TIGER Logistic Link INCOTERMS 2010 INCOTERMS. The rules come into effect on January 1, Israel Tel.:

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1 2010 The rules come into effect on January 1, 2011

2 CONTENTS Introduction to Incoterms Incoterms Groups... 4 Incoterms Classes... 4 Notes on Incoterms... 5 E TERMS... 7 EXW... 7 F TERMS... 9 FCA... 9 FAS FOB CFR CIF CPT CIP D TERMS DAT DAP DDP... 27

3 Introduction to Incoterms 2010 While the terms of sale in international business sound similar to those used in domestic contracts, they often have different meanings. Confusion over these terms can result in diminished profits or lost sales. Incoterms By the 1920s, international traders had developed a set of trade terms to describe their rights and obligations with regard to the sale and transport of goods. These terms consisted of short abbreviations for lengthy contract provisions. Unfortunately, there was no uniform interpretation of these terms. To improve this aspect of international trade, the International Chamber of Commerce (ICC) in Paris developed Incoterms (INternational COmmercial TERMS), a set of uniform rules for the interpretation of terms defining the costs, risks, and obligations of buyers and sellers in international transactions. First published in 1936, these rules have been periodically revised to account for changing modes of transport, document delivery, and security. Incoterms 2010 In late 2010 the ICC issued its latest revision, Incoterms Please note: 1. The new rules enter into force on January 1, Contracts are interpreted by the version of Incoterms referred to in the contract. Therefore, only a contract that refers to Incoterms 2010 will be governed by rules from that version. Incoterms 2010 vs. Incoterms 2000 Incoterms 2010 rules incorporate a number of changes from Incoterms Here are some key items: 1. Incoterms 2000 had 13 rules whereas Incoterms 2010 has 11 rules. For Incoterms 2010, four of the D rules: DAF, DES, DEQ, and DDU were dropped, and two new D rules were created: DAT and DAP 2. In Incoterms 2000, a number of rules, such as FOB, established that the seller delivers the goods when they pass the ship s rail. In Incoterms 2010 these rules require that the goods be delivered on board the vessel. 3. Incoterms 2000 established four groups of rules: E: Departure, F: Main Carriage Unpaid, C: Main Carriage Paid, and D: Arrival. Incoterms 2010, however, establishes two classes: 1) rules applicable for all modes of transport, and 2) rules applicable only for sea and inland waterway transport. See the next page for details. 4. Incoterms 2010 gives electronic communications the same status as paper communication so long as the parties agree. 5. Incoterms 2010 rules obligate both seller and buyer to give assistance in securing security clearances. 6. Incoterms 2010 now acknowledges the existence of string sales, where goods in transit may be sold multiple times before arrival, by giving the seller the option to procure goods shipped. Use of Incoterms Incoterms are not laws enacted by governments. Rather, they are rules agreed to by parties to a contract. Also, Incoterms are not implied into contracts for the sale of goods. If you desire to use Incoterms, you must specifically include them in your contract. Your contract should expressly refer to a specific version of Incoterms. For example: CIF Oakland, California, USA, Incoterms 2010 Incoterms Do... Incoterms 2010 may be included in a sales contract if the parties desire the following: 1. To complete a sale of goods. 2. To indicate each contracting party s costs, risks, and obligations concerning these aspects of delivery: a. When is the delivery completed? b. How does a party ensure that the other party has met the standard of performance? c. Which party must obtain requisite licenses and comply with government-imposed import/export formalities? d. What are the modes and terms of carriage? e. What are the delivery terms? f. When is the risk of loss transferred from the seller to the buyer? g. How will transport and other costs be divided between the parties? h. What notices are the parties required to give to each other regarding the transport and transfer of the goods? 3. To establish basic terms of transport and delivery in a short format. Incoterms Do Not... Incoterms 2010 are not sufficient on their own to express the full intent of the parties. They do not: 1. Apply to con tracts for services. 2. Define contractual rights and obligations other than for delivery. 3. Specify details of the transfer, transport, and delivery of the goods. 4. Determine how title to the goods will be transferred. 5. Protect a party from risk of loss. 6. Define the remedies for breach of contract.

