Incoterms

LLB403: Business Law

Summer 2019
Department of Law
University of Dhaka
 Introduction
• International Commercial Terms- Incoterms

• Three-letter trade terms reflecting business practices in contracts of the sale of goods.
These rules describe mainly the obligations, costs and risks involved in the delivery
and transportation of goods, from the sellers to the buyers.
• Developed in 1921 by International Chamber of Commerce (ICC) and first set of rules
was published in 1936.
• The second set was published in 1953. Additional amendments and expansions
followed in 1967, 1976, 1980, 1990 and 2000. The eighth and current version of the
Incoterms rules—Incoterms 2010—came into force on January 1, 2011.
• Incoterms 2010 rules update and consolidate the ‘delivered’ rules, reducing the total
number of rules from 13 to 11 and offer a simpler and cleaner presentation of all the
rules.
• Buyer and Seller: Gender neutral pronoun ‘it’
The Eleven Incoterms (2010)

• EXW (Ex works)

• FCA (Free Carrier)

• CPT (Carriage Paid to)

• CIP (Carriage and Insurance Paid to)

• DAT (Delivered at Terminal)

• DAP (Delivered at Place)

The Eleven Incoterms (2010)

• DDP (Delivered Duty Paid)

• FAS (Free Alongside Ship)

• FOB (Free on Board)

• CFR (Cost and Freight)

• CIF (Cost, Insurance and Freight)

 How to Use
• Incoterms 2010 rules should be incorporated into the contract of sale

• Appropriate Incoterms rule should be chosen

• Place or port should be specified as precisely as possible

• Incoterms rules do not give a complete contract of sale

• N.B.
• Incoterms 2010 does not prohibit alteration by the parties
• Carrier means the party with whom carriage is contracted
• Delivery is used to indicate where the risk of loss of or damage to the goods
passes from the seller to the buyer
• The obligations of seller or the buyer can be carried out personally by it or
through its intermediaries
 Main Features of Incoterms 2010 Rules

• Two new Incoterms rules DAT and DAP, have replaced the Incoterms 2000
rules DAF, DES, DEQ and DDU
• Classification of the 11 Incoterms 2010 rules
• Rules for any mode or modes of transport: This class includes seven
Incoterms rules, which are EXW, FCA, CPT, CIP, DAT, DAP and DDP. They
can be used irrespective of the mode of transport selected and irrespective of
whether one or more than one mode of transport is employed. It is important to
note that these rules can also be used in cases where a ship is used for part of
the carriage by sea.
• Rules for sea and inland waterway transport: This class includes four
Incoterms rules, which are FAS, FOB, CFR and CIF. In these cases, the point of
delivery and the place to which the goods are carried to, are both sea-ports,
hence the label ‘sea and inland waterway’ rules. Under the Incoterms rules FOB,
CFR and CIF, the goods are delivered when they are ‘on board’ the vessel.
 Main Features
• Rules for domestic and international trade: Incoterms rules apply to
both domestic and international sale contracts. Incoterms rule EXW is
meant for domestic trade.
• Guidence Note: Before each Incoterms rule, there is a ‘Guidance Note,’
which explain the fundamentals of that rule, such as when it should be
used, when risk passes and how costs are allocated between seller and
buyer.
• Electronic Communication (Article A1/B1)

• Insurance Cover (Article A3/B3)

• Security-related clearances and information required for such

clearances (Article A2/B2; A10/B10)
 Main Features
• Terminal handling charges: Under the Incoterms rules CPT, CIP, CFR, CIF,
DAT, DAP and DDP, the seller must make arrangements for the carriage of
the goods to the agreed destination. While the freight is paid by the seller, it is
actually paid for by the buyer as freight costs are normally included by the
seller in the total selling price (Article A6/B6)
• String Sales: In the sale of commodities, as opposed to the sale of
manufactured goods, a cargo is frequently sold several times during transit
‘down a string.’ When this happens, a seller in the middle of the string does
not ‘ship’ the goods because these have already been shipped by the first
seller in the string. The seller in the middle of the string, therefore, performs
its obligations towards its buyer not by shipping the goods, but by ‘procuring’
goods that have been shipped. For clarification purposes, Incoterms 2010
rules include the obligation to ‘procure goods shipped’ as an alternative to the
obligation to ship goods in the relevant Incoterms rules.
Basic Features of
11 Incoterm Rules
 1. Ex Works- EXW
(insert named place of delivery)

