Learning more about Incoterms®2010

Cost and Freight or CFR
(named port of destination)
Incoterms®2010 is the
tenth of eleven Incoterms
(it is always plural) for
the class “Rules for Sea
and Inland Waterway
Transport”. According to
the International Chamber
of Commerce (ICC),
in “the second class of
Incoterms®2010 rules, the
point of delivery and the
place to which the goods
are carried to the buyer are
both ports, hence the label
‘sea and inland waterway’
rules”.
The ICC’s Incoterms
®2010 identifies ten
obligations that the
seller may need to fulfil
in terms of Cost and
Freight or CFR: (1)
general obligations of
the seller; (2) licences,
authorisations, security
clearances and other
formalities; (3) contracts
of carriage and insurance;
(4) delivery; (5) transfer
of risks; (6) allocation
of costs; (7) notices to
the buyer; (8) delivery
document; (9) checking
– packaging – marking;
and (10) assistance with
information and related
costs.
The general obligations
of the seller are essentially
the provision of goods and
the commercial invoice
in conformity with the
contract of sale, which
implies that the documents
stipulated in the contract
of sale must be provided.
In respect of the
licences, authorisations,
security clearances and
formalities the seller must
obtain these at his own
risk and expense, and
also needs to carry out
the customs formalities
necessary for the export of
the goods.
With respect to the
contract of carriage, the
seller must contract or
procure a contract for
the carriage of the goods
from the agreed point of
delivery. The seller has no
obligation with respect to
the contract of insurance.
As for the delivery to be
effected, the seller must
place the goods on board
the vessel or procure the
goods so delivered. The
seller bears all risks of
loss of or damage of the
goods until they have been
delivered.
As for the allocation of
costs, the seller must pay
all costs until the goods
have been delivered.
The seller is responsible
for all costs relating to the
goods until they have been
delivered, including the
freight cost, loading costs
etc, and where applicable
the costs of the customs
formalities necessary for
export. The seller must
notify the buyer in order
to allow the buyer to take
delivery of the goods.
The seller must provide
the buyer with the usual
transport document.
With respect to the
checking – packaging –
marking, the seller must
pay the costs of the
necessary checking
required ie, quality, etc,
as well as the costs of any
pre-shipment inspection
mandated by the authority
in the country of origin.
As for the assistance
with information
(including security-related
information) and related
costs, the buyer could
request this from the
seller, but this would be
for the buyer’s risk and
account.
In next week’s issue
we will define Cost and
Freight (CFR) – The
Buyer’s Obligations.