4 Illustrated Guide to Incoterms 2010 The World Trade Press Illustrated Guide to Incoterms 2010 was designed to give a graphic representation of the buyer s and seller s risks and costs under each of the 11 Incoterms. The material on each facing page gives a summary of seller and buyer responsibilities. Incoterms Groups In the past, Incoterms were arranged into four groups: E (Departure), F (Main carriage unpaid), C (Main carriage paid), and D (Arrival). Traders, however, were mistakenly picking ocean transport terms (like FOB) for shipments by air. Incoterms 2010 classifies terms by mode of transport, but the four original groupings remain valid: Incoterms 2010 Groups Group E Departure EXW EX Works (...named place of delivery) Group F Main FCA Free CArrier (...named place of delivery) Carriage FAS Free Alongside Ship (...named port of shipment) FOB Free On Board (...named port of shipment) Group C Main CFR Cost and FReight (...named port of destination) Carriage Paid CIF Cost Insurance and Freight (...named port of destination) CPT Carriage Paid To (...named place of destination) CIP Carriage and Insurance Paid To (...named place of destination) Group D Arrival DAT Delivered At Terminal (...named terminal at port or place of destination) DAP Delivered At Place (...named place of destination) DDP Delivered Duty Paid (...named place of destination) Incoterms Classes As mentioned, picking an inappropriate term can present problems. The pages describing individual Incoterms will assist you in making the right choice, but for the moment, you should know that some terms are applicable for all modes of transport, while others are applicable only for sea and inland waterway transport. Incoterms 2010 Classes All modes of EXW EX Works (...named place of delivery) transport including FCA Free CArrier (...named place of delivery) multimodal CPT Carriage Paid To (...named place of destination) CIP Carriage and Insurance Paid To (...named place of destination) DAT Delivered at Terminal (...named terminal at port or place of destination) DAP Delivered At Place (...named place of destination) DDP Delivered Duty Paid (...named place of destination) Sea and inland FAS Free Alongside Ship (...named port of shipment) waterway transport FOB Free On Board (...named port of shipment) CFR Cost and FReight (...named port of destination) CIF Cost Insurance and Freight (...named port of destination) delivery In common usage, delivery is the act of delivering something, while the place of delivery is often the buyer s place of business. In Incoterms 2010, however, delivery is the point where the risk of loss or damage passes from the seller to the buyer. This is often the named port or place but not necessarily the buyer s place of business. Definitions multimodal Use of more than one mode of transport (road, rail, sea, air) to transport goods (or people) from origin to final carrier In common usage, a carrier is a firm that transports goods or passengers for hire, rather than simply arranging for such transport. In Incoterms, however, the carrier can be any person or firm who by contract undertakes to perform or

5 pre-carriage The initial transport of goods from the seller s premises to the main port or place where main carriage begins. Usually by truck, rail, or inland waterway. main carriage The primary transport of goods, generally for the longest part of the journey and generally from one country to another. Usually by sea vessel or by airplane, but also by truck, rail, or inland waterway. onward carriage Transport from the port, terminal, or place of arrival in the country of destination to the buyer s premises. Usually by truck, rail, or inland waterway. procure such services. The buyer nominates the carrier and the seller need only accept the nomination for the term to work. string sale The sale, and successive resale, of a single shipment of goods while en route from place of shipment to final This is common in the commodity trade, where oil, grain, and ore shipments are sold and resold before the vessel arrives in port. A number of Incoterms now take this practice into account by giving the seller the option to procure goods already so delivered. Notes on Incoterms 1. Underlying Contract Incoterms were designed to be used within the context of a written contract for the sale of goods (not services). Incoterms, therefore, refe to the contract of sale, rather than the contract of carriage of the goods. Buyers and sellers should specify that their contract be governed by Incoterms Two Components Each Incoterm has two components: the term name, and a named place, port, or terminal. For example: EXW, Seller s warehouse located at. Or, DDP, Buyer s warehouse located at. An Incoterm is incomplete without both components. 3. Precise Point of Delivery In addition to a specific named port, place, or terminal, it may be necessary to name a precise point of delivery. For example, the original terms of sale may state CFR Port of Rotterdam. The Port of Rotterdam, however, is huge. The buyer who prefers a particular point within the port should name the specific point in the sales contract and in the trade term. This may be an important issue in situations where the buyer is responsible for unloading, storage, and other charges once the goods have been made available at the named place. In some cases it may not be possible for the buyer to name the precise point of delivery at the time of contract. However, if the buyer does not do so in a timely manner, the seller may make delivery within a range of places that is within the terms of the contract, but inconvenient for the buyer. 4. EXW and FCA The buyer who purchases on Ex Works (EXW) or Free Carrier (FCA) terms will need to arrange for the contract of carriage. Also, since the seller will not receive a bill of lading, using a letter of credit requiring a bill of lading will not be possible. 5. EDI: Electronic Data Interchange It is increasingly common for sellers to prepare and transmit documents electronically. Incoterms provide for EDI and electronic documents so long as buyers and sellers agree on their use in the sales contract. 6. Insurable Interest In most cases, neither the buyer nor the seller is obligated to provide insurance. In fact, only two Incoterms mention insurance: CIP and CIF. In both cases the seller is obligated to secure insurance for the buyer, but only for minimum coverage. The seller and buyer, however, may have insurable interest in the goods, and prudence may dictate purchase of insurance coverage or additional insurance coverage. 7. Customs of the Port or Trade Incoterms are an attempt to standardize trade terms for all nations and all trades. However, different ports and different trades have their own customs and practices. It is best if such practices are specified in the sales contract. 8. Export/Import Customs Clearance It is usually desirable that export customs formalities be handled by the seller and import customs formalities be handled by the buyer. However, some trade terms (such as EXW) require that the buyer handle export formalities, while others, such as DDP, require that the seller handle import formalities. In each case, the buyer and seller will have to assume risks and costs associated with export and import formalities and duties. In some cases, foreign exporters may not be able to obtain import licenses in the country of import. Parties should research the pertinent local trade laws before using such terms. 9. Variants of Incoterms (Added Wording) Incoterms give no guidance regarding the addition of words to individual terms. In practice, the seller and buyer may agree to added wording. For example, if the seller agrees to DDP terms, agreeing to pay for customs formalities and import duties but not for VAT (value added tax), the term DDP VAT Unpaid may be used. Adding wording to an Incoterm, however, may present a risk if the wording contradicts the fundamental meaning of the Incoterm itself. For example, if the seller agrees to CIF, seller responsible for unloading the aircraft, there is an inherent problem, because CIF can only be used for transport by sea or inland waterway. Use additional wording only if you are certain that it is consistent with the meaning of the term used.

