TermsIncoterms2010 is denoted by a three-letter abbreviation, 11 terms are defined in total, 7 of them are applicable to any type of transport of the main transport, the remaining 4 terms are applicable exclusively to maritime transport and transport of territorial waters. All terms are classified into 4 categories E, F, C, D. These letters are the basic categories or conditions and denote the most important, namely the point of transition of the obligation for the goods from the seller to the buyer and establish the moment of transition of the risk of accidental death or damage to the goods. Next, let's look at these categories, click on the terms below and a detailed description will open.
"C" - the main carriage is paid by the seller (main carriage paid), the transfer of obligations is at the arrival terminals for the main carriage. The seller is obliged to conclude a contract for the carriage of goods, but without assuming the risk of accidental loss or damage to the goods. CFR,CIF,freight. The buyer pays for cargo insurance. The risks are transferred at the time of delivery of the cargo to the first carrier.
When using this term, the seller is obliged to conclude a contract of carriage and bear the transportation costs necessary to deliver the goods to the agreed destination. When using the term CPT, the seller transfers the goods to the carrier or another person nominated by the seller at an agreed place (if such a place is agreed by the parties and fulfills its delivery obligation.
The term contains two critical points, since risk and costs are transferred in two different places.
In accordance with the terms of cargo insurance of the Association of London Insurers, insurance is carried out with "minimum coverage" under Condition "C", with "average coverage" under Condition "B" and with "widest coverage" under Condition "A". Since in the sale of goods under the CIF term, the buyer may want to sell the goods en route to a subsequent buyer, who in turn may want to resell the goods again, it is impossible to know the amount of insurance suitable for such subsequent buyers, and thus, traditionally, the minimum CIF insurance is chosen, which, if necessary, allows the buyer to demand from seller of additional insurance. Minimum insurance, however, is not suitable for the sale of industrial goods, where the risk of theft, theft or improper handling or storage of goods requires more than insurance under Condition "C". Since the term CIP, unlike the term CIF, is normally used for the sale of industrial goods, it would be more expedient to approve the widest coverage of CIP insurance than the minimum CIF insurance. But changing the seller's insurance obligation under the terms CIF and CIP would lead to confusion, and thus both conditions reduce the seller's insurance obligation to a minimum insurance. According to the CIP term, it is especially important for the buyer to know the following: if additional insurance is needed, he must agree with the seller that the latter will provide additional insurance or take on extended insurance himself.
There are also certain cases where the buyer may want to receive more protection than is provided under Condition "A" of the above-mentioned Association, for example, insurance against war, riots, civil unrest, strikes or other work disruptions. If he wishes the seller to provide such insurance, he must provide him with the appropriate instructions, in which case the seller should, if possible, provide such insurance.
Since the cost-sharing point is fixed in the destination country, "C" terms are often mistakenly considered arrival contracts, in which the seller bears all risks and costs until the goods actually arrive at the agreed point. It should be noted that the "C" terms are of the same nature as the "F" terms in the sense that the seller fulfills the contract in the country of shipment or dispatch. Thus, sales contracts in accordance with "C" terms, like contracts under "F" terms, fall into the category of shipping contracts. The nature of shipping contracts stipulates that, while the usual transportation costs for the transportation of goods along the usual route and in the usual way to the agreed place must be paid by the seller, the buyer bears the risks of loss or damage to the goods, as well as additional costs arising from events occurring after the goods have been properly delivered for transportation. Thus, "C"-terms differ from all other terms in that they contain two "critical" points. One indicates the point to which the seller must arrange transport and bear the costs according to the contract of carriage, and the other serves to transfer risks. For this reason, maximum caution should be observed when adding obligations to the seller that are imposed on him after the risk has passed beyond the above "critical" point.
The essence of the "C" terms is the release of the seller from any further risks and costs after he has duly fulfilled the contract of sale by concluding a contract of carriage, handing over the goods to the carrier and providing insurance in accordance with CIF and CIP terms.
"C" - terms as terms of shipping contracts can be illustrated by the widespread use of documentary credits as the preferred payment method used in such terms. In cases where the parties to the contract of sale have agreed that the seller will receive payment upon submission to the bank of the agreed loading documents for a documentary loan, it would be completely contrary to the main purpose of a documentary loan if the seller bore further risks and costs after receiving payment for documentary loans or after shipment and dispatch of the goods. Of course, the seller will have to bear all the costs of the contract of carriage, regardless of whether it is paidcargoin advance, after shipment or must be paid at the destination ( With the development of the world transport system, the concept of freight has spread to air (English air freight) and land (English land freight) transport.
With the development of the world transport system, the concept of freight has spread to air (English air freight) and land (English land freight) transport." >freightto be paid by the consignee at the port of destination); however, additional costs that may arise as a result of events that took place after shipment and dispatch are necessarily paid at the expense of the buyer. If the seller has to secure a contract of carriage that includes payment of duties, taxes and other charges, such costs, of course, are borne by the seller, to the extent that they are attributed to him according to the contract.
