Tuesday, December 22, 2009

Bill of Lading Terms - Part 1


"Merchant" means and includes the Shipper, the Consignor, the Holder of this Bill of Lading, the Receiver and the Owner of the Goods.
"Carrier" means the issuer of this Bill of Lading as named on the face of it.
"Hague Rules" means the provisions of the International Convention for Unification of certain Rules relating to the Bills of Lading signed at Brussels on 25th August 1924.
"Hague-Visby Rules" means the Hague Rules as amended by the Protocol signed at Brussels on 23rd February 1968.
"Hamburg Rules" means the provisions of the United Nations Convention on the Carriage of Goods by Sea 1978.
"SCOGSA 1972" means the Singapore Carriage of Goods by Sea Act 1972.
"COGSA 1936" means the Carriage of Goods by Sea Act of the United States of America approved on 16th April 1936.
"COGWA 1936" means the Carriage of Goods by Water Act of Canada dated May 6th 1993.
"SDR'S" means Special Drawing Rights as defined by the International Monetary Fund.
"Container" includes any type of Container, Trailer, Flat or Unit Load Device.
"Person" includes an individual, a firm and a body corporate.

The provisions setout and referred to in this document shall apply if the transport as described on the face of the Bill of Lading is Port to Port or Combined Transport.

The provisions of the Carrier's applicable Tariff, if any, are incorporated herein. Copies of such provisions are obtainable from the Carrier or his agents upon request or, where applicable, from a government body with whom the Tariff has been filed. In the case of inconsistency between this Bill of Lading and the applicable Tariff, this Bill of Lading shall prevail.

The Merchant warrants that in agreeing to the terms hereof he is the agent of and has the authority of the person owning or entitled to the possession of the Goods or any person who has a present or future interest in the Goods.

 (1) This Bill of Lading shall be non-negotiable unless made 'to order' in which event it shall be negotiable and shall constitute title to the Goods and the holder shall be entitled to receive or to transfer the Goods herein described.
(2) This Bill of Lading shall be prima facie evidence of the taking in charge by the Carrier of the Goods as herein described. However, proof to the contrary shall not be admissible when this Bill of Lading has been negotiated or transferred for valuable consideration to a third party acting in good faith.

By issuance of this Bill of Lading the Carrier assumes liability as set out in these Conditions and
(1) For Port to Port or Combined Transport, undertakes to perform and/or in his own name to procure the performance of the entire transport, from the place at which the Goods are taken in charge to the place designated for delivery in this Bill of Lading.
(2) For the purposes and subject to the provisions of this Bill of Lading, the Carrier shall be responsible for the acts and omissions of any person of whose services he makes use for the performance of the Contract evidenced by this Bill of Lading.
(3) When issued on a Port to Port Basis, the responsibility of the Carrier is limited to that part of the Carriage from and during loading onto the vessel up to and during discharge from the vessel and the Carrier shall not be liable for any loss or damage whatsoever in respect of the Goods or for any other matter arising during any other part of the Carriage even though charges for the whole Carriage have been charged by the Carrier. The Merchant constitutes the Carrier as agent to enter into contracts on behalf of the Merchant with others for transport, storage, handling or any other services in respect of the Goods prior to loading and subsequent to discharge of the Goods from the vessel without responsibility for any act or omission whatsoever on the part of the Carrier or others and the Carrier may as such agent enter into contract with others on any terms whatsoever including terms less favourable than the terms in this Bill of Lading.

(1) The Merchant shall comply with the rules which are mandatory according to the National Law or by reason of International Convention, relating to the carriage of Goods of a dangerous nature, and shall in any case inform the Carrier in writing of the exact nature of the danger, before Goods of a dangerous nature are taken in charge by the Carrier and indicate to him, if need be, the precautions to be taken. (2) lithe Merchant fails to provide such information and the Carrier is unaware of the dangerous nature of the Goods and the necessary precautions to be taken and if, at the time, they are deemed to be a hazard to life or property, they may at any place be unloaded, destroyed or rendered harmless, as circumstances may require, without compensation, and the Merchant shall be liable for all loss, damage, delay or expenses arising out of their being taken in charge, or their carriage, or of any services incidental thereto. (3) If any Goods shipped with the knowledge of the Carrier as to their dangerous nature shall become a danger to the vessel, vehicle or cargo, they may in like manner be unloaded or landed at any place or destroyed or rendered innocuous by the Carrier, without liability on the part of the Carrier, except-General Average, if any.

(1) The Consignor shall be deemed to have guaranteed to the Carrier the accuracy, at the time the Goods were taken in charge by the Carrier,' of the description of the Goods, marks, numbers, quantity, weight and/or volume as furnished by him, and the Consignor shall defend, indemnify and hold harmless the Carrier against all loss, damage and expenses arising or resulting from inaccuracies in or inadequacy of such particulars. The right of the Carrier to such obligation from the Consignor shall in no way limit his responsibility and liability under this Bill of Lading to any person other than the Consignor.
(2) Without prejudice to Clause 8 (A) (2) (c), the Merchant shall be liable for any loss, damage or injury caused by faulty or insufficient packing of Goods or by faulty loading or packing within containers and trailers and on flats when such loading or packing has been performed by the Merchant or on behalf of the Merchant by a person other than the Carrier, or by defect or unsuitability of the containers, trailers or flats, when supplied by the Merchant, and shall defend, indemnify and hold harmless the Carrier against any additional expenses so caused.
(3) Carrier will not be liable for any failure of the Consignee to take delivery of any Goods transported under this Bill of Lading, and any and all Costs, Consequences, Fines, Dues, Taxes, Penalties, Levies, Container Detention Charges as per tariff will remain entirely the responsibility of the Merchants, including and notwithstanding any and all responsibility towards Authorities as a result of the failure to take delivery. The Merchant will not be absolved of the responsibility and the costs levied to return containers utilized for the transport of the Merchant’s Goods as agreed prior to the Carriage. If containers are returned in damaged condition the Merchant shall compensate the Carrier for all possible costs of repair and expenses or replacement value on those containers supplied by the Carrier.
(4) Carrier will not be liable for inherent vice of Goods, including damage to Goods shipped in ordinary containers due to ambient low or high temperatures, shall not be responsible for loss or damage to perishables due to hot loading, over stowage, loss or damages due deterioration, decay, rot, heat or frost, discolouration, change in skin texture, marked, cut or stained bags or boxes or other packages of freights, fruits, vegetables and other goods carried expressly at the sole risk of the Merchant.
(5) It is agreed that superficial rust, oxidation or any like condition due to moisture is not a condition of damage but is inherent to the nature of the Goods and acknowledgement of the receipt or the Goods in apparent good order and condition is not a representation that such conditions of rust, oxidation or the like did not exist on receipt.
(6) (a) The Merchant undertakes not to tender for transportation any Goods which require temperature control without previously giving written notice of their nature and particular temperature range to be maintained and in the case of a temperature controlled Container stuffed by or on behalf of the Merchant further undertakes that the Goods have been properly stuffed in the Container and that its thermostatic controls have been properly set by the Merchant before receipt of the Goods by the Carrier. If the said requirements are not complied with the Carrier shall not be liable for any loss of or damage to the Goods by such non-compliance.
(b) The Carrier shall not be liable for any loss of or damage to the Goods arising from latent defects, derangement, breakdown, stoppage of the temperature controlling machinery, plant insulation or any apparatus of the Containers, provided that the Carrier shall before or at the beginning of the transport exercise due diligence to maintain the temperature controlled Container in an efficient state.

A (1) The Carrier shall be liable for loss or damage to the Goods occurring between the time when he takes the Goods into his charge and the time of delivery.
(2) The Carrier shall, however, be relieved of liability for any loss or damage if such loss or damage was caused by
(a) an act or omission of the Merchant, or person other than the Carrier acting on behalf of the Merchant or from whom the Carrier took the Goods in charge:
(b) insufficiency or defective condition of the packaging or marks and/or numbers:
(c) handling, loading, storage or unloading of the Goods by the Merchant or any person acting on behalf of the Merchant:
(d) inherent vice of the Goods:
(e) strike, lockout, stoppage or restraint of labour, the consequences of which the Carrier could not avoid by the exercise of reasonable diligence:
(f) a nuclear incident if the operator of a nuclear installation or a person acting for him is liable for this damage under an applicable International Convention or National Law governing liability in respect of nuclear energy:
(g) any cause or event which the Carrier could not avoid and the consequences whereof he could not prevent by the exercise of reasonable diligence.
(3) The burden of proving that the loss or damage was due to one or more of the above causes or events shall rest upon the Carrier. When the Carrier establishes that, in the circumstances of the case, the loss or damage could be attributed to one or more of the causes and events specified in (b) to (d) above, it shall be presumed that it was so caused. The claimant shall, however, be entitled to prove that the loss or damage was not, in fact, caused wholly or partly by one or more of these causes or events.