6 10. Packing It is the responsibility of the seller to provide packaging unless the goods shipped are conventionally shipped unpackaged (commodities such as oil or grain). In most situations it is best if the buyer and seller agree in the sales contract on the type and extent of packing required. However, it may not be possible to know beforehand the type or duration of transport. As a result, it is the responsibility of the seller to provide for safe and appropriate packaging, but only to the extent that the buyer has made the circumstances of the transport known beforehand. If the seller is responsible for packing goods in an ocean or air freight container, their responsibility includes stuffing the container properly to withstand shipment. 11. Inspection There are several issues related to inspections: a) the seller is responsible for costs of inspection to make certain the quantity and quality of the shipment are in conformity with the sales contract; b) pre-shipment inspections as required by the export authority are the responsibility of the party responsible for export formalities; c) import inspections as required by the import authority are the responsibility of the party responsible for import formalities; and d) third-party inspections for independent verification of quality and quantity (if required) are generally the responsibility of the buyer. The buyer may require such an inspection and inspection document as a condition of payment. 12. Passing of Risks and Costs In all E, F, and D terms, both risks and costs pass from seller to buyer at the named place, port, or terminal. In all C terms, however, the transfer of risks occurs at a different point than the transfer of costs. Refer to each term for details. 13. Carrier In common usage, a carrier is a firm that transports goods or passengers for hire, rather than simply arranging for such transport. In Incoterms, however, carrier is the party with whom carriage is contracted and can be any person or firm. In practice, the buyer nominates the carrier and the seller need only accept the nomination. It is recommended that the carrier be named in the sales contract.

7 E TERMS Departure Terms EXW EXW, Ex Works (... named place of delivery) Air Yes In Ex Works, the seller/exporter/manufacturer merely makes the goods available to the buyer at the seller s named place of delivery, which is commonly, but not necessarily, the seller s place of business. With EXW, the seller has no responsibility to load the goods onto a truck or other transport vehicle or to clear the goods for export. This trade term places the greatest responsibility on the buyer and minimum obligations on the seller. The parties to the transaction, however, may stipulate that the seller be responsible for loading the goods onto a transport vehicle at the risk and cost of the buyer. Such a stipulation is a variant and must be made within the contract of sale. When using the FCA term, it is advisable to clearly specify in the contracts of sale and carriage the precise point of delivery. The EXW term is generally not recommended for international trade transactions, as loading the goods at the seller s named place and handling export formalities usually places too much of a burden upon the buyer. If the buyer cannot handle loading the goods or export formalities, the EXW term should not be used. In such a case, FCA is recommended. The EXW term is often used when making an initial quotation for the sale of goods. It represents the cost of the goods without any other costs included. The EXW term is commonly used in courier shipments when the courier picks up the shipment from client s premises and loads courier s own truck. Payment terms for Ex Works transactions are generally cash in advance and open account. Examples EXW, ABC Factory, Full Address, Paris, France EXW, XYZ Printing Plant, Full Address, Singapore Modes of Transport Rail Yes Road Yes Sea Yes Inland Waterway Yes Multimodal Yes Incoterm Category EXW specifies that the seller/exporter/manufacturer merely makes the goods available to the buyer, not cleared for export, at the seller s named place of delivery, which is commonly, but not necessarily, the seller s place of business. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Provide the buyer, at the buyer s risk and cost, assistance in securing any license, documents, authorizations, and security clearance required for the export of the goods. 3. Carriage and Insurance The seller has no obligation to provide for carriage of goods or for insurance. Provide the buyer, at the buyer s request and cost (if any), information required to obtain insurance. 4. Delivery Make the goods available to the buyer at the named place and point of delivery at the time stipulated in the sales contract. If the buyer has not stipulated a specific point at

