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explicit wording to this effect in the contract of sale. This term should not be used when the buyer cannot carry out the export formalities directly or indirectly. In such circumstances, the FCA term should be used, provided the sellers agree that he will load at their cost and risk.

Group F

This group includes FCA, FAS and FOB. The “F”-terms require the seller to deliver the goods for carriage as instructed by the buyer and pay the freight costs.

FCA /FREE CARRIER (... named place)

“Free Carrier” means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the seller’s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading.

This term may be used irrespective of the mode of transport, including multimodal transport. “Carrier” means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes.

If the buyer nominates a person other than a carrier to receive the goods, the sellers are deemed to have fulfilled their obligation to deliver the goods when they are delivered to that person.

FAS /FREE ALONGSIDE SHIP (... named port of shipment)

“Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. In other words, the seller pays for transportation of the goods to the port of shipment and the buyers pay for loading, freight, insurance, unloading and transportation from the port of destination to their warehouse.

The FAS term requires the seller to clear the goods for export. This is a reversal from previous Incoterms versions which required the buyer to arrange for export clearance. However, if the parties wish the buyer to clear the goods for export, this should be made clear by adding explicit wording to this effect in the contract of sale.

FOB /FREE ON BOARD (... named port of shipment)

“Free on Board” means that the seller delivers when the goods pass the ship’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. In other words, the seller pays for the transportation of the goods to the port of shipment and the loading costs. And the buyer pays for freight, insurance unloading and transportation from the port of destination to the warehouse. This term can be used only for sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the FCA term should be used.

Group С

Group C includes CFR, CIF, CPT and CIP. The “C”-terms require the sellers to contract for carriage on usual terms at their own expense. Therefore a point up to which he would have to pay transport costs must necessarily be indicated after the respective “C”-term.

CFR /COST AND FREIGHT (... named port of destination)

“Cost and Freight” means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination. But the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. In simple words, the seller pays for the transportation of the goods to the port of shipment, loading costs and freight. The buyers pay for insurance, unloading and for the goods to be transported from the port of destination to their warehouse.

The CFR term requires the seller to clear the goods for export. This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship's rail, the CPT term should be used.

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import at the named point and place at the frontier, but before the customs border of the adjoining country. The term “frontier” may be used for any frontier including that of the country of export. Therefore, it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term. In simple words, the seller covers all costs and bears all risks until the goods reached a named point at the frontier. The buyer pays all costs and bears all risks involved in transporting the goods from the frontier to the warehouse. The buyer also pays duties.

However, if the parties wish the seller to be responsible for the unloading of the goods from the arriving means of transport and to bear the risks and costs of unloading, this should be made clear by adding explicit wording to this effect in the contract of sale.

This term may be used irrespective of the mode of transport when goods are to be delivered at a land frontier. When delivery is to take place in the port of destination, on board a vessel or on the quay (wharf), the DES or DEQ terms should be used.

DES /DELIVERED EX SHIP (... named port of destination)

“Delivered Ex Ship” means that the seller delivers when the goods are placed at the disposal of the buyer on board the ship not cleared for import at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination before discharging. If the parties wish the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used.

This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on a vessel in the port of destination.

DEQ/DELIVERED EX QUAY(... named port of destination)

“Delivered Ex Quay” means that the seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay (wharf) at the named port of destination. The seller has to bear costs and risks involved in bringing the goods to the named port of destination and discharging the goods on the quay (wharf). The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. It means that the seller pays for the goods to be transported to the port of shipment, loading, freight, insurance and unloading. The buyer only has to pay for the goods to be transported from the port of destination to the warehouse.

This is a reversal from previous Incoterms versions which required the seller to arrange for import clearance.

If the parties wish to include in the seller’s obligations all or part of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sale.

This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on discharging from a vessel onto the quay (wharf) in the port of destination. However if the parties wish to include in the seller’s obligations the risks and costs of the handling of the goods from the quay to another place (warehouse, terminal, transport station, etc.) in or outside the port, the DDU or DDP terms should be used.

DDU /DELIVERED DUTY UNPAID (... named place of destination)

“Delivered Duty Unpaid” means that the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto, other than, where applicable, any “duty” (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination. Such “duty” has to be borne by the buyers as well as any costs and risks caused by their failure to clear the goods for import in time. It means that the seller pays all transportation costs and bears all risks involved in getting the goods to the buyer’s warehouse. The buyer only has to pay duty.

However, if the parties wish the seller to carry out customs formalities and bear the costs and risks resulting from this as well as some of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sale.

This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or on the quay (wharf), the DES or DEQ terms should be used.

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Text 4.4. Read the text and identify the underlying principle of the other classification of Incoterms.

Mode of Transport and the Appropriate Incoterms 2000

There is another classification of Incoterms taking into account the mode of transport and payment of duty. Therefore, they can be categorized into EXW, Incoterms for shipping, Incoterms for multimodal transport and Incoterms covering payment of duty.

EXW (ex works)

As has been mentioned above, this incoterm represents the maximum obligation for the buyer: the sellers make the goods available and ready for collection from their factory, and the buyers have to cover all costs and bear all risks until they reach the buyers’ warehouse. It can be used for all forms of transport.

Incoterms for Shipping

When goods are to be sent by maritime and inland waterway transport, the following costs have to be paid:

1.The cost of transporting the goods from the seller's factory to the port of shipment, from which they are to be shipped abroad.