B When in accordance with Clause 8 A(1) the Carrier is liable to pay compensation in respect of loss or damage and the stage of transport where loss or damage occurred and the stage of transport where loss or damage occurred is known, the liability of the Carrier in respect of such loss or damage shall be:-
(1) determined by the provisions contained in any International Convention or National Law, which provisions
(a) cannot be departed from by private contract, to the detriment of the claimant, and
(b) would have applied if the claimant had made a separate and direct contract with the Carrier in respect of the particular stage of transport where the loss or damage occurred and received as evidence thereof any particular document which must be issued in order to make such International Convention or National Law applicable.
(2) with respect to the transportation in the United Slates of America or in Canada to the Port of Loading or from the Port of Discharge, the responsibility of the Carrier shall be to procure transportation by carriers (one or more) and such transportation shall be subject to the inland carriers' contracts of carriage and tariffs and any law compulsorily applicable. The Carrier guarantees the fulfilment of such inland carriers' obligation under the contracts and tariffs.

(1) Goods may be stuffed by the Carrier in or on Containers and Goods may be stuffed with other Goods.
(2) The terms of this Bill of Lading shall govern the responsibility of the Carrier in connection with or arising out of the supply of a Container to the Merchant, whether supplied before or after the Goods are received by the Carrier or delivered to the Merchant.
(3) If a Container has been stuffed by or on behalf of the Merchant.
(A) the Carrier shall not be liable for loss or damage to the Goods;
(i) caused by the manner in which the Container has been stuffed
(ii) caused by the unsuitability of the Goods for carriage in Containers;
(iii) caused by the unsuitability or defective condition of the Container provided that where the Container has been supplied by or on behalf of the Carrier, this paragraph (iii) shall only apply if the unsuitability or defective condition arose (a) without any want of due diligence on the part of the Carrier or (b) would have been apparent on reasonable inspection by the Merchant at or prior to the time when the Container was stuffed;
(iv) if the Container is not sealed at the commencement of the Carriage except where the Carrier has agreed to seal the Container.
(B) the Merchant shall defend, indemnify and hold harmless the Carrier against any loss, damage, claim, liability or expense whatsoever arising from one or more of the matters covered by (A) above except for (A) (iii) (a).
(4) Where the Carrier is instructed to provide a Container, in the absence of a written request to the contrary, the Carrier is not under an obligation to provide a Container of any particular type or quality.

(1) This Bill of Lading insofar as it relates to sea carriage by any vessel whether named herein or not shall have effect subject to the Hague Rules or any legislation making such Rules or the Hague-Visby Rules compulsorily applicable (such as SCOGSA 1972 or COGSA 1936) to this Bill of Lading and the provision of the Hague Rules or applicable legislation shall be deemed incorporated herein. The Hague Rules (or COGSA) 1936 if this Bill of Lading is subject to U.S. law) shall apply to the carriage of Goods by inland waterways and reference to carriage by sea in such Rules or legislation shall be deemed to include reference to inland waterways. The Hague Rules or applicable legislation shall apply to all Goods whether carried on deck or under deck. If and to extent that provisions of the Harter Act of the United States of America 1893 would otherwise be compulsorily applicable to regulate the Carrier's responsibility for the Goods during any period prior to loading on or after discharge from the vessel, the Carrier's responsibility shall instead be governed by the provisions of Clause 8, but if such provisions are found to be invalid such responsibility shall be subject to COGSA 1936.

(2) The Carrier shall be entitled (and nothing in this Bill of Lading shall operate to limit or deprive such entitlement) to the full benefit of, and rights to, all limitations of or exemptions from liability and all rights conferred or authorised by any applicable law, statute or regulation of any country including, but not limited to, where applicable any provisions of sections 4281 to 4287, inclusive, of the Revised Statutes or the United States of America and amendments thereto and where applicable any provisions of the laws of the United States of America.

(1) When the Carrier is liable for compensation in respect of loss or damage to the Goods, such compensation shall be calculated by reference to the value of such Goods at the place and time they are delivered to the Consignee in accordance with the contract or should have been so delivered.
(2) The value of the Goods shall be fixed according to the current commodity exchange price, or, if there be no such price, according to the current market price, or, if there be no commodity exchange price or current market price, by reference to the normal value of Goods of the same kind and quality.
(3) Except where otherwise provided in this Bill of Lading, compensation shall not exceed 2 SDR's per kilo of the gross weight, or 666.67 SDR's per package or unit, of Goods lost or damaged, whichever shall be the greater. SDR's shall be calculated as at the date when settlement is agreed or judgment made. However, the Carrier shall not, in any case, be liable for an amount greater than the actual loss to the person entitled to the claim.
Where the Hague Rules, Hague-Visby Rules or SCOGSA 1972 or COGSA 1936 apply, the Carrier shall not, unless a declared value has been noted in accordance with paragraph 5 of this Clause, be or become liable for any loss or damage to or in connection with the Goods in an amount per package or shipping unit in excess or the package or shipping unit limitation as laid down by the applicable Rules or Act or any legislation making these Rules compulsorily applicable to this Bill of Lading. Such limitation amount, according to SCOGSA 1972 is the equivalent of 10,000 Poincare Gold Francs per package or unit or 30 Poincare Gold Francs per kilo of the gross weight of the Goods lost or damage, whichever shall be the greater, and according to COGSA 1936 is US$500 and according to COGWA 1936 is Can. $500 If no other limitation amount is applicable under the relevant compulsory legislation, the limitation shall be according to SCOGSA 1972.
(5) The Carrier's liability, if any, may be increased to a higher value by the Shipper making a declaration, in writing, of the Goods valuation on delivery to the Carrier of the Goods for shipment, such valuation to be inserted on the front of this Bill of Lading, in the space provided, and extra freight paid if required by the Carrier. In such case, if the actual value of the Goods shall exceed such declared value, the value shall nevertheless be deemed to be the declared value and the carrier's liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rate on the basis of such declared value.
(6) Where a container is used to consolidate Goods and such Container is stuffed by the Carrier, the number of packages or shipping units stated on the face of this Bill of Lading in the box provided shall be deemed the number of packages or shipping units for the purpose of any limit of  liability per package or shipping unit provided in any International Convention or National Law relating to the Carnage of Goods by Sea or Water. Except as aforesaid the Container shall be considered the package, or shipping unit. The words ‘shipping unit’ shall mean each physical unit or piece or cargo not shipped in a package, including articles or things or any description whatsoever, except Goods shipped in bulk, and irrespective of the weight or measurement unit employed in calculating freight charges. As to Goods shipped in bulk, the limitation applicable thereto shall be the limitation applicable thereto shall be the limitation provided in such convention or law which may be applicable and in no event shall anything herein be construed to be a waiver of limitation as to Goods shipped in bulk.

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Thursday, October 22, 2009

Dry Bulk Cargo Barge

A dry bulk cargo barge is a barge designed to carry freight such as coal, finished steel or its ingredients, grain, sand or gravel, and similar materials. Barges are constructed of steel. They have an outer hull, an internal void that is fitted with heavy struts and cross braces, and an internal cargo box. The outer hull of a barge can come in one of two configurations. A rake barge has a curved bow to provide less resistance when being pushed and is usually placed at the head of the tow. A box barge is usually placed in the center and rear of the tow and can hold more cargo.

Such barges can be equipped with covers of various types if the cargo is weather-sensitive (finished steel or grain). Generally, these covers are fabricated of fiberglass or steel. They can be lifted or rolled away for access to the barge hold, or cargo box.

In 2004, the dry bulk cargo barge fleet on the Mississippi River System (Mississippi, Gulf Intracoastal Waterway east and west, Ohio, Illinois, Missouri Rivers, etc.) stood at 5,836 open hoppers and 11,572 covered hoppers, for a total of 17,408, according the Criton Corporation. Smaller barge fleets also operate on the East (Hudson River, etc.) and West coasts (Columbia River, Sacramento River, etc) of the United States, and in numerous countries including India.

"Dry bulk cargo barges" are typically operated and mainted with efficiancy and environmental stewardship in mind. Typically, an informal set of industry best practices are applicable, including:

Barge loading
Barge loading should be conducted in a manner that minimizes the amount of cargo spilled onto the deck. The loading process is the responsibility of the loader operator at the loading facility.

