 are placed at the disposal of the buyer at named place in country of importation.[10]

FOOTNOTES

1. 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.

2. Id.

3. If the named place is anywhere other than the seller's premises, or FCA Named Place (International Carrier) than the seller is responsible for inland freight and loading of goods.

4. Under Incoterms 2000, it is the seller's responsibility to clear the goods for export as per FAS term. This is a reversal from previous Incoterms versions that required the buyer to arrange for export clearance.

5. 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.

6. Id.

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

8. Id.

9. Under DEQ term of Incoterms 2000, it is buyer's responsibility to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. This is reversal from previous Incoterms versions that required the seller to arrange for import clearance.

10. 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 December 12, 2005
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