• Suitable for domestic trade and represents the minimum obligation of

the seller.
• Risk passes and costs are transferred at the same place.

• General Obligations (Article A1 and B1):

• The seller must provide the goods and the commercial invoice (in
conformity with the contract of sale).
• The buyer must pay the price of the goods (as provided in the contract of
sale).

• Contracts of Carriage and Insurance (Article A3 and B3):

• Neither the seller, nor the buyer, has any obligation to make a contract of
carriage, or a contract of insurance.
 EXW (continued)
• Delivery (Article A4 and B4):
• The seller must deliver the goods, by placing them at the disposal of the buyer, (at the agreed
point, if any) at the named place of delivery (i.e. seller’s premises, works, factory, warehouse
etc), not loaded on any collecting vehicle, on the agreed date or within the agreed period.
• Under this rule, the seller is not bound to load the goods.
• The buyer must take delivery of the goods, when they are delivered.

• Transfer of risks (Article A5 and B5):

• The seller bears all risks of loss of or damage to the goods, until they have been delivered.
On the other hand, the buyer bears all risks of loss of or damage to the goods, from the time
they have been delivered.

• Allocation of costs (Article A6 and B6):

• The seller must pay all costs relating to the goods, until they have been delivered. On the
other hand, the buyer must pay all costs relating to the goods, from the time they have been
delivered.
 2. Free Carrier- FCA
(insert named place of delivery)
• Appropriate for international trade.

• Risk passes and costs are transferred at the same place.

• General Obligations (Article A1 and B1):

• The seller must provide the goods and the commercial invoice (in conformity
with the contract of sale).
• The buyer must pay the price of the goods (as provided in the contract of sale).

• Contracts of Carriage and Insurance (Article A3 and B3):

• The seller has no obligation to make a contract of carriage.
• The buyer must contract (at its own expense) for the carriage of goods from the
named place of delivery.
• Neither the seller, nor the buyer, has any obligation to make a contract of
insurance.
 FCA (continued)
• Delivery (Article A4 and B4):
• The seller must deliver the goods, to the carrier or any person
nominated by the buyer, (at the agreed point, if any) at the named
place of delivery, on the agreed date or within the agreed period.
• Delivery is completed:
• If the named place is the seller’s premises, when the goods are loaded by the
seller, on the means of transport, provided by the buyer; or,
• If the named place is not the seller’s premises, but another place, in that case
when the goods are placed at the disposal of the carrier or any person nominated
by the buyer, on the seller’s means of transport, ready for unloading.
• In the first mode of delivery, the seller is bound to load the goods, but
it is not, in the last mode.
• The buyer must take delivery of the goods, when they are delivered.
 FCA (Continued)
• Transfer of risks (Article A5 and B5):
• The seller bears all risks of loss of or damage to the goods, until they have
been delivered. On the other hand, the buyer bears all risks of loss of or
damage to the goods, from the time they have been delivered.

• Allocation of costs (Article A6 and B6):

• The seller must pay
• all costs relating to the goods, until they have been delivered; and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable
upon export.
• The buyer must pay
• all costs relating to the goods, from the time they have been delivered, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable
upon import and the costs for their transport through any country, if any.
FCA
FCA
 3. Carriage Paid To (CPT)
(insert named place of destination)
• Risk passes and costs are transferred at different places

• General Obligations (Article A1 and B1):

• The seller must provide the goods and the commercial invoice (in conformity with
the contact of sale).
• The buyer must pay the price of the goods (as provided in the contract of sale).

