INTERNATIONAL RULES AND CONDITIONS OF CARGO TRANSPORTATION
Incoterms 2021 (Incoterms 2021) is a rule applied in international trade, which determines the rights and obligations of the parties under the contract of sale in terms of delivery of goods from the seller to the buyer (terms of delivery of goods).
FOB
“Free on Board” means that the seller delivers the goods on board a vessel nominated by the buyer at the named port of shipment, or ensures that the goods are delivered. The risk of loss or damage to the goods passes when the goods are on board and from that moment on, the buyer bears all costs.
The seller must either deliver the goods on board the ship or ensure that the goods so delivered are made available for shipment. The reference to the obligation to “provide” takes into account the numerous sales along the chain, which are often used in commodity trading.
FOB – May be inappropriate when the goods are handed over to the carrier before they are placed on board the ship, for example goods in containers, which is typical for delivery to the terminal In such situations, it is advisable to use the term FCA.
FOB – requires the seller to complete customs formalities for exportation, if any. However, the seller is not obligated to comply with import customs formalities, pay import duties or perform other import customs formalities.
CIF
“Cost, Insurance and Freight” means that the Seller delivers the goods on board or delivers the goods so delivered at the place of destination. The risk of loss or damage to the goods passes when the goods are on board. The seller is obliged to conclude a contract and pay all costs and freight necessary to deliver the goods to the named port of destination.
The seller also concludes an insurance contract covering the risk of loss or damage to the goods during carriage. The buyer should note that the CIF requires the seller to provide insurance with only minimum coverage. If the buyer wishes to have more protection through insurance, he must either clearly agree on this with the seller, or carry out additional insurance at his own expense.
When using the terms CPT, CIP, CFR or CIF, the seller fulfills his obligation to deliver when he hands over the goods to the carrier in the manner specified in the chosen term, but not when the goods have reached their destination.
This term contains two critical points, as risk and cost move in two different places. While the port of destination is always specified in the contract, the port of shipment may not be specified when the risk passes to the buyer. If the port of shipment is of particular interest to the buyer, the parties are advised to define it as clearly as possible in the contract.
The parties are also encouraged to determine as precisely as possible the point at the agreed port of destination, since the costs to that point are borne by the seller. The seller is advised to provide contracts of carriage that accurately reflect this choice. If the seller, under his contract of carriage, bears the costs of unloading at the agreed point in the port of destination, the seller is not entitled to demand compensation from the buyer for such costs, unless otherwise agreed by the parties.
The seller must either deliver the goods on board the ship or ensure that the goods so delivered are delivered at the place of destination. In addition, the seller must either conclude a contract of carriage or provide such a contract. The reference to the obligation to “provide” takes into account the numerous sales along the chain, which are often used in commodity trading.
CIF – may be inappropriate when the goods are handed over to the carrier before they are placed on board the ship, for example, goods in containers, which is typical for delivery to the terminal. In such situations, it is appropriate to use the term CIP. The CIF requires the seller to complete export customs formalities, if any. However, the seller is not obligated to comply with import customs formalities, pay import duties or perform other import customs formalities.
CPT
“Carriage paid to” means that the seller transfers the goods to the carrier or another person nominated by the seller at the agreed place (if such a place is agreed by the parties) and that the seller is obliged to enter into a contract of carriage and bear the carriage costs necessary to deliver the goods to the agreed destination.
This term can be used regardless of the chosen mode of transport, as well as when using more than one mode of transport.
This term contains two critical points, as risk and cost move in two different places. The parties are advised to define as clearly as possible in the contract the place of delivery of the goods, where the risk passes to the buyer, where the seller is obliged to conclude a contract of carriage.
When using several carriers for the transportation of goods in an agreed direction and if the parties have not agreed on a specific delivery point. The disadvantage is that the risk is passed on when the goods are handed over to the first carrier at a location outside the buyer’s control. If the parties intend for the transfer of risk to take place at a later stage (ie at an ocean port or airport), they need to specify this in their sales contract.
The parties are also encouraged to determine as precisely as possible the point at the agreed place of destination, as the costs to that point are borne by the seller. The seller is advised to provide contracts of carriage that accurately reflect this choice. If the seller, under his contract of carriage, bears the costs of unloading at the agreed place of destination, the seller is not entitled to demand compensation from the buyer for such costs, unless otherwise agreed by the parties.
CPT – requires the seller to complete customs formalities for export, if any. However, the seller is not obligated to comply with import customs formalities, pay import duties or perform other import customs formalities.