Barge unloading
Barge unloading should be conducted in a manner that minimizes the amount of cargo spilled onto the deck. The unloading process is the responsibility of the unloader operator at the unloading facility.

Cargo spillage
The nature of the dry bulk commodity business is such that some amount of cargo spillage is typically unavoidable. In such cases the following practices are standard:

When possible, cargo residue will be swept and shoveled back into the hopper, provided cargo is the same.

If the current cargo is not the same as the residue remaining on the barge deck, the residue should be swept up against the barge coaming and in some cases may be shoveled and placed into a container or bag.

If the quantity of cargo exceeds an amount that can be safely cleaned, then a barge report will be filed and the cargo will be cleaned at a facility.

Trash on deck
Trash that may be left on deck such as junk line or garbage is bagged and placed so that exposure to rain or the possibility of being washed off of tow is eliminated.

Below deck water
Barge hulls are maintained to minimize the accumulation of river water below deck.

If a barge develops a detectable leak, crew members will go below deck and install a temporary patch, known as a shingle.

The hull will be repaired when possible.

Water that accumulates in void tank generally needs to be removed. When this is the case, the following best practices are applicable:

Visually inspect the water in the void for a sheen.

If no sheen is detected, the water is pumped from the void tank into the river. The crew will observe the water surrounding the tow for any sign of a visible sheen.

In the event a visible sheen is detected, the pump is immediately turned off (provided the barge is in no danger of sinking.) and the corrective action process as described in the VGP is implemented.

Barge inspection
When a barge is picked up by a boat, the on watch deck crew does an inspection of each barge that includes the following:

Each void tank is inspected for water. If water is found it is visually inspected for a sheen.

The deck of each barge is visually inspected for cargo spillage or trash.

Barge inspections are recorded on a barge inspection form.

It is common for a barge to be handled by multiple vessels and even multiple vessels each barge voyage (empty to empty).

Barge inspection forms are maintained shore side.

At least once every watch, the deck crew inspects the void tanks of each barge to ensure that no water is being taken on.

Deck scaling
Barge decks are maintained to minimize the formation of large rust scales, this is typically accomplished by painting the deck as needed.

Terminology related to the dry bulk cargo barge industry:

Above Waterline- The portion of a barge that is out of the water at a given time. This will vary based on whether or not the barge is loaded or empty.

Barge- Non-powered cargo or work vessel.

Barge Pump- Small portable pump used for removing water.

Barge Voyage- The time from which an empty barge is placed in tow, until it has been loaded, emptied and returned to a fleet. May include stops in a terminal fleet, cleaning and/or repair.

Barge Washing- Using water to clean cargo from the deck and/or hopper of a barge. Typically conducted at a barge washing facility.

Below Waterline- The portion of a barge that is below the water at a given time. This will vary based on whether or not the barge is loaded or empty

Boot- Fitting attached to the end of a suction hose on a barge pump that prevents large particles from being suctioned.

Cargo Box- Open hold on a barge for cargo

Cargo Residue- A quantity of product remaining on a barge deck on in a hopper.

Cargo Trimming- Shifting or rearranging cargo to level a barge.

Coaming- High sides around an open hopper barge.

Cover- Fits over the coaming. Used to protect weather sensitive cargo such as grain. Large, typically constructed of steel or fiberglass. Depending on style, they can be lifted off by crane or rolled away for access to the hopper.

Cover Hatch- Lid which allows access to the cargo hopper through the cover. Typically used for cargo loading.

Deck- The work area and walkways of a barge.

Dry Dock- Structure used to raise a vessel out of the water so as to expose all parts of the hull for inspection, repairs or painting.

Draft- Vertical distance between the water line and the bottom of the vessel hull.

Empty Barge- A barge without cargo.

Fleet- Group of moored barges

Fleeting- Service that includes mooring of barges and associated shifting.

Fleet tug- Or Harbor Boat- small towboat used for fleeting.

Freeboard- Vertical distance from the water line to the deck.

Hatch- Opening in a deck for maintenance.

Hatch lid- Covers the hatch opening.

Hopper- Open hold on a barge for cargo.

Hull- The frame or body of a vessel, excluding the bulk heads, deck or mechanical equipment.

Inboard- Towards the center of the vessel.

Inland Waters- Waterways inside the united states.

Integrated tow- Barges of mixed cargo.

Jumbo Barge- Common size for dry cargo barge, 35’x195’ or 200’

Knuckle- Curved steel plate on side and bottom of barges.

Lightering- Removing product from a barge to achieve the desired draft.

Line Boat- Live on boat making regular trips.

Line Deck- Open deck at the end of a barge.

Loaded Barge- A barge containing cargo.

Mooring- The act of securing a vessel.

Outboard- Towards the outside of the vessel.

Rearrange Tow- To move barges within a tow.

Shifting- Moving barges within a fleet or from a terminal fleet to a loader or unloader.

Shingle- Temporary plug to stop a leak below deck.

Tier- Row of barges across the width of a fleet.

Terminal- A facility that conducts either loading or unloading operations.

Terminal Fleet- Group of moored barges at or near a terminal.

Turning- Two boats meeting and exchanging tows.

Tow- Group of barges lashed together for pushing.

Tow Work- Assembling and connecting barges together.

Void- Closed hull space providing buoyancy.

Watch- Working shift of a vessel crew member.

Western Rivers- The Mississippi river system.

Wet products, such as vegetable oils, orange juice, and liquid fuels are carried in tank barges.

S: wikipedia

Friday, October 2, 2009

Bulk Carrier

A bulk carrier, bulk freighter, or bulker is a merchant ship specially designed to transport unpackaged bulk cargo, such as grains, coal, ore, and cement in its cargo holds. Since the first specialized bulk carrier was built in 1852, economic forces have fueled the development of these ships, causing them to grow in size and sophistication. Today's bulkers are specially designed to maximize capacity, safety, efficiency, and to be able to withstand the rigors of their work.

Now, bulkers make up 40% of the world's merchant fleets and range in size from single-hold mini-bulkers to mammoth ore ships able to carry 365,000 metric tons of deadweight (DWT). A number of specialized designs exist: some can unload their own cargo, some depend on port facilities for unloading, and some even package the cargo as it is loaded. Over half of all bulkers have Greek, Japanese, or Chinese owners and more than a quarter are registered in Panama. Japan is the largest single builder of bulkers, and 82% of these ships were built in Asia.

Bulk cargo can be very dense, corrosive, or abrasive. This can present safety problems: cargo shifting, spontaneous combustion, and cargo saturation can threaten a ship. The use of ships that are old and have corrosion problems has been linked to a spate of bulker sinkings in the 1990s, as have the bulker's large hatchways, important for efficient cargo handling. New international regulations have since been introduced to improve ship design and inspection, and to streamline the process of abandoning ship.

There are various ways to define the term bulk carrier. As of 1999, the International Convention for the Safety of Life at Sea defines a bulk carrier as "a ship constructed with a single deck, top side tanks and hopper side tanks in cargo spaces and intended to primarily carry dry cargo in bulk; an ore carrier; or a combination carrier." However, most classification societies use a broader definition where a bulker is any ship that carries dry unpackaged goods. Multipurpose cargo ships can carry bulk cargo, but can also carry other cargoes and are not specifically designed for bulk carriage. The term "dry bulk carrier" is used to distinguish bulkers from bulk liquid carriers such as oil, chemical, or liquefied petroleum gas carriers. Very small bulkers are almost indistinguishable from general cargo ships, and they are often classified based more on the ship's use than its design.

A number of abbreviations are used to describe bulkers. "OBO" describes a bulker which carries a combination of ore, bulk, and oil, and "O/O" is used for combination oil and ore carriers. The terms "VLOC," "VLBC," "ULOC," and "ULBC" for very large and ultra large ore and bulk carriers were adapted from the supertanker designations very large crude carrier and ultra large crude carrier.

Tuesday, August 18, 2009

Kinds of Bill of Lading

Refer previously article regarding Bill of Lading, below are various kinds of Bill of Lading in the international transportation export and import:

* Combined Transport / Multimodal B/L
A B/L covering transport by shipping container from an inland place prior to the loading port, to an inland place beyond the destination port. Most freight forwarders and shipping companies title their B/Ls as "Bill of Lading for Combined Transport or Port-to-Port shipment" or similar.

* Congen B/L
A standard form of bill of lading used in shipments by chartered ship.

* Clean B/L
A bill of lading indicating that the goods were received by the carrier in good order and condition, without any clauses declaring a defective condition in the goods and/or their packing.