8 the named place of delivery, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been made available to the buyer at the named place of delivery, at the agreedupon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been made available to the buyer at the named place of delivery. 7. Notice to the Buyer Provide notice that enables the buyer to take delivery of the goods. 8. Delivery and Transport Document(s) The seller has no obligation to provide the buyer with a delivery document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, with assistance in securing information and documents, including security information, the buyer requires for export, transport, and import of the goods to the final Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. 2. Licenses, Security, and Customs Formalities Obtain any export and import licenses or authorizations, and handle all export and import customs formalities. 3. Carriage and Insurance Buyer has no obligation to seller for carriage or insurance. Provide for carriage of the goods from the named place of delivery to the buyer s 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered (made available) at the named place of delivery as provided in the sales contract. Assume all risk of loss or damage if the goods are not picked up at the agreed-upon time and place. 6. Costs Pay all costs from the time the goods have been delivered (made available) at the named place of delivery. Pay all costs related to carriage of the goods from the named place of delivery to the buyer s final Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to export and import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller If, according to the sales contract, the buyer is entitled to specify a time for taking delivery or the point of taking delivery at the named place of delivery, to give seller sufficient notice. 8. Proof of Delivery Provide the seller with evidence of taking delivery. 9. Inspection(s) Pay for pre-shipment inspections including those required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, the buyer requires for export and import formalities, security clearance, and transport of the goods to the final

9 FCA FCA, Free Carrier (... named place of delivery) F TERMS Main Carriage Unpaid Terms In Free Carrier, the seller/exporter/manufacturer clears the goods for export and delivers them to the carrier specified by the buyer at the named place of delivery. If the named place of delivery is the seller s place of business, the seller is responsible for loading the goods onto the transport vehicle. If the named place is any other location, such as the loading dock of the carrier, the seller is not responsible for unloading. When using the FCA term, it is advisable to clearly specify in the contracts of sale and carriage the precise point of delivery. Carrier has a special meaning. Technically, a carrier is a firm that itself transports goods or passengers for hire, rather than simply arranging for such transport. Examples are a shipping line, airline, trucking firm, or railway. In the FCA term, however, the carrier can be any person who by contract undertakes to perform or procure such services by any of the above methods of transport including multimodal. Therefore, a person, such as a freight forwarder, can act as a carrier. With the FCA term, the buyer nominates the carrier, and the seller need only accept the nomination for the term to work. The FCA term may be used for any mode of transport including multimodal. With FCA, the named place of delivery is domestic to the buyer. The FCA term is often used when making an initial quotation for the sale of goods. Examples FCA, ABC Shipping, Door 4, Full Address, Hamburg, Germany FCA, XYZ Airlines Cargo Terminal, San Francisco International Airport (SFO), USA Modes of Transport Air Yes Rail Yes Road Yes Sea Yes Inland Waterway Yes Multimodal Yes Incoterm Category FCA is an F term specifying that the seller/exporter/ manufacturer is responsible for delivering the goods to the carrier, export cleared, at the named place of delivery, but does not bear risk or costs afterwards. Note:Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures. 3. Carriage and Insurance The seller has no obligation to provide for carriage of goods or for insurance. At the request of the buyer, the seller may contract for carriage on standard industry terms at the buyer s risk and cost. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods to the carrier at the named place of delivery at the time stipulated in the sales contract. If the

10 named place of delivery is the seller s place of business, the seller is responsible for loading the goods onto the transport vehicle. If the named place is any other location, such as the loading dock of the carrier, the seller is not responsible for unloading. If the buyer has not stipulated a specific point at the named place of delivery, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risk of loss or damage to the goods until they have been delivered to the carrier at the named place of delivery, within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered to the carrier at the named place of delivery. Pay all costs relating to export, including customs formalities, duties, and taxes. 7. Notice to the Buyer At buyer s risk and cost, provide notice to the buyer that the goods have been delivered to the carrier, or that the carrier did not take possession of the goods at the agreed-upon time. 8. Delivery and Transport Document(s) Provide the buyer with a proof of delivery. At the buyer s request, if the proof of delivery is not a transport document, help the buyer obtain a transport document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, the buyer requires for transport and import of the goods to the final Reimburse the buyer for buyer s costs related to securing information and documents, including security information the seller requires for export formalities and security clearance of the goods. Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. 2. Licenses, Security, and Customs Formalities Obtain any import licenses or authorizations and handle all import customs formalities. 3. Carriage and Insurance Provide for carriage of the goods from the named place of delivery. Buyer has no obligation to the seller for insurance. 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered to the carrier at the named place of delivery. Assume all risk of loss or damage and other costs if the buyer s carrier fails to take delivery at the agreedupon time and place. 6. Costs Pay all costs for carriage and insurance from the time the goods have been delivered to the carrier at the named place of delivery. Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller Give sufficient notice to the seller of the name of the carrier, the delivery point, the time or period for delivery, and the mode of transport. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named place of delivery.

