Learning more about Incoterms®2010

In an earlier issue we introduced “Carriage and Insurance Paid to” or “CIP” (named place of destination) as the fourth of the Incoterms for the class “Rules for any Mode or Modes of Transport”. This means that it can be used irrespective of the selected mode of transport and can even be used for more than one mode of transport. In the introduction of the CIP term and in subsequent issues we briefly highlighted the ten seller’s obligations and the ten buyer’s obligations. This part serves to summarise and conclude the term. According to the International Chamber of Commerce (ICC) CIP, at a named place of destination, means that “the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed by the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination”. In addition, the seller also contracts for insurance. Such insurance must cover the buyer’s risk of loss or damage to the goods during the carriage. It is critical to remember that that the seller is only required to obtain minimum cover. Should the buyer require additional insurance, then he/ she should either contract the buyer to do this or arrange his/her own additional insurance. According to the ICC’s “Guidance Note” for CIP, when this term or Carriage Paid to (CPT), Cost and Freight (CFR) or Cost Insurance and Freight (CIF) are used, the seller fulfils his delivery obligation once he hands the goods to the carrier. The ICC’s “Guidance Note” for CIP states two critical points, since the risks pass and costs are transferred at different places. As a consequence the contract of sale should be explicit (very) with respect to the place of delivery as well as to the named place of destination. Another matter that needs to be explicit is the point within the agreed place of destination. The reason is that the costs to that point are for the seller’s account. In accordance with this term, the seller is required to, where applicable, clear the goods for export. The seller does, however, not have any obligation with respect to the clearance of imported goods. In next week’s issue we will define the fifth of the Incoterms – Delivered at Terminal (DAT).