* Dirty/Foul/ Claused B/L
A bill of lading with any clauses declaring a defective condition in the goods and/or their packing. Almost invariably not acceptable to banks for presentation under L/Cs and almost always not acceptable to the buyer. (See also Clean Bill of Lading).

* House B/L
A bill of lading issued by a freight forwarder acting as a carrier. The terms and conditions of the contract may well be different to the terms and conditions contained on the shipping company's B/L, which can in extraordinary circumstances lead to legal complications should a dispute arise.

* Master B/L
The term used for the B/L issued by a shipping company to a freight forwarder for all of the goods covered by one or more House B/Ls on the one ship going from one loading port to one destination port.

* Ocean B/L
A B/L covering port-to-port shipment. Typically banks continue to use this term on L/Cs even though the majority of international shipments are containerised (See also Multimodal B/L).

* On Board/ Shipped On Board B/L
A B/L evidencing that the goods were not only received by the carrier but were actually loaded on board in good order and condition. "Shipped" indicates that not only were the goods on board, but that the ship has departed the port.

* Order B/L
A negotiable B/L, in which the goods are consigned "to order of" a particular party, often the shipper in which case the consignee is mostly shown simply as "to order".

* Straight B/L
A non-negotiable B/L in which the goods are consigned directly to a named consignee.

Air Waybill (AWB)
The document which covers transport by air. It is issued by the carrier, whether an airline or a freight forwarder, as a non-negotiable document serving as a receipt to the consignor for the goods, and containing the conditions of transport. It also shows the details of the consignee so that they can be contacted on arrival of the goods.
  • HAWB
  • House AWB issued by a freight forwarder acting as a carrier.

  • MAWB
  • The term used for the AWB issued on airline's stationery to a freight forwarder for all of the goods covered by one or more House AWBs on the one flight going from one loading airport to one destination airport.

Tuesday, July 28, 2009

INCOTERMS 2000 in International Import & Export

Note: Incoterm had revision effect on January 1, 2011 as INCOTERM 2010


Incoterms or international commercial terms are a series of international sales terms, published by International Chamber of Commerce (ICC) and widely used in international commercial transactions. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices. They closely correspond to the U.N. Convention on Contracts for the International Sale of Goods.


The purpose of Incoterms (International Commercial Terms) is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree.

Frequently, parties to a contract are unaware of the different trading practices in their respective countries. This can give rise to misunderstandings, disputes and litigation with all the waste of time and money that this entails. In order to remedy these problems the International Chamber of Commerce (ICC) first published in 1936 a set of international rules for the interpretation of trade terms. These rules were known as "Incoterms 1936" . Amendments and additions were later made in 1953, 1967, 1976, 1980, 1990 and presently in 2000 in order to bring the rules in line with current international trade practices.

It should be stressed that the scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold (in the sense of "tangibles" , not including "intangibles" such as computer software).

It appears that two particular misconceptions about Incoterms are very common. First, Incoterms are frequently misunderstood as applying to the contract of carriage rather than to the contract of sale. Second, they are sometimes wrongly assumed to provide for all the duties which parties may wish to include in a contract of sale.

As has always been underlined by ICC, Incoterms deal only with the relation between sellers and buyers under the contract of sale, and, moreover, only do so in some very distinct respects.

While it is essential for exporters and importers to consider the very practical relationship between the various contracts needed to perform an international sales transaction - where not only the contract of sale is required, but also contracts of carriage, insurance and financing - Incoterms relate to only one of these contracts, namely the contract of sale.

Nevertheless, the parties' agreement to use a particular Incoterm would necessarily have implications for the other contracts. To mention a few examples, a seller having agreed to a CFR - or CIF -contract cannot perform such a contract by any other mode of transport than carriage by sea, since under these terms he must present a bill of lading or other maritime document to the buyer which is simply not possible if other modes of transport are used. Furthermore, the document required under a documentary credit would necessarily depend upon the means of transport intended to be used.

Second, Incoterms deal with a number of identified obligations imposed on the parties - such as the seller's obligation to place the goods at the disposal of the buyer or hand them over for carriage or deliver them at destination - and with the distribution of risk between the parties in these cases.

Further, they deal with the obligations to clear the goods for export and import, the packing of the goods, the buyer's obligation to take delivery as well as the obligation to provide proof that the respective obligations have been duly fulfilled. Although Incoterms are extremely important for the implementation of the contract of sale, a great number of problems which may occur in such a contract are not dealt with at all, like transfer of ownership and other property rights, breaches of contract and the consequences following from such breaches as well as exemptions from liability in certain situations. It should be stressed that Incoterms are not intended to replace such contract terms that are needed for a complete contract of sale either by the incorporation of standard terms or by individually negotiated terms.

Generally, Incoterms do not deal with the consequences of breach of contract and any exemptions from liability owing to various impediments. These questions must be resolved by other stipulations in the contract of sale and the applicable law.

Incoterms have always been primarily intended for use where goods are sold for delivery across national boundaries: hence, international commercial terms. However, Incoterms are in practice at times also incorporated into contracts for the sale of goods within purely domestic markets. Where Incoterms are so used, the A2 and B2 clauses and any other stipulation of other articles dealing with export and import do, of course, become redundant.


The main reason for successive revisions of Incoterms has been the need to adapt them to contemporary commercial practice. Thus, in the 1980 revision the term Free Carrier (now FCA) was introduced in order to deal with the frequent case where the reception point in maritime trade was no longer the traditional FOB-point (passing of the ship's rail) but rather a point on land, prior to loading on board a vessel, where the goods were stowed into a container for subsequent transport by sea or by different means of transport in combination (so-called combined or multimodal transport).

Further, in the 1990 revision of Incoterms, the clauses dealing with the seller's obligation to provide proof of delivery permitted a replacement of paper documentation by EDI-messages provided the parties had agreed to communicate electronically. Needless to say, efforts are constantly made to improve upon the at the seller's own premises (the "E" -term Ex works); followed by the drafting and presentation of Incoterms in order to facilitate their practical implementation.


During the process of revision, which has taken about two years, ICC has done its best to invite views and responses to successive drafts from a wide ranging spectrum of world traders, represented as these various sectors are on the national committees through which ICC operates. Indeed, it has been gratifying to see that this revision process has attracted far more reaction from users around the world than any of the previous revisions of Incoterms. The result of this dialogue is Incoterms 2000, a version which when compared with Incoterms 1990 may appear to have effected few changes. It is clear, however, that Incoterms now enjoy world wide recognition and ICC has therefore decided to consolidate upon that recognition and avoid change for its own sake. On the other hand, serious efforts have been made to ensure that the wording used in Incoterms 2000 clearly and accurately reflects trade practice. Moreover, substantive changes have been made in two areas:
  • The customs clearance and payment of duty obligations under FAS and DEQ; and
  • The loading and unloading obligations under FCA.
All changes, whether substantive or formal have been made on the basis of thorough research among users of Incoterms and particular regard has been given to queries received since 1990 by the Panel of Incoterms Experts, set up as an additional service to the users of Incoterms.

In view of the changes made to Incoterms from time to time, it is important to ensure that where the parties intend to incorporate Incoterms into their contract of sale, an express reference is always made to the current version of Incoterms. This may easily be overlooked when, for example, a reference has been made to an earlier version in standard contract forms or in order forms used by merchants. A failure to refer to the current version may then result in disputes as to whether the parties intended to incorporate that version or an earlier version as a part of their contract. Merchants wishing to use Incoterms 2000 should therefore clearly specify that their contract is governed by "Incoterms 2000" .


In 1990, for ease of understanding, the terms were grouped in four basically different categories; namely starting with the term whereby the seller only makes the goods available to the buyer at the seller's own premises (the "E" -term Ex works); followed by the second group whereby the seller is called upon to deliver the goods to a carrier appointed by the buyer (the "F" -terms FCA, FAS and FOB); continuing with the "C" -terms where the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after shipment and dispatch (CFR, CIF, CPT and CIP); and, finally, the "D" -terms whereby the seller has to bear all costs and risks needed to bring the goods to the place of destination (DAF, DES, DEQ, DDU and DDP). The following chart sets out this classification of the trade terms.


Group E
EXW Ex Works

Group F
Main carriage unpaid
FCA Free Carrier (... named place)
FAS Free Alongside Ship (...named port of shipment)
FOB Free On Board (... named port of shipment)

Group С
Main carriage paid
CFR Cost and Freight (... named port of destination)
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
DAF Delivered At Frontier (... named place)
DES Delivered Ex Ship (... named port of destination)
DEQ Delivered Ex Quay (... named port of destination)
DDU Delivered Duty Unpaid (... named place of destination)
DDP Delivered Duty Paid (... named place of destination)


While drafting Incoterms 2000, considerable efforts have been made to achieve as much consistency as possible and desirable with respect to the various expressions used throughout the thirteen terms. Thus, the use of different expressions intended to convey the same meaning has been avoided. Also, whenever possible, the same expressions as appear in the 1980 UN Convention on Contracts for the International Sale of Goods (CISG) have been used.