• Contracts of Carriage and Insurance (Article A3 and B3):

• The seller must contract (at its own expense) for the carriage of goods, from the
named place of delivery, to the named place of destination.
• The contract must be made on usual terms and provide for carriage by usual route
and in a customary manner.
• The buyer has no obligation to make a contract of carriage.
• Neither the seller, nor the buyer, has any obligation to make a contract of insurance.
 CPT (Continued)
• Delivery (Article A4 and B4):
• The seller must deliver the goods, by handing them over to the carrier
contracted by it, (at the agreed point, if any) at the named place of
delivery, on the agreed date or within the agreed period.
• The buyer must take delivery of the goods, when they have been
delivered and receive them from the carrier at the named place of
destination.

• Transfer of risks (Article A5 and B5):

• The seller bears all risks of loss of or damage to the goods, until they
have been delivered.
• The buyer bears all risks of loss of or damage to the goods, from the
time they have been delivered.
 CPT (Continued)
• Allocation of costs (Article A6 and B6):
• The seller must pay,
• all costs relating to the goods, until they have been delivered;
• the freight and all other costs under the contract of carriage, including the
costs of loading the goods on the carrier and charges for unloading at the
named place of destination; and
• the costs of customs formalities, as well as, all duties, taxes and other
charges payable upon export, and the costs of their transport through any
country, if any.
• The buyer must pay,
• all costs relating to the goods from the time they have been delivered; and
• the costs of customs formalities, as well as, all duties, taxes and other
charges payable upon import.
CPT
 4. CARRIAGE AND INSURANCE PAID TO- CIP
(insert named place of destination)

• CIP = CPT + a cargo insurance (complying with the minimum

cover)
• Two critical points:
• Risk passes and costs are transferred at different places.

• General Obligations (Article A1 and B1):

• The seller must provide the goods and the commercial invoice (in
conformity with the contact of sale).
• The buyer must pay the price of the goods (as provided in the
contract of sale).
 CIP (contd.)
• Contracts of Carriage and Insurance (Article A3 and
B3):
• The seller must contract (at its own expense) for the carriage
of goods, from the named place of delivery, to the named
place of destination.
• The contract must be made on usual terms and provide for
carriage by usual route and in a customary manner.
• The buyer has no obligation to make a contract of carriage.
 CIP (contd.)
• Contract of insurance:
• The seller must obtain (at its own expense) a cargo insurance complying at least with
the minimum cover, provided by Clauses (C) of the Institute Cargo Clauses or any
similar clauses. The insurance must be contracted with an insurance company of good
repute and must entitle the buyer or any person having an insurable interest in the
goods, to claim directly from the insurer.
• When required by the buyer, the seller must provide, at buyer’s expense, any additional
cover, provided by Clauses (A) or (B) of the Institute Cargo Clauses or any similar
clauses and / or cover complying with the Institute War Clauses and / or Institute Strike
Clauses or any similar clauses.
• The insurance must cover, at least, the price provided in the contract, plus 10%
(i.e. 110%) and must be in the currency of the contract.
• The insurance must cover the goods from the named place of delivery to, at least, the
named place of destination.
• The seller must provide the buyer with the insurance policy.
• The buyer has no obligation to make contract of insurance.
 CIP (Contd.)
• Delivery (Article A4 and B4):
• The seller must deliver the goods, by handing them over to the carrier
contracted by it, (at the agreed point, if any) at the named place of
delivery, on the agreed date or within the agreed period.
• The buyer must take delivery of the goods, when they have been
delivered and receive them from the carrier, at the named place of
destination.