11 FAS Free Alongside Ship (... named port of shipment) In Free Alongside Ship, the seller/exporter/manufacturer clears the goods for export and places them alongside the ship (on a dock or barge) at the named port of shipment. When using the FAS term, it is advisable to clearly specify in the contract of sale, and in contracts of carriage, not only the named port of shipment, but also the precise loading point at or within the named port of shipment. This is particularly the case when the named port of shipment is large and options abound for delivery points. With FAS, the seller has the option to deliver the goods alongside the ship, or to procure goods already so delivered. This is a reference to so-called string sales where a single shipment might be resold multiple times during transport, as is common in the commodity trade. The FAS term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore. If the shipment is containerized or to be containerized, common practice is to deliver the shipment to the carrier at a terminal and not alongside a ship. In such situations, the FCA term is recommended. The named place in FAS is a port, and therefore the term is used only for ocean or inland waterway transport. With FAS, the named port of shipment is domestic to the seller. Usual payment terms for FAS transactions are cash in advance and open account, but letters of credit are also used. Examples FAS, ABC Shipping Line, Dock #2, Port Elizabeth, South Africa FAS, XYZ Shipping Line, Quay #4, Le Havre, France Modes of Transport Air No Rail No Road No Sea Yes Inland Waterway Yes Multimodal No Incoterm Category FAS is an F term specifying that the seller/exporter is responsible for delivering the goods, export cleared, alongside the ship, but does not bear risk or costs afterwards. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered Used only for ocean or inland waterway transport. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures. 3. Carriage and Insurance The seller has no obligation to provide for main carriage of goods or for insurance. At the request of the buyer, the seller may contract for carriage on standard industry terms at the buyer s risk and cost. No obligation to provide insurance. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods alongside the ship at the named port of shipment, or procure the goods so delivered, within the agreed-upon time stipulated in the sales contract. If the buyer has not stipulated a specific loading point at the named port of shipment, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been delivered alongside the ship at the named port of shipment within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered alongside the ship at the named port of shipment. Pay all costs relating to export, including customs formalities, duties, and taxes.

12 7. Notice to the Buyer At buyer s risk and cost, provide notice to the buyer that the goods have been delivered alongside the ship at the named port of shipment, or that the ship did not take possession of the goods at the agreed-upon time. 8. Delivery and Transport Document(s) Provide the buyer with a proof of delivery that the goods have been delivered alongside the ship at the named port of shipment. At the buyer s request, if the proof of delivery is not a transport document, help the buyer obtain a transport document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, required by the buyer for transport and import of the goods to the final Reimburse the buyer for buyer s costs related to securing information and documents, including security information, the seller requires for export formalities and security clearance of the goods to the named port of shipment. Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. 2. Licenses, Security, and Customs Formalities Obtain any import licenses or authorizations and handle all import customs formalities. 3. Carriage and Insurance Provide for loading and carriage of the goods from the named port of shipment. Buyer has no obligation to the seller for insurance. 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered alongside the ship at the named port of shipment as provided in the sales contract. If the buyer nominates the ship, assume all risk of loss or damage and costs if the named ship does not arrive on time, or if the ship fails to take the goods, or if sufficient notice is not given to seller regarding ship name, loading point, and time. 6. Costs Pay all costs for carriage and insurance from the time the goods have been delivered alongside the ship at the named port of shipment. Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller If the buyer nominates the ship, give sufficient notice to the seller of the name of the ship, the loading point, and the time or period for delivery. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named port of shipment.

13 FOB Free On Board (... named port of shipment) In Free On Board, the seller/exporter/manufacturer clears the goods for export and delivers them on board the named vessel at the named port of shipment. This is a change from Incoterms 2000, where the seller was responsible only to deliver the goods past the ship s rail. With FOB, the seller has the option to deliver the goods on board the vessel, or to procure goods already so delivered. This is a reference to so-called string sales, where a single shipment might be resold multiple times during transport, as is common in the commodity trade. The named place in FOB is a port and therefore the term is used only for ocean or inland waterway transport. With FOB, the named port of shipment is domestic to the seller. If the shipment is containerized or to be containerized, common practice is to deliver the shipment to the carrier at a terminal and not on board a ship. In such situations, the FCA term is recommended. The FOB term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore. The key document in FOB transactions is the On Board Bill of Lading. The named place in FOB is a port, and therefore the term is used only for ocean or inland waterway transport. Sellers and buyers often misuse the FOB term. FOB does not mean loading goods onto a truck or train at the seller s place of business. FOB is used only in reference to delivering the goods on board a ship in ocean or inland waterway transport. The FCA term, on the other hand, is applicable to all modes of transport. Examples FOB, ABC Shipping Line, Vessel XYZ, Buenos Aires, Argentina FOB, DEF Shipping Line, Vessel UVW, Gdansk, Poland Modes of Transport Air No Rail No Road No Sea Yes Inland Waterway Yes Multimodal No Incoterm Category FOB is an F term specifying that the seller/exporter is responsible for delivering the goods, export cleared, on board a ship, but does not bear risk or costs afterwards. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered Used only for ocean or inland waterway transport. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures. 3. Carriage and Insurance The seller has no obligation to provide for main carriage of goods or for insurance. At the request and cost of the buyer, the seller may contract for carriage on standard industry terms at the buyer s risk and cost. No obligation to provide insurance. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods on board the named vessel at the named port of shipment at the time stipulated in the sales contract, or procure the goods so delivered. If the buyer has not stipulated a specific loading point at the named port of shipment, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been delivered on board the ship at the named port of shipment, within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered on board the vessel at the named port of shipment. Pay all costs