In some cases it has been necessary to use the same term to express two different meanings simply because there has been no suitable alternative. Traders will be familiar with this difficulty both in the context of contracts of sale and also of contracts of carriage. Thus, for example, the term "shipper" signifies both the person handing over the goods for carriage and the person who makes the contract with the carrier: however, these two "shippers" may be different persons, for example under a FOB contract where the seller would hand over the goods for carriage and the buyer would make the contract with the carrier.

It is particularly important to note that the term "delivery" is used in two different senses in Incoterms. First, it is used to determine when the seller has fulfilled his delivery obligation which is specified in the A4 clauses throughout Incoterms. Second, the term "delivery" is also used in the context of the buyer's obligation to take or accept delivery of the goods, an obligation which appears in the B4 clauses throughout Incoterms. Used in this second context, the word "delivery" means first that the buyer "accepts" the very nature of the "C"-terms, namely that the seller fulfils his obligations upon the shipment of the goods and, second that the buyer is obliged to receive the goods. This latter obligation is important so as to avoid unnecessary charges for storage of the goods until they have been collected by the buyer. Thus, for example under CFR and CIF contracts, the buyer is bound to accept delivery of the goods and to receive them from the carrier and if the buyer fails to do so, he may become liable to pay damages to the seller who has made the contract of carriage with the carrier or, alternatively, the buyer might have to pay demurrage charges resting upon the goods in order to obtain the carrier's release of the goods to him. When it is said in this context that the buyer must "accept delivery", this does not mean that the buyer has accepted the goods as conforming with the contract of sale, but only that he has accepted that the seller has performed his obligation to hand the goods over for carriage in accordance with the contract of carriage which he has to make under the A3 a) clauses of the "C"-terms. So, if the buyer upon receipt of the goods at destination were to find that the goods did not conform to the stipulations in the contract of sale, he would be able to use any remedies which the contract of sale and the applicable law gave him against the seller, matters which, as has already been mentioned, lie entirely outside the scope of Incoterms.

Where appropriate, Incoterms 2000, have used the expression "placing the goods at the disposal of" the buyer when the goods are made available to the buyer at a particular place. This expression is intended to bear the same meaning as that of the phrase "handing over the goods" used in the 1980 United Nations Convention on Contracts for the International Sale of Goods.

The word "usual" appears in several terms, for example in EXW with respect to the time of delivery (A4) and in the "C"-terms with respect to the documents which the seller is obliged to provide and the contract of carriage which the seller must procure (A8, A3). It can, of course, be difficult to tell precisely what the word "usual" means, however, in many cases, it is possible to identify what persons in the trade usually do and this practice will then be the guiding light. In this sense, the word "usual" is rather more helpful than the word "reasonable", which requires an assessment not against the world of practice but against the more difficult principle of good faith and fair dealing. In some circumstances it may well be necessary to decide what is "reasonable". However, for the reasons given, in Incoterms the word "usual" has been generally preferred to the word "reasonable".

With respect to the obligation to clear the goods for import it is important to determine what is meant by "charges" which must be paid upon import of the goods. In Incoterms 1990 the expression "official charges payable upon exportation and importation of the goods" was used in DDP A6. In Incoterms 2000 DDP A6 the word "official" has been deleted, the reason being that this word gave rise to some uncertainty when determining whether the charge was "official" or not. No change of substantive meaning was intended through this deletion. The "charges" which must be paid only concern such charges as are a necessary consequence of the import as such and which thus have to be paid according to the applicable import regulations. Any additional charges levied by private parties in connection with the import are not to be included in these charges, such as charges for storage unrelated to the clearance obligation. However, the performance of that obligation may well result in some costs to customs brokers or freight forwarders if the party bearing the obligation does not do the work himself.

"ports", "places", "points" and "premises"
So far as concerns the place at which the goods are to be delivered, different expressions are used in Incoterms. In the terms intended to be used exclusively for carriage of goods by sea -such as FAS, FOB, CFR, CIF, DES and DEQ - the expressions "port of shipment" and "port of destination" have been used. In all other cases the word "place" has been used. In some cases, it has been deemed necessary also to indicate a "point" within the port or place as it may be important for the seller to know not only that the goods should be delivered in a particular area like a city but also where within that area the goods should be placed at the disposal of the buyer. Contracts of sale would frequently lack information in this respect and Incoterms therefore stipulate that if no specific point has been agreed within the named place, and if there are several points available, the seller may select the point which best suits his purpose (as an example see FCA A4). Where the delivery point is the seller's "place" the expression "the seller's premises" (FCA A4) has been used.

"ship" and "vessel"
In the terms intended to be used for carriage of goods by sea, the expressions "ship" and "vessel" are used as synonyms. Needless to say, the term "ship" would have to be used when it is an ingredient in the trade term itself such as in "free alongside ship" (FAS) and "delivery ex ship" (DES). Also, in view of the traditional use of the expression "passed the ship's rail" in FOB, the word "ship" has had to be used in that connection.

"checking" and "inspection"
In the A9 and B9 clauses of Incoterms the headings "checking -packaging and marking" and "inspection of the goods" respectively have been used. Although the words "checking" and "inspection" are synonyms, it has been deemed appropriate to use the former word with respect to the seller's delivery obligation under A4 and to reserve the latter for the particular case when a "pre-shipment inspection" is performed, since such inspection normally is only required when the buyer or the authorities of the export or import country want to ensure that the goods conform with contractual or official stipulations before they are shipped.


Incoterms focus on the seller's delivery obligation. The precise distribution of functions and costs in connection with the seller's delivery of the goods would normally not cause problems where the parties have a continuing commercial relationship. They would then establish a practice between themselves ( "course of dealing" ) which they would follow in subsequent dealings in the same manner as they have done earlier. However, if a new commercial relationship is established or if a contract is made through the medium of brokers - as is common in the sale of commodities -, one would have to apply the stipulations of the contract of sale and. whenever Incoterms 2000 have been incorporated into that contract, apply the division of functions, costs and risks following therefrom.

It would, of course, have been desirable if Incoterms could specify in as detailed a manner as possible the duties of the parties in connection with the delivery of the goods. Compared with Incoterms 1990, further efforts have been made in this respect in some specified instances (see for example FCA A4). But it has not been possible to avoid reference to customs of the trade in FAS and FOB A4 ( "in the manner customary at the port" ), the reason being that particularly in commodity trade the exact manner in which the goods are delivered for carriage in FAS and FOB contracts vary in the different sea ports.


The risk of loss of or damage to the goods, as well as the obligation to bear the costs relating to the goods, passes from the seller to the buyer when the seller has fulfilled his obligation to deliver the goods. Since the buyer should not be given the possibility to delay the passing of the risk and costs, all terms stipulate that the passing of risk and costs may occur even before delivery, if the buyer does not take delivery as agreed or fails to give such instructions (with respect to time for shipment and/or place for delivery) as the seller may require in order to fulfil his obligation to deliver the goods. It is a requirement for such premature passing of risk and costs that the goods have been identified as intended for the buyer or, as is stipulated in the terms, set aside for him (appropriation).

This requirement is particularly important under EXW, since under all other terms the goods would normally have been identified as intended for the buyer when measures have been taken for their shipment or dispatch ( "F" - and "C" -terms) or their delivery at destination ( "D" -terms). In exceptional cases, however, the goods may have been sent from the seller in bulk without identification of the quantity for each buyer and, if so, passing of risk and cost does not occur before the goods have been appropriated as aforesaid (cf. also article 69.3 of the 1980 United Nations Convention on Contracts for the International Sale of Goods).


9.1 The "E"- term is the term in which the seller's obligation is at its minimum:
the seller has to do no more than place the goods at the disposal of the buyer at the agreed place - usually at the seller's own premises. On the other hand, as a matter of practical reality, the seller would frequently assist the buyer in loading the goods on the latter's collecting vehicle. Although EXW would better reflect this if the seller's obligations were to be extended so as to include loading, it was thought desirable to retain the traditional principle of the seller's minimum obligation under EXW so that it could be used for cases where the seller does not wish to assume any obligation whatsoever with respect to the loading of the goods. If the buyer wants the seller to do more, this should be made clear in the contract of sale.