• Transfer of risks (Article A5 and B5):

• The seller bears all risks of loss of or damage to the goods, until they
have been delivered.
• On the other hand, the buyer bears all risks of loss of or damage to the
goods, from the time they have been delivered.
 CIP (contd.)
• Allocation of costs (Article A6 and B6):
The seller must pay-
• all costs relating to the goods, until they have been delivered;
• the freight and all other costs under the contract of carriage, including the costs of
loading the goods on the carrier and charges for unloading at the named place of
destination;
• the cost of insurance, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable
upon export, and the costs for their transport through any country, if any.
The buyer must pay-
• all costs relating to the goods from the time they have been delivered;
• the cost of additional insurance (if any), procured by the seller at the buyer’s request, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable
upon import.
CIP
 5. DELIVERED AT TERMINAL - DAT
(insert named terminal at port or place of
destination)
• ‘Terminal’ includes any place, whether covered or not, such as a quay,
warehouse, container yard or road, rail or air cargo terminal.
• Under this rule, risk passes and costs are transferred at same place.

• General Obligations (Article A1 and B1):

• The seller must provide the goods and the commercial invoice (in conformity with
the contact of sale).
• On the other hand, the buyer must pay the price of the goods (as provided in the
contract of sale).

• Contracts of Carriage and Insurance (Article A3 and B3):

• The seller must contract (at its own expense) for the carriage of goods to the
named terminal, at the port or place of destination.
• The buyer has no obligation to make contract of carriage.
• Neither the seller, nor the buyer has any obligation to make a contract of insurance.
 DAT (Contd.)
• Delivery (Article A4 and B4):
• The seller must, unload the goods from the arriving means of transport
and then deliver them by placing them at the disposal of the buyer, (at
the agreed point, if any) at the named terminal, in the port or place of
destination, on the agreed date or within the agreed period.
• The buyer must take delivery of the goods, when they have been
delivered.

• Transfer of risks (Article A5 and B5):

• The seller bears all risks of loss of or damage to the goods, until they
have been delivered.
• On the other hand, the buyer bears all risks of loss of or damage to the
goods, from the time they have been delivered.
 DAT (Contd.)
• Allocation of costs (Article A6 and B6):

• The seller must pay,

• all costs relating to the goods, until they have been delivered;
• the freight and all other costs under the contract of carriage, including the costs of
loading of goods on the carrier and charges for unloading at the named terminal;
and
• the costs of customs formalities, as well as, all duties, taxes and other charges
payable upon export, and the costs for their transport through any country, prior to
delivery.

• The buyer must pay,

• all costs relating to the goods from the time they have been delivered; and
• the costs of customs formalities, as well as, all duties, taxes and other charges
payable upon import.
DAT (Contd.)
 6. DELIVERED AT PLACE – DAP
(insert named place of destination)

• DAP = DAT + risks and costs involved in transporting and handling

the goods from terminal to another place.
• General Obligations (Article A1 and B1):
• The seller must provide the goods and the commercial invoice (in conformity
with the contact of sale).
• The buyer must pay the price of the goods (as provided in the contract of sale).

• Contracts of Carriage and Insurance (Article A3 and B3):

• The seller must contract (at its own expense) for the carriage of goods to the
named place of destination.
• The buyer has no obligation to make contract of carriage.
• Neither the seller, nor the buyer has any obligation to make a contract of
insurance.
 DAP (Contd.)
• Delivery (Article A4 and B4):
• The seller must deliver the goods, by placing them at the disposal of
the buyer, on the arriving means of transport, ready for unloading, (at
the agreed point, if any) at the named place of destination, on the
agreed date or within the agreed period.
• The buyer must take delivery of the goods, when they have been
delivered.

• Transfer of risks (Article A5 and B5):

• The seller bears all risks of loss of or damage to the goods, until they
have been delivered.
• On the other hand, the buyer bears all risks of loss of or damage to
the goods, from the time they have been delivered.
 DAP (Contd.)
• Allocation of costs (Article A6 and B6):

• The seller must pay,

• all costs relating to the goods, until they have been delivered;
• the freight and all other costs under the contract of carriage, including the costs of
loading of goods on the carrier; and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable
upon export, and the costs for their transport through any country, prior to delivery

• The buyer must pay,

• all costs relating to the goods from the time they have been delivered;
• the charges for unloading necessary to take delivery of the goods from the carrier, at
the named place of destination; and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable
upon import.
DAP (Contd.)
 7. DELIVERED DUTY PAID – DDP
(insert named place of destination)

• DDP = DAP + import clearance by seller.