14 relating to export, including customs formalities, duties, and taxes. 7. Notice to the Buyer At buyer s risk and cost, provide notice to the buyer that the goods have been delivered on board the ship at the named port of shipment, or that the ship did not take possession of the goods at the agreed-upon time. 8. Delivery and Transport Document(s) Provide the buyer with a proof of delivery that the goods have been delivered on board the ship at the named port of shipment. At the buyer s request, if the proof of delivery is not a transport document, help the buyer obtain a transport document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, required by the buyer for transport and import of the goods to the final Reimburse the buyer for buyer s costs related to securing information and documents, including security information the seller requires for export formalities and security clearance of the goods to the ship at the named port of shipment. Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. 2. Licenses, Security, and Customs Formalities Obtain any import licenses or authorizations and handle all import customs formalities. 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered on board the ship at the named port of shipment. If the buyer nominates the ship, assume all risk of loss or damage and costs if the named ship does not arrive on time, or if the ship fails to take the goods, or if sufficient notice is not given to seller regarding ship name, loading point, and time. 6. Costs Pay all costs for carriage and insurance from the time the goods have been delivered on board the ship at the named port of shipment. Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller If the buyer nominates the ship, give sufficient notice to the seller of the name of the vessel, the loading point, and the time or period for delivery. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named port of shipment. 3. Carriage and Insurance Provide for carriage of the goods from the named port of shipment. Buyer has no obligation to the seller for insurance.

15 CFR Cost and Freight (... named port of destination) C TERMS Main Carriage Paid Terms In Cost and Freight, the seller/exporter/manufacturer clears the goods for export and delivers them on board the ship at the port of shipment (not destination). This is where risk passes from seller to buyer. The seller, however, is responsible for contracting for and paying the costs associated with transport of the goods to the named port of This is where costs transfer from seller to buyer. It is important to note that the transfer of risk from seller to buyer occurs at a different point than the transfer of costs. When using the CFR term, it is advisable to clearly specify in the contract of sale, and in contracts of carriage, not only the named port of destination, but also the precise point at or within the named port of With CFR, the seller has the option to deliver the goods on board the vessel, or to procure goods already so delivered. This is a reference to so-called string sales where a single shipment might be resold multiple times during transport, as is common in the commodity trade. The named destination in CFR is a port, and therefore the term is used only for ocean or inland waterway transport. If the shipment is containerized or to be containerized, common practice is to deliver the shipment to the carrier at a terminal and not on board a ship. In such situations, the CPT term is recommended. With CFR, the named port of destination is domestic to the buyer. The CFR term is commonly used the sale of a) bulk commodity cargo such as oil, grains, and ore, b) oversize and overweight cargo that will not fit into an ocean container, and c) cargo that exceeds the weight limitations of ocean containers. Examples CFR, Terminal 2, Port of Oakland, California, USA CFR, ABC Terminal, Port of Tokyo, Japan Modes of Transport Air No Rail No Road No Sea Yes Inland Waterway Yes Multimodal No Incoterm Category CFR is a C term specifying that the seller is responsible for delivering the goods on board the ship at the port of shipment and contracting and paying for carriage to the named port of C terms evidence shipment (as opposed to arrival ) contracts. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures.

16 3. Carriage and Insurance Contract or procure a contract for the carriage of the goods from the point of delivery to the named port of destination No obligation to provide insurance. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods on board the ship at the port of shipment (not destination) or procure goods already so delivered within the agreed-upon time. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been delivered on board the ship at the port of shipment (not destination), within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered on board the ship at the port of shipment. Pay all costs of loading and carriage to the named port of Pay for costs of unloading if unloading is included in the contract for main carriage. Pay all costs relating to export, including customs formalities, duties, and taxes, as well as costs required for transshipment through any country up to the named port of 7. Notice to the Buyer Provide notice that enables the buyer to take timely possession of the goods at the named port of 8. Delivery and Transport Documents Provide the buyer with a transport document, dated within the period agreed, that allows the buyer to claim the goods at the named port of destination and (unless otherwise agreed) allows the buyer to sell the goods while in transit through the transfer of the document or by notification to the sea carrier. If a negotiable transport document is issued, a full set of originals must be given to the buyer. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, required by the buyer for import and transport of the goods from the named port to the final Reimburse the buyer for buyer s costs related to securing information and documentation, including security information the seller requires for export formalities, transport, security clearance, and transshipment to the named port of Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. 2. Licenses, Security, and Customs Formalities Obtain any import licenses or authorizations and handle all import customs formalities. 3. Carriage and Insurance Buyer has no obligation to the seller. 4. Taking Delivery Take delivery of the goods at the named port of destination as provided in the contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered on board the ship at the port of shipment (not destination). 6. Costs Pay any additional costs for the goods, other than main carriage, once they have been delivered on board the ship at the port of shipment. Pay costs of unloading, lighterage, and wharfage at the port of destination unless such costs were to be paid by seller under seller s contract for carriage. Pay all costs relating to import formalities, duties, fees, and taxes. Pay costs of onward carriage. 7. Notice to Seller If, according to the sales contract, the buyer is entitled to specify a time for shipping or the point of receiving the shipment at the named port of destination, to give seller sufficient notice. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named port of