9.2 The"F"- terms require the seller to deliver the goods for carriage as instructed by the buyer. The point at which the parties intend delivery to occur in the FCA term has caused difficulty because of the wide variety of circumstances which may surround contracts covered by this term. Thus, the goods may be loaded on a collecting vehicle sent by the buyer to pick them up at the seller's premises; alternatively, the goods may need to be unloaded from a vehicle sent by the seller to deliver the goods at a terminal named by the buyer. Incoterms 2000 take account of these alternatives by stipulating that, when the place named in the contract as the place of delivery is the seller's premises, delivery is complete when the goods are loaded on the buyer's collecting vehicle and, in other cases, delivery is complete when the goods are placed at the disposal of the buyer not unloaded from the seller's vehicle. The variations mentioned for different modes of transport in FCA A4 of Incoterms 1990 are not repeated in Incoterms 2000.

The delivery point under FOB, which is the same under CFR and CIF, has been left unchanged in Incoterms 2000 in spite of a considerable debate. Although the notion under FOB to deliver the goods "across the ship's rail" nowadays may seem inappropriate in many cases, it is nevertheless understood by merchants and applied in a manner which takes account of the goods and the available loading facilities. It was felt that a change of the FOB-point would create unnecessary confusion, particularly with respect to sale of commodities carried by sea typically under charter parties.

Unfortunately, the word "FOB" is used by some merchants merely to indicate any point of delivery-such as "FOB factory" , "FOB plant" , "FOB Ex seller's works" or other inland points -thereby neglecting what the abbreviation means: Free On Board. It remains the case that such use of "FOB" tends to create confusion and should be avoided.

There is an important change of FAS relating to the obligation to clear the goods for export, since it appears to be the most common practice to put this duty on the seller rather than on the buyer. In order to ensure that this change is duly noted it has been marked with capital letters in the preamble of FAS.

9.3 The "C"-terms require the seller to contract for carriage on usual terms at his own expense. Therefore, a point up to which he would have to pay transport costs must necessarily be indicated after the respective "C" -term. Under the CIF and CIP terms the seller also has to take out insurance and bear the insurance cost. Since the point for the division of costs is fixed at a point in the country of destination, the "C" -terms are frequently mistakenly believed to be arrival contracts, in which the seller would bear all risks and costs until the goods have actually arrived at the agreed point. However, it must be stressed that the "C" -terms are of the same nature as the "F" -terms in that the seller fulfils the contract in the country of shipment or dispatch. Thus, the contracts of sale under the "C" -terms, like the contracts under the "F" -terms, fall within the category of shipment contracts.

It is in the nature of shipment contracts that, while the seller is bound to pay the normal transport cost for the carriage of the goods by a usual route and in a customary manner to the agreed place, the risk of loss of or damage to the goods, as well as additional costs resulting from events occurring after the goods having been appropriately delivered for carriage, fall upon the buyer. Hence, the "C" -terms are distinguishable from all other terms in that they contain two "critical" points, one indicating the point to which the seller is bound to arrange and bear the costs of a contract of carriage and another one for the allocation of risk. For this reason, the greatest caution must be observed when adding obligations of the seller to the "C" -terms which seek to extend the seller's responsibility beyond the aforementioned "critical" point for the allocation of risk. It is of the very essence of the "C" -terms that the seller is relieved of any further risk and cost after he has duly fulfilled his contract by contracting for carriage and handing over the goods to the carrier and by providing for insurance under the CIF- and CIP-terms.

The essential nature of the "C"-terms as shipment contracts is also illustrated by the common use of documentary credits as the preferred mode of payment used in such terms. Where it is agreed by the parties to the sale contract that the seller will be paid by presenting the agreed shipping documents to a bank under a documentary credit, it would be quite contrary to the central purpose of the documentary credit for the seller to bear further risks and costs after the moment when payment had been made under documentary credits or otherwise upon shipment and dispatch of the goods. Of course, the seller would have to bear the cost of the contract of carriage irrespective of whether freight is pre-paid upon shipment or is payable at destination (freight collect); however, additional costs which may result from events occurring subsequent to shipment and dispatch are necessarily for the account of the buyer.

If the seller has to provide a contract of carriage which involves payment of duties, taxes and other charges, such costs will, of course, fall upon the seller to the extent that they are for his account under that contract. This is now explicitly set forth in the A6 clause of all "C"-terms.

If it is customary to procure several contracts of carriage involving transhipment of the goods at intermediate places in order to reach the agreed destination, the seller would have to pay all these costs, including any costs incurred when the goods are transhipped from one means of conveyance to the other. If, however, the carrier exercised his rights under a transhipment -or similar clause - in order to avoid unexpected hindrances (such as ice, congestion, labour disturbances, government orders, war or warlike operations) then any additional cost resulting therefrom would be for the account of the buyer, since the seller's obligation is limited to procuring the usual contract of carriage.

It happens quite often that the parties to the contract of sale wish to clarify the extent to which the seller should procure a contract of carriage including the costs of discharge. Since such costs are normally covered by the freight when the goods are carried by regular shipping lines, the contract of sale will frequently stipulate that the goods are to be so carried or at least that they are to be carried under "liner terms" . In other cases, the word "landed" is added after CFR or CIF. However, it is advisable not to use abbreviations added to the "C" -terms unless, in the relevant trade, the meaning of the abbreviations is clearly understood and accepted by the contracting parties or under any applicable law or custom of the trade.

In particular, the seller should not - and indeed could not, without changing the very nature of the "C" -terms - undertake any obligation with respect to the arrival of the goods at destination, since the risk of any delay during the carriage is borne by the buyer. Thus, any obligation with respect to time must necessarily refer to the place of shipment or dispatch, for example, "shipment (dispatch) not later than..." . An agreement for example, "CFR Hamburg not later than..." is really a misnomer and thus open to different possible interpretations. The parties could be taken to have meant either that the goods must actually arrive at Hamburg at the specified date, in which case the contract is not a shipment contract but an arrival contract or, alternatively, that the seller must ship the goods at such a time that they would normally arrive at Hamburg before the specified date unless the carriage would have been delayed because of unforeseen events.

It happens in commodity trades that goods are bought while they are at sea and that, in such cases, the word "afloat" is added after the trade term. Since the risk of loss of or damage to the goods would then, under the CFR- and CIF-terms, have passed from the seller to the buyer, difficulties of interpretation might arise. One possibility would be to maintain the ordinary meaning of the CFR- and CIF-terms with respect to the allocation of risk between seller and buyer, namely that risk passes on shipment: this would mean that the buyer might have to assume the consequences of events having already occurred at the time when the contract of sale enters into force. The other possibility would be to let the passing of the risk coincide with the time when the contract of sale is concluded. The former possibility might well be practical, since it is usually impossible to ascertain the condition of the goods while they are being carried. For this reason the 1980 United Nations Convention on Contracts for the International Sale of Goods article 68 stipulates that "if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage" . There is, however, an exception to this rule when "the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer" . Thus, the interpretation of a CFR- or CIF-term with the addition of the word "afloat" will depend upon the law applicable to the contract of sale. The parties are advised to ascertain the applicable law and any solution which might follow therefrom. In case of doubt, the parties are advised to clarify the matter in their contract.

In practice, the parties frequently continue to use the traditional expression C&F (or С and F, C+F). Nevertheless, in most cases it would appear that they regard these expressions as equivalent to CFR. In order to avoid difficulties of interpreting their contract the parties should use the correct Incoterm which is CFR, the only world-wide-accepted standard abbreviation for the term "Cost and Freight (... named port of destination)".

CFR and CIF in A8 of Incoterms 1990 obliged the seller to provide a copy of the charterparty whenever his transport document (usually the bill of lading) contained a reference to the charterparty, for example, by the frequent notation "all other terms and conditions as per charterparty" . Although, of course, a contracting party should always be able to ascertain all terms of his contract - preferably at the time of the conclusion of the contract - it appears that the practice to provide the charterparty as aforesaid has created problems particularly in connection with documentary credit transactions. The obligation of the seller under CFR and CIF to provide a copy of the charterparty together with other transport documents has been deleted in Incoterms 2000.