• DDP represents the maximum responsibility of the seller.
• DDP must not be used if seller is unable to obtain import clearance.

• General Obligations (Article A1 and B1):

• The seller must provide the goods and the commercial invoice (in conformity with
the contact of sale).
• The buyer must pay the price of the goods (as provided in the contract of sale).

• Contracts of Carriage and Insurance (Article A3 and B3):

• The seller must contract, at its own expense, for the carriage of goods to the named
place of destination.
• The buyer has no obligation to make contract of carriage.
• Neither the seller, nor the buyer has any obligation to make a contract of insurance.
 DDP (Contd.)
• Delivery (Article A4 and B4):
• The seller must deliver the goods, by placing them at the disposal of
the buyer, on the arriving means of transport, ready for unloading, (at
the agreed point, if any) at the named place of destination, on the
agreed date or within the agreed period.
• The buyer must take delivery of the goods, when they have been
delivered.

• Transfer of risks (Article A5 and B5):

• The seller bears all risks of loss of or damage to the goods, until they
have been delivered.
• On the other hand, the buyer bears all risks of loss of or damage to
the goods, from the time they have been delivered.
 DDP (Contd.)
• Allocation of costs (Article A6 and B6):

• The seller must pay,

• all costs relating to the goods, until they have been delivered;
• the freight and all other costs under the contract of carriage, including the
costs of loading of goods on the carrier; and
• the costs of customs formalities, as well as, all duties, taxes and other charges
payable upon both export and import, and the costs for their transport
through any country, prior to delivery.

• The buyer must pay,

• all costs relating to the goods from the time they have been delivered; and
• the charges for unloading necessary to take delivery of the goods from the
carrier, at the named place of destination.
DDP (Contd.)
 8. FREE ALONGSIDE SHIP – FAS
(insert named port of shipment)

• Risk passes and costs are transferred at same place.

• FAS rule is typically used for heavy-lift or bulk cargo and not suitable for
sea transport of goods in containers.
• In the case of sea transport of goods in containers, it is typical for the
seller to hand over the goods over to the carrier at a terminal, and not
alongside the ship. In such situations, the FAS rule would be
inappropriate and the FCA rule should be used.
• General Obligations (Article A1 and B1):
• The seller must provide the goods and the commercial invoice (in conformity
with the contact of sale).
• The buyer must pay the price of the goods (as provided in the contract of sale).
 FAS (Contd.)
• Contracts of Carriage and Insurance (Article A3 and B3):
• The seller has no obligation to make a contract of carriage.
• The buyer must contract, at its own expense, for the carriage of goods from the
named port of delivery.
• Neither the seller, nor the buyer, has any obligation to make a contract of insurance.

• Delivery (Article A4 and B4):

• The seller must deliver the goods, either by placing them along side the ship,
nominated by the buyer, at the loading point, at the named port, or by procuring the
goods so delivered, on the agreed date or within the agreed period, and in the
manner customary at the port.
• The term ‘procuring the goods so delivered’ refers to multiple sales down a chain or
‘string sales,’ particularly common in the commodity trades.
• The buyer must take delivery of the goods, when they have been delivered
 FAS (Contd.)
• Transfer of risks (Article A5 and B5):
• The seller bears all risks of loss of or damage to the goods, until they have been delivered.
• The buyer bears all risks of loss of or damage to the goods, from the time they have been
delivered.

• Allocation of costs (Article A6 and B6):

• The seller must pay,

• all costs relating to the goods, until they have been delivered; and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon
export.

• The buyer must pay,

• all costs relating to the goods, from the time they have been delivered,
• the freight and all other costs under the contract of carriage, including costs of loading, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon
import and the costs for their transport through any country, if any.
FAS (Contd.)
 9. FREE ON BOARD - FOB
(insert named port of shipment)

• Under this rule, risk passes and costs are transferred at the same place.