2.The cost of loading the goods onto the ship at the port of shipment.

3.Freight costs representing the charge made for carrying the goods on the ship.

4.The insurance costs incurred while the goods are being transported.

5.The cost of unloading the goods when the ship reaches the port of destination in the importing country.

6. The cost of transporting the goods from the port of destination to the buyer's warehouse.

The following Incoterms are used for sea transportation: FAS, FOB, CFR, CIF, DES and DEQ. They are arranged so as to measure the sellers’ obligations for the costs to be paid.

FAS (Free Alongside Ship)

The seller is responsible for the delivery of goods only to the dockside before they are transferred onto a ship. The buyer is then responsible for all further costs (loading, freight, insurance, unloading and transportation from the port of destination to the warehouse). The passing of risk occurs when the goods have been delivered to the quay at the port of shipment.

FOB (Free on Board)

The seller is responsible for delivery of goods onto a ship (transportation of the goods to the port of shipment and loading costs). The buyer is then responsible for all further costs (freight, insurance, unloading and transportation from the port of destination to the warehouse). The passing of risk occurs when the goods have passed the ship’s rail at the port of shipment.

CFR (Cost and Freight)

The seller is responsible for the transportation of the goods to the port of shipment, loading costs and freight. The buyer pays for insurance, unloading and for the goods to be transported from the port of destination to the warehouse. The passing of risk is the same as for FOB (when the goods pass the ship’s rail at the port of shipment).

CIF (Cost, Insurance and Freight)

The seller is responsible for the transportation of the goods to the port of shipment, loading costs, freight and insurance. The buyer pays for unloading and for the goods to be transported from the port of destination to the warehouse. The passing of risk is the same as for FOB and CFR (when the goods pass the ship’s rail at the port of shipment).

DES (Delivered Ex Ship)

The seller and the buyer share the costs exactly as under CIF. The difference is in the passing of risk. The passing of risk occurs after the ship has arrived at the port of destination but before the goods are unloaded.

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Multimodal transport

Concept check

1.A close look at different modes of transport and payment of duty allows us to classify all Incoterms accordingly. What is this classification?

2.For which Incoterms does the buyer have to pay insurance?

3.For which Incoterms does the seller have to pay freight?

4.You are an exporter. Which Incoterms are applicable in these transactions?

1)You paid for the goods to be transported to the docks at Harwich. Afterwards they became the buyer’s responsibility.

2)You made the goods ready for collection, but the buyer had to do everything else.

3)You paid all the costs involved in getting the goods to Spain, but left the costs of unloading to the importer.

4)You paid all the costs involved in getting the goods to Mexico, but the buyer took over the risk from the time the goods were loaded onto the ship in London.

5)You paid for the goods to be transported to Dover and loaded onto the ship, but that was

all.

6)You paid for the goods to be transported to the docks and loaded onto the ship. You also agreed to pay the cost of carrying the goods across the Atlantic.

7)The importer only had to pay for the goods to be transported from Rotterdam to his warehouse. You paid for everything else.

5.Using your own words, explain the differences and similarities between:

1)CIF and DES;

2)DES and DEQ;

3)DDP and DDU;

4)FAS and FOB;

5)CFR and CIF; and

6)CPT and CIP.

6.Which Incoterm was used in each case – FCA, CPT, CIP, DAF, DDU, or DDP?

1)When we imported T-shirts from the US, we only had to organise transportation – the company in New York did everything else.

2)We offered our customers in Brazil very favourable terms of delivery; they only had to pay duty.

3)I arranged for the goods to be sent as far as the border; after that, it was up to the importer to do everything else.

4)We did not have to lift a finger – the exporter did everything!

5)We had to arrange insurance as well as to pay to transport the last load of the goods we imported.

6)I sent the importers the necessary information about the carriage charges they had to pay, and they organised insurance and transportation themselves.

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2. Find in Text 4.3 the English equivalents for the following word combinations.

Риск потери или повреждения товара; нести все расходы и риски; минимальные обязанности продавца; передача риска; порт отправки; порт назначения; в распоряжении покупателя; погрузка и разгрузка товара; транспортировка несколькими видами транспорта; внутренний водный транспорт; перила (рейлинг) судна; очистить товары для экспорта; страховое покрытие; доставить на борт транспортного средства; максимальные обязанности покупателя; оплата пошлины.

3. Match the words on the left with their definitions on the right.

4.Fill in the gaps with the appropriate form of the words from exercise 3.

1)If the parties wish to specify some special conditions of delivering the goods, they should add the corresponding explicit … in the contract of sale.

2)Railway companies undertake the … of goods as instructed by counterparties.

3)… is the protection against risk which an insurance policy provides for the policy-holder.

4)“Ex works” means that the buyer bears all costs and risks connected with taking the goods from the seller’s own … not loaded on any … .

5)The FAS term requires the seller to deliver and place the goods … the … and to … the goods for export.

6)The passing of risk means that the counterparty bears all costs of loss of or … to the goods from this point.

7)The DEQ term is used when the goods are to be delivered and discharged from a … onto the … in the port of destination.

8)While DDP represents the seller’s maximum obligation, under the EXW-term his obligation is … .

5.Match the words on the left with their synonyms.

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