Although the A8 clauses of Incoterms seek to ensure that the seller provides the buyer with "proof of delivery" , it should be stressed that the seller fulfils that requirement when he provides the "usual" proof. Under CPT and CIP it would be the "usual transport document" and under CFR and CIF a bill of lading or a sea waybill. The transport documents must be "clean" , meaning that they must not contain clauses or notations expressly declaring a defective condition of the goods and/or the packaging. If such clauses or notations appear in the document, it is regarded as "unclean" and would then not be accepted by banks in documentary credit transactions. However, it should be noted that a transport document even without such clauses or notations would usually not provide the buyer with incontrovertible proof as against the carrier that the goods were shipped in conformity with the stipulations of the contract of sale. Usually, the carrier would, in standardized text on the front page of the transport document, refuse to accept responsibility for information with respect to the goods by indicating that the particulars inserted in the transport document constitute the shipper's declarations and therefore that the information is only "said to be" as inserted in the document. Under most applicable laws and principles, the carrier must at least use reasonable means of checking the correctness of the information and his failure to do so may make him liable to the consignee. However, in container trade, the carrier's means of checking the contents in the container would not exist unless he himself was responsible for stowing the container.

There are only two terms which deal with insurance, namely CIF and CIP. Under these terms the seller is obliged to procure insurance for the benefit of the buyer. In other cases it is for the parties themselves to decide whether and to what extent they want to cover themselves by insurance. Since the seller takes out insurance for the benefit of the buyer, he would not know the buyer's precise requirements. Under the Institute Cargo Clauses drafted by the Institute of London Underwriters, insurance is available in "minimum cover" under Clause C, "medium cover" under Clause В and "most extended cover" under Clause A. Since in the sale of commodities under the CIF term the buyer may wish to sell the goods in transit to a subsequent buyer who in turn may wish to resell the goods again, it is impossible to know the insurance cover suitable to such subsequent buyers and, therefore, the minimum cover under CIF has traditionally been chosen with the possibility for the buyer to require the seller to take out additional insurance. Minimum cover is however unsuitable for sale of manufactured goods where the risk of theft, pilferage or improper handling or custody of the goods would require more than the cover available under Clause C. Since CIP, as distinguished from CIF, would normally not be used for the sale of commodities, it would have been feasible to adopt the most extended cover under CIP rather than the minimum cover under CIF. But to vary the seller's insurance obligation under CIF and CIP would lead to confusion and both terms therefore limit the seller's insurance obligation to the minimum cover. It is particularly important for the CIP-buyer to observe this: should additional cover be required, he should agree with the seller that the latter could take out additional insurance or, alternatively, arrange for extended insurance cover himself. There are also particular instances where the buyer may wish to obtain even more protection than is available under Institute Clause A, for example insurance against war, riots, civil commotion, strikes or other labour disturbances. If he wishes the seller to arrange such insurance he must instruct him accordingly in which case the seller would have to provide such insurance if procurable.

9.4 The "D" -terms are different in nature from the "C" -terms, since the seller according to the "D" -terms is responsible for the arrival of the goods at the agreed place or point of destination at the border or within the country of import. The seller must bear all risks and costs in bringing the goods thereto. Hence, the "D" -terms signify arrival contracts, while the "C" -terms evidence departure (shipment) contracts.

Under the "D" -terms except DDP the seller does not have to deliver the goods cleared for import in the country of destination.

Traditionally, the seller had the obligation to clear the goods for import under DEQ, since the goods had to be landed on the quay and thus were brought into the country of import. But owing to changes in customs clearance procedures in most countries, it is now more appropriate that the party domiciled in the country concerned undertakes the clearance and pays the duties and other charges. Thus, a change in DEQ has been made for the same reason as the change in FAS previously mentioned. As in FAS, in DEQ the change has been marked with capital letters in the preamble.

It appears that in many countries trade terms not included in Incoterms are used particularly in railway traffic ( "franco border" , "franco-frontiere" , "Frei Grenze" ). However, under such terms it is normally not intended that the seller should assume the risk of loss of or damage to goods during the transport up to the border. It would be preferable in these circumstances to use CPT indicating the border. If, on the other hand, the parties intend that the seller should bear the risk during the transport DAF indicating the border would be appropriate.

The DDU term was added in the 1990 version of Incoterms. The term fulfils an important function whenever the seller is prepared to deliver the goods in the country of destination without clearing the goods for import and paying the duty. In countries where import clearance may be difficult and time consuming, it may be risky for the seller to undertake an obligation to deliver the goods beyond the customs clearance point. Although, according to DDU B5 and B6, the buyer would have to bear the additional risks and costs which might follow from his failure to fulfil his obligations to clear the goods for import, the seller is advised not to use the DDU term in countries where difficulties might be expected in clearing the goods for import.


As appears from the expressions "the seller must" and "the buyer must" Incoterms are only concerned with the obligations which the parties owe to each other. The words "no obligation" have therefore been inserted whenever one party does not owe an obligation to the other party. Thus, if for instance according to A3 of the respective term the seller has to arrange and pay for the contract of carriage we find the words "no obligation" under the heading "contract of carriage" in B3 a) setting forth the buyer's position. Again, where neither party owes the other an obligation, the words "no obligation" will appear with respect to both parties, for example, with respect to insurance.

In either case, it is important to point out that even though one party may be under "no obligation" towards the other to perform a certain task, this does not mean that it is not in his interest to perform that task. Thus, for example, just because a CFR buyer owes his seller no duty to make a contract of insurance under B4, it is clearly in his interest to make such a contract, the seller being under no such obligation to procure insurance cover under A4.


In practice, it frequently happens that the parties themselves by adding words to an Incoterm seek further precision than the term could offer. It should be underlined that Incoterms give no guidance whatsoever for such additions. Thus, if the parties cannot rely on a well-established custom of the trade for the interpretation of such additions they may encounter serious problems when no consistent understanding of the additions could be proven.

If for instance the common expressions "FOB stowed" or "EXW loaded" are used, it is impossible to establish aworld-wide understanding to the effect that the seller's obligations are extended not only with respect to the cost of actually loading the goods in the ship or on the vehicle respectively but also include the risk of fortuitous loss of or damage to the goods in the process of stowage and loading. For these reasons, the parties are strongly advised to clarify whether they only mean that the function or the cost of the stowage and loading operations should fall upon the seller or whether he should also bear the risk until the stowage and loading has actually been completed. These are questions to which Incoterms do not provide an answer: consequently, if the contract too fails expressly to describe the parties' intentions, the parties may be put to much unnecessary trouble and cost.

Although Incoterms 2000 do not provide for many of these commonly used variants, the preambles to certain trade terms do alert the parties to the need for special contractual terms if the parties wish to go beyond the stipulations of Incoterms.

EXWthe added obligation for the seller to load the goods on the buyer's collecting vehicle.
CIF / CIPthe buyer's need for additional insurance.
DEQthe added obligation for the seller to pay for costs after discharge.

In some cases sellers and buyers refer to commercial practice in liner and charter party trade. In these circumstances, it is necessary to clearly distinguish between the obligations of the parties under the contract of carriage and their obligations to each other under the contract of sale. Unfortunately, there are no authoritative definitions of expressions such as "liner terms" and "terminal handling charges" (THC). Distribution of costs under such terms may differ in different places and change from time to time. The parties are recommended to clarify in the contract of sale how such costs should be distributed between themselves.

Expressions frequently used in charterparties, such as "FOB stowed" , "FOB stowed and trimmed" , are sometimes used in contracts of sale in order to clarify to what extent the seller under FOB has to perform stowage and trimming of the goods onboard the ship. Where such words are added, it is necessary to clarify in the contract of sale whether the added obligations only relate to costs or to both costs and risks.

As has been said, every effort has been made to ensure that Incoterms reflect the most common commercial practice. However in some cases - particularly where Incoterms 2000 differ from Incoterms 1990 - the parties may wish the trade terms to operate differently. They are reminded of such options in the preamble of the terms signalled by the word "However".


Since Incoterms provide a set of terms for use in different trades and regions it is impossible always to set forth the obligations of the parties with precision. To some extent it is therefore necessary to refer to the custom of the port or of the particular trade or to the practices which the parties themselves may have established in their previous dealings (cf. article 9 of the 1980 United Nations Convention on Contracts for the International Sale of Goods). It is of course desirable that sellers and buyers keep themselves duly informed of such customs when they negotiate their contract and that, whenever uncertainty arises, they clarify their legal position by appropriate clauses in their contract of sale. Such special provisions in the individual contract would supersede or vary anything that is set forth as a rule of interpretation in the various Incoterms.


In some situations, it may not be possible at the time when the contract of sale is entered into to decide precisely on the exact point or even the place where the goods should be delivered by the seller for carriage. For instance reference might have been made at this stage merely to a "range" or to a rather large place, for example, seaport, and it is then usually stipulated that the buyer has the right or duty to name later on the more precise point within the range or the place. If the buyer has a duty to name the precise point as aforesaid his failure to do so might result in liability to bear the risks and additional costs resulting from such failure (B5/B7 of all terms). In addition, the buyer's failure to use his right to indicate the point may give the seller the right to select the point which best suits his purpose (FCA A4).