17 CIF Cost, Insurance, and Freight (... named port of destination) In Cost, Insurance, and Freight, the seller/exporter/manufacturer clears the goods for export and delivers them on board the ship at the port of shipment (not destination). This is where risk passes from seller to buyer. The seller, however, is responsible for contracting for and paying the costs associated with transport of the goods and minimum cover insurance to the named port of This is where costs transfer from seller to buyer. It is important to note that the transfer of risk from seller to buyer occurs at a different point than the transfer of costs. When using the CIF term, it is advisable to clearly specify in the contract of sale and in contracts of carriage, not only the named port of destination, but also the precise point at or within the named port of With CIF, the seller has the option to deliver the goods on board the vessel, or to procure goods already so delivered. This is a reference to so-called string sales where a single shipment might be resold multiple times during transport, as is common in the commodity trade. The named destination in CIF is a port, and therefore the term is used only for ocean or inland waterway transport. If the shipment is containerized or to be containerized, common practice is to deliver the shipment to the carrier at a terminal and not on board a ship. In such situations, the CIP term is recommended. With CIF, the named port of destination is domestic to the buyer. The CIF term is commonly used in the sale of a) bulk commodity cargo such as oil, grains, and ore, b) oversize and overweight cargo that will not fit into an ocean container, and c) cargo that exceeds the weight limitations of ocean containers. Examples CIF, Terminal 2, Port of Oakland, California, USA CIF, ABC Terminal, Port of Tokyo, Japan Modes of Transport Air No Rail No Road No Sea Yes Inland Waterway Yes Multimodal No CIF is a C term specifying that the seller is responsible for delivering the goods on board the ship at the port of shipment, and contracting and paying for carriage and insurance to the named port of C terms evidence shipment (as opposed to arrival ) contracts. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Obtain at own risk and cost all export licenses, documents, and authorizations and carry out export formalities and procedures. 3. Carriage and Insurance Contract or procure a contract for the carriage of the goods from the point of delivery to the named port of Obtain and pay for minimum cover cargo insurance (Institute Cargo Clauses, Clause C coverage) from a reputable insurance company or underwriter. Insurance must provide coverage at least to the named port of destination, entitle the buyer to make a claim directly to the insurer, be for a minimum of 110% of the contract amount, and be in the currency of the sales contract. Provide the buyer with an insurance policy or evidence of insurance. Provide information to enable the buyer to obtain additional insurance.

18 4. Delivery Deliver the goods on board the ship at the port of shipment or procure goods already so delivered. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been delivered on board the ship at the port of shipment (not destination), within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered on board the ship at the port of shipment. Pay all costs of loading and carriage to the named port of Pay for the cost of insurance as described in #3 above. Pay for costs of unloading if unloading is included in the contract for main carriage. Pay all costs relating to export, including customs formalities, duties, and taxes, as well as costs required for transshipment through any country up to the named port of 7. Notice to the Buyer Provide notice that enables the buyer to take timely possession of the goods at the named port of 8. Delivery and Transport Documents Provide the buyer with a transport document, dated within the period agreed, that allows the buyer to claim the goods at the named port of destination and (unless otherwise agreed) allows the buyer to sell the goods while in transit through the transfer of the document or by notification to the sea carrier. If a negotiable transport document is issued, a full set of originals must be given to the buyer. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, required by the buyer for import and transport of the goods from the named port to the final Reimburse the buyer for buyer s costs related to securing information and documentation, including security information the seller requires for export formalities, transport, security clearance, and transshipment to the named port of Buyer s Responsibilities (summary) 1. Payment Pay for the goods as per sales contract. 2. Licenses, Security, and Customs Formalities Obtain any import licenses or authorizations and handle all import customs formalities. 3. Carriage and Insurance Buyer has no obligation to seller. 4. Taking Delivery Take delivery of the goods at the named port of destination as provided in the contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered on board the ship at the port of shipment (not destination). 6. Costs Pay any additional costs for the goods, other than main carriage, once they have been delivered on board the ship at the port of shipment. Pay costs of unloading, lighterage, and wharfage at the port of destination unless such costs were to be paid by seller under seller s contract for carriage. Pay all costs relating to import formalities, duties, fees, and taxes. Pay costs of onward carriage. 7. Notice to Seller If, according to the sales contract, the buyer is entitled to specify a time for shipping or the point of receiving the shipment at the named port of destination, to give seller sufficient notice. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named port of