This is clearly stated in article A.6. of all "C"-terms. If there are usually several contracts of carriage involving the reloading of goods at intermediate points to reach the agreed destination, the seller must pay all these costs, including any costs incurred when reloading the goods from one vehicle to another. However, ifcarrierused his rights - according to the contract of carriage - to avoid unforeseen circumstances, then all additional costs arising from this will be attributed to the buyer, since the seller's obligation is limited to securing the usual contract of carriage. It often happens that the parties to the contract of sale wish to clearly define to what extent the seller must provide for the contract of carriage, including unloading costs. Since such costs are usually covered by freight when the goods are transported on ordinary shipping lines, the contract of sale often provides that the goods are transported in this way or at least in accordance with the "conditions of carriage of goods by scheduled vessels".
After the CFR and CIF terms, it is not recommended to add the words "including unloading if in the relevant field of trade the meaning of the abbreviation is not clearly understood and is not accepted by the Contracting Parties, or under the relevant law or custom of trade. In particular, the seller should not - and he could not - without changing the very nature of the "C" terms, take any obligations regarding the arrival of the goods at the destination, since the risk of delay during transportation is borne by the buyer. Thus, any obligation regarding the time must necessarily relate to the place of shipment or dispatch, for example, "shipment (dispatch) no later than ...". The contract, for example, "CFR Vladivostok no later than ..." is actually incorrect and thus can cause all kinds of interpretations. It can be assumed that the parties meant either that the goods should arrive in Vladivostok on a certain day, and in this case the contract is not a shipment contract, but an arrival contract, or, in another case, that the seller must ship the goods at such a time that the goods arrive in Vladivostok before a certain date, except cases of transportation delays due to unforeseen events.
In the trade of goods, it happens that the goods are purchased when they are at sea, and in such cases, the word "afloat" is added after the terms of trade. Since in these cases, in accordance with CFR and CIF terms, the risk of loss or damage to the goods has already passed from the seller to the buyer, difficulties of interpretation may arise. One possibility is to preserve the usual meaning of the CFR and CIF terms regarding the distribution of risk between the seller and the buyer, namely that the risk passes after shipment: this would mean that the buyer may be forced to assume the consequences of events that already took place at the time when the contract of sale entered into force.
Another possibility to clarify the moment of risk transfer is the time of conclusion of a new purchase and sale agreement. The first possibility is more real, since it is usually impossible to determine the condition of the goods during transportation. For this reason, Article 68 of the 1980 UN Convention on Contracts for International Trade in Goods (CISG) provides that "if circumstances so indicate, the risk is assumed by the buyer from the moment the goods are handed over to the carrier who issued the documents included in the contract of carriage." However, this rule has an exception when "the seller knew or should have known that the goods were lost or damaged, and did not inform the buyer about it." Thus, the interpretation of CFR and CIF terms with the addition of the word "afloat" will depend on the law applicable to this contract of sale.
Articles A.8. of the collection of Incoterms tend to ensure that the seller provides the buyer with "proof of delivery", it should be emphasized that the seller fulfills this requirement by providing "ordinary" evidence. According to the terms CPT and CIP it will be a "normal transport document" and according to the terms CFR and CIF it will bebill of ladingor a sea waybill. Transport documents must be "clean", which means that they must not contain reservations or instructions stating the poor condition of the goods or packaging. If such reservations or indications appear in a document, it is considered "unclean" and is not accepted by banks in documentary credit transactions. However, it should be noted that a transport document, even if it does not contain such reservations or indications, usually does not provide the buyer with irrefutable proof against the carrier that the goods were shipped in accordance with the terms of the contract of sale. Usually, the carrier in the standard text on the first page of the transport document refuses to accept responsibility for information about the goods, indicating that the details included in the transport document are only statements of the shipper. According to most applicable laws and principles, the carrier must at least use reasonable means to verify the accuracy of the information, and his failure to do so may make him liable to the consignee. However, in container trade, the carrier has no means of checking the contents of the container, unless he himself was responsible for loading the container.
"D" - arrival, transfer of obligations from the buyer, full delivery (arrival). The seller bears all shipping costs and assumes all risks until the goods are delivered to the destination countryTHAT,DAP,DDP. The terms are different in nature from the "C" terms, since according to the "D" terms, the seller is responsible for the arrival of the goods at the agreed place or destination at the border or in the country of import. The seller is obliged to bear all the risks and costs of delivering the goods to this place. Thus, the "D"-terms mean arrival contracts, while the "C"-terms speak of shipment contracts. In accordance with the "D" terms, with the exception of DDP, the seller is not obliged to deliver goods cleared for import in the destination country.
In accordance with the DDP term, the seller delivers when the goods are provided to the buyer, cleared of customs duties required for importation, on the arrived vehicle, ready for unloading at the named destination, thus imported into the country of import. In countries where customs clearance can be difficult and time-consuming, it may be risky for the seller to undertake to deliver the goods outside the customs clearance point. In most countries, it is now more appropriate for a party permanently residing in the country concerned to carry out customs clearance and pay duties and other fees. Although in accordance with Articles B.5. and B.6. of the termDDUthe buyer must bear additional risks and costs that may arise from the inability for him to fulfill his obligations to clean the goods for import, the seller is advised not to use the term DDU in countries where it is possible to expect difficulties in cleaning the goods for import.
If the parties assume that the seller bears the risk during transportation, the term DAF should be used with an indication of the border. The term DDU performs an important function in cases when the seller is ready to deliver the goods to the destination country without clearing the goods for import and paying the duty.