International Commercial Terms
When negotiating an international sales contract, both parties need to pay as much attention to the terms of sales as to the sales price. To make it as clear as possible, an international set of trade terms (Incoterms) have been adopted by most countries that defines exactly the responsibility and risk of both the buyer and seller.
Basically this can be simplified as,
Costs
Who will bear the costs involved in delivering the goods
Risks
Who will bear the risks of loss or damage to the goods in transit.
Responsibilities
Who is responsible for making
all the necessary arrangements
Ex Works
Seller – Place the goods at the disposal of the buyer at the names place.
Buyer – Take delivery of the goods when they have been placed at his disposal.
FOB
Carriage to be arranged by buyer.
Risk transfer from the seller to the buyer when the goods are the disposal of buyer.
Cost transfer from the seller to the buyer when the goods are at the disposal of buyer.
CFR
Carriage to be arranged by seller.
Risk transfer from the seller to the buyer when the goods pass the ships rail.
Cost transfer at port of destination, buyer paying such costs as are not for the sellers account under the contract of carriage.
CIF
Carriage and Insurance to be arranged by seller.
Risk transfer from the seller to the buyer when the goods pass the ships rail.
Cost transfer at port of destination, buyer paying such costs as are not for the seller account under the contract carriage.
DDP
Delivery at buyers premises or another named place of destination.
Maximum obligation for the seller.
Cost and Risk of delivery sellers account.