19 CPT Carriage Paid To (... named place of destination) In Carriage Paid To, the seller/exporter/manufacturer clears the goods for export and is responsible for delivering the goods to the carrier at an agreed-upon place of shipment (not the destination). This is where risk passes from seller to buyer. The seller, however, is responsible for contracting for and paying the costs associated with transport of the goods to the named place of This is where costs transfer from seller to buyer. It is important to note that the transfer of risk from seller to buyer occurs at a different point than the transfer of costs. When using the CPT term, it is advisable to clearly specify in the contract of sale and in contracts of carriage, not only the named place of destination, but also the precise point at or within the named place of The CPT term may be used for any mode of transport including multimodal. In CPT, the named place of destination is domestic to the buyer. The CPT term is often used in sales where the shipment is by air freight, containerized ocean freight, courier shipments of small parcels, and in ro-ro (roll-on, roll-off) shipments of motor vehicles. If more than one carrier is used for carriage to the named place of destination, such as in multimodal shipments, the risk passes when the goods have been delivered to the first carrier. Examples CPT, ABC Rail Terminal, Madrid, Spain CPT, XYZ Barge Terminal, Frankfurt AM, Germany Modes of Transport Air Yes Rail Yes Road Yes Sea Yes Inland Waterway Yes Multimodal Yes Incoterm Category Carriage Paid To is a C term specifying that the seller is responsible for contracting and paying for carriage to the named place of C terms evidence shipment (as opposed to arrival ) contracts. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures as well as those required for transshipment through any country prior to delivery. 3. Carriage and Insurance Contract or procure a contract for the carriage of the goods from the point of delivery to the named place of No obligation to provide insurance. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods to the (first) carrier at the named place of shipment (not place of destination). 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been delivered to the (first) carrier at the place of shipment, within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered to the (first) carrier at the named place of shipment. Pay all costs of loading and carriage to the named place of Pay costs of unloading if unloading is included in the contract for main carriage. Pay all costs relating to export, including

20 customs formalities, duties, and taxes, as well as costs required for transshipment through any country up to the named place of 7. Notice to the Buyer Provide timely notice that the goods have been delivered to the (first) carrier and notice that enables the buyer to take timely possession of the goods at the named place of 8. Delivery and Transport Documents Provide the buyer with a transport document, dated within the period agreed, that allows the buyer to claim the goods at the named place of destination and (unless otherwise agreed) allows the buyer to sell the goods while in transit through the transfer of the document or by notification to the sea carrier. If a negotiable transport document is issued, a full set of originals must be given to the buyer. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, required by the buyer for import and transport of the goods from the named place to the final Reimburse the buyer for buyer s costs related to securing information and documentation, including security information the seller requires for export formalities, transport, security clearance, and transshipment to the named place of Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. 2. Licenses, Security, and Customs Formalities Obtain any import licenses or authorizations and handle all import formalities. 3. Carriage and Insurance The buyer has no obligation to seller for carriage or insurance. 4. Taking Delivery Take delivery of the goods at the named place of destination as provided in the contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered to the (first) carrier at the place of shipment. 6. Costs Pay costs other than main carriage after the goods have been delivered to the (first) carrier at the place of shipment. Such costs include unloading, lighterage, and wharfage at the place of destination unless such costs were to be paid by seller under seller s contract for carriage. Pay all costs relating to import formalities, duties, fees, and taxes. Pay costs of onward carriage. 7. Notice to Seller If, according to the sales contract, the buyer is entitled to specify a time or point of taking delivery at the named place of destination, to give seller sufficient notice. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named place of

21 CIP CIP, Carriage and Insurance Paid To (... named place of destination) In Carriage and Insurance Paid To, the seller/exporter/ manufacturer clears the goods for export and is responsible for delivering the goods to the carrier at an agreed-upon place of shipment (not the destination). This is where risk passes from seller to buyer. The seller, however, is responsible for contracting for and paying the costs associated with transport of the goods and minimum cover insurance to the named place of This is where costs transfer from seller to buyer. It is important to note that the transfer of risk from seller to buyer occurs at a different point than the transfer of costs. When using the CIP term, it is advisable to clearly specify in the contract of sale and in contracts of carriage, not only the named place of destination, but also the precise point at or within the named place of The CIP term may be used for any mode of transport including multimodal. In CIP, the named place of destination is domestic to the buyer. The CIP term is often used in sales where the shipment is by air freight, containerized ocean freight, courier shipments of small parcels, and in ro-ro (roll-on, roll-off) shipments of motor vehicles. If more than one carrier is used for carriage to the named place of destination, such as in multimodal shipments, the risk passes when the goods have been delivered to the first carrier. Examples CIP, ABC Rail Terminal, Siding C, Madrid, Spain CIP, XYZ Barge Terminal, Dock A, Frankfurt AM, Germany Modes of Transport Air Yes Rail Yes Road Yes Sea Yes Inland Waterway Yes Multimodal Yes Incoterm Category Carriage and Insurance Paid To is a C term specifying that the seller is responsible for contracting and paying for carriage and insurance to the named place of C terms evidence shipment (as opposed to arrival ) contracts. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. 2. Licenses, Security, and Customs Formalities Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures as well as those required for transshipment through any country prior to delivery. 3. Carriage and Insurance Contract or procure a contract for the carriage of the goods from the point of delivery to the named place of Obtain and pay for minimum cover cargo insurance (Institute Cargo Clauses, Clause C coverage) from a reputable insurance company or underwriter. Insurance must provide coverage at least to the named place of destination, entitle the buyer to make a claim directly to the insurer, be for a minimum of 110% of the contract amount, and be in the currency of the sales contract. Provide the buyer with an insurance policy or evidence of insurance. Provide information to enable the buyer to obtain additional insurance. 4. Delivery Deliver the goods to the (first) carrier at the named place of shipment (not place of destination).