Week 2 Project BUS3055

Delivery and Shipment Terms © 2017 South University

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Business and Commercial Law

©2017 South University

2 Delivery and Shipment Terms

Title and Risk of Loss

Delivery and Shipment Terms

Incoterms® consist of 11 standard international trade terms used in international sales contracts to define the responsibilities of the buyers and sellers related to costs, transportation and risks at specific points in the transaction. Incoterms® are maintained by the International Chamber of Commerce and assign the responsibility for arranging transportation, insurance and customs clearance between buyers and sellers. Intcoterms® do not address passage of title. Some of the terms are also used in domestic shipment and delivery transactions. The most frequently used terms are summarized in the following table.

Term Definitions and Responsibilities

CFR

Cost & Freight – Named Port Buyer’s Side

The seller fulfills his obligations when the appropriately packed goods have been loaded on the seller’s designated vessel at the named port of shipment and cleared for export. The seller pays the transportation costs to the agreed port on the buyer’s side. The buyer arranges and pays for unloading import clearance and on-carriage. Neither party has an obligation to insure.

CIF

Cost, Insurance & Freight – Named Place Buyer’s Side

Same as CFR, except the seller purchases insurance.

The seller fulfills his obligations when the appropriately packed goods have been loaded on the seller’s designated vessel at the named port of shipment and cleared for export. The seller pays the transportation costs to the agreed port on the buyer’s side and purchases insurance to cover the shipment.

DDP

Delivered Duty Paid Named Place Buyer’s Side

The seller provides for export clearance, delivers the packaged goods cleared for import at the named destination and pays all transportation costs to that point. Buyer arranges unloading and on-carriage depending on the actual destination agreed upon. Neither party is required to insure the cargo.

EXW

Ex Works – Named Place at Origin

Under ex works, the seller needs only to make the goods available to the buyer at the seller's facility or other designated origin point. The buyer is responsible for loading the goods and arranging any transportation or clearance for export, unless the agreement states otherwise. Seller has minimal obligations. The buyer assumes all risks and responsibility involved in taking the goods from the place it originates to the final destination.

FAS

Free Alongside Ship – Seller’s Side

The seller fulfills his obligations when the appropriately packed goods have been placed alongside the vessel at the named port of shipment and cleared for export. The buyer arranges and pays for loading, main carriage, import clearance and on-carriage. Neither party has an obligation to insure.

FOB

Free on Board – Loaded on Vessel Seller’s Side

The seller fulfills his obligations when the appropriately packed goods have been loaded on the buyer’s designated vessel at the named port of shipment and cleared for export. The buyer arranges and pays for the main carriage, import clearance and on-carriage. Neither party has an obligation to insure.