VARIOUS FORMS AND STANDARDIZATION OF TERMS

Introduction

Rules for Sea and Inland Waterway Transport

Rules for any Mode or Modes of Transport

Introduction

Export sales transactions usually embody trade terms which are not customary in domestic trade.
To avoid any misunderstandings with a buyer abroad, the exporter should make clear the
meaning of any trade term adopted in the transaction. This may be done by, for example,
inserting a term into the contract to the effect that the contract will be governed by the law of his
own country, the parties may state explicitly what is understood by the use of a particular term or
the parties may opt to contract, where appropriate, on standard contract forms issued by trade
associations. Alternatively, the exporter may choose to make referencein his own conditions of
sale to sets of standard trade terms, for example, Incoterms or Intraterms. The former is
sponsored by the International Chamber of Commerce under the title of Incoterms 2010 and the
latter is a set of terms developed to eliminate, by the use of plain language in a “register easily
understood by traders”, any doubts as to the meaning of terms

Incoterms 2010

The International Chamber of Commerce (ICC) has now produced its ninth revision of the
International Commercial Terms, Incoterms, 2020. The two new Incoterms – Delivered at
Terminal (DAT) and Delivered at Place (DAP) – are available for use irrespective of the mode of
transport. Incoterms 2010 have been divided into two groups:

Those for use for sea and inland waterway transport, where the point of delivery and the place to
which the goods are carried to the buyer are both ports

Those which may be used in relation to any mode or modes of transport which can be used when
there is no maritime transport involved or where maritime transport is used only for part of the
carriage.

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Rules for Sea and Inland Waterway Transport

FAS – Free Alongside Ship

“Free Alongside Ship” means that the seller delivers when the goods are placed alongside the
vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The
risk of loss of or damage to the goods passes when the goods are alongside the ship, and the
buyer bears all costs from that moment onwards.

FOB – Free On Board

“Free On Board” means that the seller delivers the goods on board the vessel nominated by the
buyer at the named port of shipment or procures the goods already so delivered. The risk of loss
of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all
costs from that moment onwards.

Duties of the exporter under FOB

(A) Supply the contracted goods in conformity with the contract of sale and deliver the goods on
board the vessel named by the buyer at the named port of shipment;

(B) Bear all costs and risks of the goods until such time as they shall have effectively passed the
ship’s rail. In other words, once goods are placed on ship’s rail, title to the property passes to the
buyer and so risks too;

(C) Provide at his own expense the customary clean shipping documents as proof of delivery of
goods;

(D)Provide export license and pay export duty, if any ; and

(E) Pay loading costs.

Duties of Importer under FOB terms of delivery.

(A) Reserve the necessary shipping space and give due notice of the same to the exporter;

(B) Bear all costs and risks of the goods from the time when they shall have effectively passed
the ship’s rail;
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(C) Pay freight;

(D)Pay unloading costs and

(E) Pay the price as provided in the contract to exporter.

CFR – Cost and Freight

“Cost and Freight” means that the seller delivers the goods on board the vessel or procures the
goods already so delivered. The risk of loss of or damage to the goods passes when the goods are
on board the vessel. the seller must contract for and pay the costs and freight necessary to bring
the goods to the named port of destination.

CIF – Cost, Insurance and Freight

“Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or
procures the goods already so delivered. The risk of loss of or damage to the goods passes when
the goods are on board the vessel. The seller must contract for and pay the costs and freight
necessary to bring the goods to the named port of destination. The seller also contracts for
insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.
The buyer should note that under CIF the seller is required to obtain insurance only on minimum
cover. Should the buyer wish to have more insurance protection, it will need either to agree as
much expressly with the seller or to make its own extra insurance arrangements.

Seller’s Duty Under CIF Contracts

(A) The seller is under obligation to procure and prepare documents

The seller must procure and prepare shipment documents. Such as, he should prepare an invoice
and receive a bill of lading and also policy insurance.

(B)Invoice

In CIF contracts the seller is under a duty to tender an invoice to the buyer. ‘The seller’s invoice
to the price’. Moreover, ‘the seller must give credit to the buyer for the amount of the freight’.

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(C) Insurance

The seller must obtain insurance policy cover the goods to protect marine cause and then tender
the insurance to the buyer. Otherwise, he commits a breach of contract. If the seller could not
cover the insurance policy or fails to obtain it, he will responsible for the risk.

(D) Bill of Lading

The seller is under obligation to insure bill of lading and also he must obtain shipped it. The face
of bill should be clear because it shows that the goods have been obtained for shipped.
Otherwise, the goods are not in good order. In CIF contracts the buyer pays for the goods against
the documents and it is a ‘reason or the insistence on a clear bill of lading’. Also bill of lading
should be transferable, and during the transit the buyer can sell the goods. The seller in cif
contract must procure and tender bill of lading. Furthermore, it should be issued at the time of
shipment.

Buyer’s Duty Under CIF Contracts

(A) Payment against Document

Tender of documents plays a significant role in a CIF contract. The buyer should confirm a good
tender of documents, because it represents the goods. Against the document , the buyer has to
pay for the goods. The buyer is under a duty to pay to the seller in the currency which correspond
with the contract of sale. If any currency has fluctuations, the seller has right to protect himself
against it. Today in the most CIF contracts will establish a letter of credit as a method of
payment.

(B) Name of port of destination

There are a numerous number of destinations. The buyer is under a duty to name port of
destination. Before the shipment, the buyer has to choose the name of the port and he must tell
the seller.

(C) delivery is the buyer’s obligation. He must take delivery when the goods arrive. Also he must
bear all unloading costs.

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(D) the buyer is under an obligation to obtain any import licence ‘if required’. But the parties can
agreed otherwise in the contract.

Rules for any Mode or Modes of Transport

EXW – Ex Works

“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at
the seller’s premises or at another named place (i.e., works, factory, warehouse, etc.). The seller
does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for
export, where such clearance is applicable.

FCA – Free Carrier

“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated
by the buyer at the seller’s premises or another named place. The parties are well advised to
specify as clearly as possible the point within the named place of delivery, as the risk passes to
the buyer at that point.

CPT – Carriage Paid to

“Carriage Paid To” means that the seller delivers the goods to the carrier or another person
nominated by the seller at an agreed place (if any such place is agreed between parties) and that
the seller must contract for and pay the costs of carriage necessary to bring the goods to the
named place of destination.

CIP – Carriage and Insurance Paid to

“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another
person nominated by the seller at an agreed place (if any such place is agreed between parties)
and that the seller must contract for and pay the costs of carriage necessary to bring the goods to
the named place of destination. The seller also contracts for insurance cover against the buyer’s
risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP
the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have

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