• FOB rule is typically used for heavy-lift or bulk cargo and not suitable for sea
transport of goods in containers.
• In the case of sea transport of goods in containers, it is typical for the seller to hand
over the goods over to the carrier at a terminal, and not alongside the ship. In such
situations, the FAS rule would be inappropriate and the FCA rule should be used.
• This term has been greatly misused over the last three decades, ever since Incoterms
1980 explained that FCA should be used, instead of FOB, for container shipments.
• General Obligations (Article A1 and B1):
• The seller must provide the goods and the commercial invoice (in conformity with the
contact of sale).
• The buyer must pay the price of the goods (as provided in the contract of sale).
 FOB (Contd.)
• Contracts of Carriage and Insurance (Article A3 and B3):
• The seller has no obligation to make a contract of carriage.
• The buyer must contract, at its own expense, for the carriage of goods from the named
port of delivery.
• Neither the seller, nor the buyer, has any obligation to make a contract of insurance.

• Delivery (Article A4 and B4):

• The seller must deliver the goods, either by placing them on board the ship, nominated
by the buyer, at the loading point of the named port of shipment, or by procuring the
goods so delivered, on the agreed date or within the agreed period, and in the manner
customary at the port.
• It should be noted that where the goods are in containers, it is typical for the seller to
hand over the goods over to the carrier at a terminal, before they are on board the ship.
In such situations, the FOB rule would be inappropriate and the FCA rule should be
used.
• The buyer must take delivery of the goods, when they have been delivered.
 FOB (Contd.)
• Transfer of risks (Article A5 and B5):
• The seller bears all risks of loss of or damage to the goods, until they have been delivered.
• The buyer bears all risks of loss of or damage to the goods, from the time they have been
delivered.

• Allocation of costs (Article A6 and B6):

• The seller must pay,

• all costs relating to the goods, until they have been delivered, including costs of loading, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon
export.

• The buyer must pay,

• all costs relating to the goods, from the time they have been delivered,
• the freight and all other costs, under the contract of carriage, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon
import and the costs for their transport through any country, if any.
FOB (Contd.)
 10. COST AND FREIGHT – CFR
(insert named port of destination)

• This rule has two critical points. Risk passes and costs are transferred at
different places.
• This rule is not suitable for sea transport in containers (since it is typical
for the seller to hand over the goods over to the carrier at a terminal,
before they are on board the ship). So, even in the case of sea transport
of goods in container, the CFR rule would be inappropriate and the CPT
rule should be used.
• General Obligations (Article A1 and B1):
• The seller must provide the goods and the commercial invoice (in
conformity with the contact of sale).
• The buyer must pay the price of the goods (as provided in the contract of
sale).
 CFR (Contd.)
• Contracts of Carriage and Insurance (Article A3 and B3):
• The seller must contract, at its own expense, for the carriage of goods, from the named
place of delivery, to the named port of destination. The contract must be made on usual
terms and provide for carriage by usual route, in a vessel of the type normally used for
the transport of similar goods.
• The buyer has no obligation to make a contract of carriage.
• Neither the seller, nor the buyer, has any obligation to make a contract of insurance.

• Delivery (Article A4 and B4):

• The seller must deliver the goods, either by placing them on board the ship, or by
procuring the goods so delivered, on the agreed date or within the agreed period, and in
the manner customary at the port.
• The buyer must take delivery of the goods, when they have been delivered and receive
them from the carrier at the named place of destination.
• It should be noted that where the goods are in containers, it is typical for the seller to
hand over the goods over to the carrier at a terminal, before they are on board the ship. In
such situations, the CFR rule would be inappropriate and the CPT rule should be used.
 CFR (Contd.)
• Transfer of risks (Article A5 and B5):
• The seller bears all risks of loss of or damage to the goods, until they have been delivered.
• On the other hand, the buyer bears all risks of loss of or damage to the goods, from the time they have
been delivered.

