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| Terms of Sale
Terms of Sale serve two basic functions:
• They determine who pays the costs
involved in transportation.
• They determine where the risk passes
from seller to buyer.
It is vital to ensure as either the seller or
buyer you are fully aware of your legal obligations under the agreed
Terms of Sale. To avoid misunderstanding it is recommended that
INCOTERMS 2000 are used and reference is made to such use on the
contract of sale, plus all other relevant documents, i.e. Pro-Forma
invoices, Commercial Invoices, Documentary Letters Of Credit etc.
You should also ensure the correct INCOTERM is used so that in the
event of any dispute, you have fulfilled your obligations under
the chosen Term Of Sale.
INCOTERMS form only part of the overseas contract
of sale dealing solely with transportation. They are not a substitute
for written Trading Conditions which should refer to other issues
such as, your right to retain ownership of the goods until paid
for, payment terms, method of payment, the right to charge interest
on overdue payments or liability for defective products etc.
There are 13 different terms of sale identified by
INCOTERMS 2000. Each of these is identified by using a 3 letter
code. For your guidance they are disclosed below.
| Departure |
| EXW |
Ex Works -- Title and risk pass
to buyer including payment of all transportation and insurance
cost from the seller's door. Used for any mode of transportation.
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| Main carriage unpaid |
| FCA |
Free Carrier -- Title and risk
pass to buyer including transportation and insurance cost when
the seller delivers goods cleared for export to the carrier
or named place. |
| FAS |
Free Alongside Ship --Title and
risk pass to buyer including payment of all transportation and
insurance cost once delivered alongside ship by the seller.
Used for sea or inland waterway transportation. The export clearance
obligation rests with the seller. |
| FOB |
Free On Board and risk passes to
buyer including payment of all transportation and insurance
cost once delivered on board the ship by the seller. Used for
sea or inland waterway transportation. |
| Main Carriage Paid |
| CFR |
Cost and Freight -- Title, risk
and insurance cost pass to buyer when delivered on board the
ship by seller who pays the transportation cost to the destination
port. Used for sea or inland waterway transportation. |
| CIF |
Cost, Insurance and Freight --
Title and risk pass to buyer when delivered on board the ship
by seller who pays transportation and insurance cost to destination
port. Used for sea or inland waterway transportation. |
| CPT |
Carriage Paid To -- Title, risk
and insurance cost pass to buyer when delivered to carrier by
seller who pays transportation cost to destination. Used for
any mode of transportation. |
| CIP |
Carriage and Insurance Paid To --Title
and risk pass to buyer when delivered to carrier by seller who
pays transportation and insurance cost to destination. Used
for any mode of transportation. |
| Arrival |
| DAF |
Delivered at Frontier -- Title,
risk and responsibility for import clearance pass to buyer when
delivered to named border point by seller. Used for any mode
of transportation |
| DES |
Delivered Ex Ship -- Title, risk,
responsibility for vessel discharge and import clearance pass
to buyer when seller delivers goods on board the ship to destination
port. Used for sea or inland waterway transportation. |
| DEQ |
Delivered Ex Quay (Duty Paid) --
Title and risk pass to buyer when delivered on board the ship
at the destination point by the seller who delivers goods on
dock at destination point cleared for import. Used for sea or
inland waterway transportation. |
| DDU |
Delivered Duty Unpaid -- Seller
fulfills his obligation when goods have been made available
at the named place in the country of importation |
| DDP |
Delivered Duty Paid -- Title and
risk pass to buyer when seller delivers goods to named destination
point cleared for import. Used for any mode of transportation.
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