The term "customs clearance" has given rise to misunderstandings. Thus, whenever reference is made to an obligation of the seller or the buyer to undertake obligations in connection with passing the goods through customs of the country of export or import it is now made clear that this obligation does not only include the payment of duty and other charges but also the performance and payment of whatever administrative matters are connected with the passing of the goods through customs and the information to the authorities in this connection. Further, it has - although quite wrongfully - been considered in some quarters inappropriate to use terms dealing with the obligation to clear the goods through customs when, as in intra-European Union trade or other free trade areas, there is no longer any obligation to pay duty and no restrictions relating to import or export. In order to clarify the situation, the words "where applicable" have been added in the A2 and B2, A6 and B6 clauses of the relevant Incoterms in order for them to be used without any ambiguity where no customs procedures are required.

It is normally desirable that customs clearance is arranged by the party domiciled in the country where such clearance should take place or at least by somebody acting there on his behalf. Thus, the exporter should normally clear the goods for export, while the importer should clear the goods for import.

Incoterms 1990 departed from this under the trade terms EXW and FAS (export clearance duty on the buyer) and DEQ (import clearance duty on the seller) but in Incoterms 2000 FAS and DEQ place the duty of clearing the goods for export on the seller and to clear them for import on the buyer respectively, while EXW -representing the seller's minimum obligation - has been left unamended (export clearance duty on the buyer). Under DDP the seller specifically agrees to do what follows from the very name of the term - Delivered Duty Paid - namely to clear the goods for import and pay any duty as a consequence thereof.


In most cases, the parties would know beforehand which packaging is required for the safe carriage of the goods to destination. However, since the seller's obligation to pack the goods may well vary according to the type and duration of the transport envisaged, it has been felt necessary to stipulate that the seller is obliged to pack the goods in such a manner as is required for the transport, but only to the extent that the circumstances relating to the transport are made known to him before the contract of sale is concluded (cf. articles 35.1. and 35.2.b. of the 1980 United Nations Convention on Contracts for the International Sale of Goods where the goods, including packaging, must be "fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement" ).


In many cases, the buyer may be well advised to arrange for inspection of the goods before or at the time they are handed over by the seller for carriage (so-called pre-shipment inspection or PSI). Unless the contract stipulates otherwise, the buyer would himself have to pay the cost for such inspection that is arranged in his own interest. However, if the inspection has been made in order to enable the seller to comply with any mandatory rules applicable to the export of the goods in his own country, the seller would have to pay for that inspection, unless the EXW term is used, in which case the costs of such inspection are for the account of the buyer.


Any mode of transport
Group E
EXW Ex Works (... named place)

Group F
FCA Free Carrier (... named place)

Group С
CPT Carriage Paid To (... named place of destination)
CIP Carriage and Insurance Paid To (... named place of destination)

Group D
DAF Delivered At Frontier (... named place)
DDU Delivered Duty Unpaid (... named place of destination)
DDP Delivered Duty Paid (... named place of destination)

Maritime and inland waterway transport only
Group F
FAS Free Alongside Ship (... named port of shipment)
FOB Free On Board (... named port of shipment)

Group С
CFR Cost and Freight (... named port of destination)
CIF Cost, Insurance and Freight (... named port of destination)

Group D
DES DES Delivered Ex Ship (... named port of destination)
DEQ Delivered Ex Quay (... named port of destination)


In some cases the preamble recommends the use or non-use of a particular term. This is particularly important with respect to the choice between FCA and FOB. Regrettably, merchants continue to use FOB when it is totally out of place thereby causing the seller to incur risks subsequent to the handing over of the goods to the carrier named by the buyer. FOB is only appropriate to use where the goods are intended to be delivered "across the ship's rail" or, in any event, to the ship and not where the goods are handed over to the carrier for subsequent entry into the ship, for example stowed in containers or loaded on lorries or wagons in so-called roll on - roll off traffic. Thus, a strong warning has been made in the preamble of FOB that the term should not be used when the parties do not intend delivery across the ship's rail.

It happens that the parties by mistake use terms intended for carriage of goods by sea also when another mode of transport is contemplated. This may put the seller in the unfortunate position that he cannot fulfil his obligation to tender the proper document to the buyer (for example a bill of lading, sea waybill or the electronic equivalent). The chart printed at paragraph 17 above makes clear which trade term in Incoterms 2000 it is appropriate to use for which mode of transport. Also, it is indicated in the preamble of each term whether it can be used for all modes of transport or only for carriage of goods by sea.


Traditionally, the on board bill of lading has been the only acceptable document to be presented by the seller under the CFR and CIF terms. The bill of lading fulfils three important functions, namely:
  • proof of delivery of the goods on board the vessel;
  • evidence of the contract of carriage; and
  • a means of transferring rights to the goods in transit to another party by the transfer of the paper document to him.
Transport documents other than the bill of lading would fulfil the two first-mentioned functions, but would not control the delivery of the goods at destination or enable a buyer to sell the goods in transit by surrendering the paper document to his buyer. Instead, other transport documents would name the party entitled to receive the goods at destination. The fact that the possession of the bill of lading is required in order to obtain the goods from the carrier at destination makes it particularly difficult to replace by electronic means of communication.

Further, it is customary to issue bills of lading in several originals but it is, of course, of vital importance for a buyer or a bank acting upon his instructions in paying the seller to ensure that all originals are surrendered by the seller (so-called "full set" ). This is also a requirement under the ICC Rules for Documentary Credits (the so-called ICC Uniform Customs and Practice, "UCP"; current version at date of publication of Incoterms 2000: ICC publication 500).

The transport document must evidence not only delivery of the goods to the carrier but also that the goods, as far as could be ascertained by the carrier, were received in good order and condition. Any notation on the transport document which would indicate that the goods had not been in such condition would make the document "unclean" and would thus make it unacceptable under the UCP.

In spite of the particular legal nature of the bill of lading it is expected that it will be replaced by electronic means in the near future. The 1990 version of Incoterms had already taken this expected development into proper account. According to the A8 clauses, paper documents may be replaced by electronic messages provided the parties have agreed to communicate electronically. Such messages could be transmitted directly to the party concerned or through a third party providing added-value services. One such service that can be usefully provided by a third party is registration of successive holders of a bill of lading. Systems providing such services, such as the so-called BOLERO service, may require further support by appropriate legal norms and principles as evidenced by the CMI 1990 Rules for Electronic Bills of Lading and articles 16-17 of the 1996 UNCITRAL Model Law on Electronic Commerce.


In recent years, a considerable simplification of documentary practices has been achieved. Bills of lading are frequently replaced by non-negotiable documents similar to those which are used for other modes of transport than carriage by sea. These documents are called "sea waybills" , "liner waybills" , "freight receipts" , or variants of such expressions. Non-negotiable documents are quite satisfactory to use except where the buyer wishes to sell the goods in transit by surrendering a paper document to the new buyer. In order to make this possible, the obligation of the seller to provide a bill of lading under CFR and CIF must necessarily be retained. However, when the contracting parties know that the buyer does not contemplate selling the goods in transit, they may specifically agree to relieve the seller from the obligation to provide a bill of lading, or, alternatively, they may use CPT and CIP where there is no requirement to provide a bill of lading.


A buyer paying for the goods under a "C" -term should ensure that the seller upon payment is prevented from disposing of the goods by giving new instructions to the carrier. Some transport documents used for particular modes of transport (air, road or rail) offer the contracting parties a possibility to bar the seller from giving such new instructions to the carrier by providing the buyer with a particular original or duplicate of the waybill. However, the documents used instead of bills of lading for maritime carriage do not normally contain such a barring function. The Comite Maritime International has remedied this shortcoming of the above-mentioned documents by introducing the 1990 "Uniform Rules for Sea Waybills" enabling the parties to insert a "no-disposal" clause whereby the seller surrenders the right to dispose of the goods by instructions to the carrier to deliver the goods to somebody else or at another place than stipulated in the waybill.


Contracting parties who wish to have the possibility of resorting to ICC Arbitration in the event of a dispute with their contracting partner should specifically and clearly agree upon ICC Arbitration in their contract or, in the event that no single contractual document exists, in the exchange of correspondence which constitutes the agreement between them. The fact of incorporating one or more Incoterms in a contract or the related correspondence does NOT by itself constitute an agreement to have resort to ICC Arbitration.
The following standard arbitration clause is recommended by ICC: "All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules."
  • Note: Incoterm had revision effect on January 1, 2011 as INCOTERM 2010