• Allocation of costs (Article A6 and B6):

• The seller must pay,

• all costs relating to the goods, until they have been delivered;
• the freight and all other costs under the contract of carriage, including the costs of loading the
goods on board the vessel and charges for unloading, including lighterage and wharage charges,
at the named port of destination; and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon
export, and the costs of their transport through any country, if any.

• The buyer must pay,

• all costs relating to the goods from the time they have been delivered; and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon
import.
CFR (Contd.)
 11. COST INSURANCE AND FREIGHT – CIF
(insert named port of destination)

• CIF = CFR + a cargo insurance, complying with the minimum cover.

• This rule has two critical points. Risk passes and costs are transferred at
different places.
• This rule is not suitable for sea transport in containers (since it is typical for
the seller to hand over the goods over to the carrier at a terminal, before
they are on board the ship). So, even in the case of sea transport of goods in
container, the CIF rule would be inappropriate and the CIP rule should be
used.

• General Obligations (Article A1 and B1):

• The seller must provide the goods and the commercial invoice (in
conformity with the contact of sale).
• The buyer must pay the price of the goods (as provided in the contract of
sale).
 CIF (Contd.)
• Contracts of Carriage and Insurance (Article A3 and B3):

• The seller must contract, at its own expense, for the carriage of
goods, from the named place of delivery, to the named port of
destination. The contract must be made on usual terms and
provide for carriage by usual route, in a vessel of the type
normally used for the transport of similar goods.
• The buyer has no obligation to make a contract of carriage.
 CIF (Contd.)
• Contract of insurance:
• The seller must obtain, at its own expense, a cargo insurance complying at least
with the minimum cover, provided by Clauses (C) of the Institute Cargo Clauses or
any similar clauses. The insurance must be contracted with an insurance company
of good repute and must entitle the buyer or any person having an insurable
interest in the goods, to claim directly from the insurer.
• When required by the buyer, the seller must provide, at buyer’s expense, any
additional cover, provided by Clauses (A) or (B) of the Institute Cargo Clauses or
any similar clauses and / or cover complying with the Institute War Clauses and /
or Institute Strike Clauses or any similar clauses.
• The insurance must cover, at least, the price provided in the contract, plus
10% (i.e. 110%) and must be in the currency of the contract.
• The insurance must cover the goods from the named place of delivery to, at least,
the named port of destination.
• The buyer has no obligation to make contract of insurance.
 CIF (Contd.)
• Delivery (Article A4 and B4):
• The seller must deliver the goods, either by placing them on board the
ship, or by procuring the goods so delivered, on the agreed date or within
the agreed period, and in the manner customary at the port.
• The buyer must take delivery of the goods, when they have been delivered
and receive them from the carrier at the named place of destination.

• Transfer of risks (Article A5 and B5):

• The seller bears all risks of loss of or damage to the goods, until they have
been delivered.
• On the other hand, the buyer bears all risks of loss of or damage to the
goods, from the time they have been delivered.
 CIF (Contd.)
• Allocation of costs (Article A6 and B6):

• The seller must pay,

• all costs relating to the goods, until they have been delivered;
• the freight and all other costs under the contract of carriage, including the costs of loading the goods on
board the vessel and charges for unloading, including lighterage and wharage charges, at the named port
of destination;
• the cost of insurance, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon export, and
the costs of their transport through any country, if any.

• The buyer must pay,

• all costs relating to the goods from the time they have been delivered;
• the cost of additional insurance (if any), procured by the seller at the buyer’s request, and
• the costs of customs formalities, as well as, all duties, taxes and other charges payable upon import.

• FAS: It should be noted that where the goods are in containers, it is typical for the seller to
hand over the goods over to the carrier at a terminal, and not alongside the ship. In such
situations, the FAS rule would be inappropriate and the FCA rule should be used.
CIF (Contd.)
Rules for Any Mode(s) of Transport