Shesha FS Logistics (Pty) Ltd
INCOTERMS EXPLAINED
Incoterms are specifically designed to clarify the agreement between the shipper and consignee regarding the division of costs, responsibilities, and the risk of loss or damage to the cargo being transported. Make sure you understand your obligations and that you have the correct insurance cover"
EXW - ExWorks
Ex Works (EXW) refers to a term where the seller makes the goods available to the buyer at the seller’s premises or another specified location (e.g., factory, warehouse). The seller is not responsible for loading the goods onto any collecting vehicle, nor for clearing them for export.
FOB - Free on Board
The seller delivers the goods by placing them on board the vessel designated by the buyer at the specified port of shipment or ensures the goods are already loaded. The risk of loss or damage transfers to the buyer once the goods are on board the vessel, with the buyer assuming all costs from that point forward.
CPT - Carriage Paid To
The seller hands over the goods to the carrier or a person designated by the seller at a mutually agreed location, if such a place is specified in the agreement. The seller is responsible for arranging and covering the transportation costs needed to deliver the goods to the specified destination.
DAP - Delivered At Place
The seller fulfills their obligation when the goods are made available to the buyer on the arriving transport, ready for unloading at the specified destination. The seller assumes all risks associated with delivering the goods to that location.
FCA - Free Carrier
The seller hands over the goods to the carrier or another individual designated by the buyer at the seller’s premises or a specified location. It is recommended that both parties clearly specify the exact point within the named delivery location, as the risk transfers to the buyer at that specific point.
CFR - Cost and Freight
The seller delivers the goods by placing them on board the vessel or ensures they are already loaded. The risk of loss or damage transfers to the buyer once the goods are on board. The seller is responsible for arranging and covering the costs of transportation and freight to the specified port of destination.
CIP - Carriage and Insurance Paid To
The seller's responsibilities are the same as under CPT, but in addition, they must arrange insurance to cover the buyer’s risk of loss or damage to the goods during transit. It’s important for the buyer to note that under CIP, the seller is only required to provide minimum insurance coverage. If the buyer desires additional protection, they must either negotiate this explicitly with the seller or arrange for extra insurance independently.
DPU - Delivered at Place Unloaded
DPU has replaced the previous Incoterm® DAT (Delivered At Terminal). Under DPU, the seller delivers the goods by unloading them and making them available to the buyer at a specified destination. The seller assumes all risks associated with transporting and unloading the goods at the named place of destination.
FAS - Free Alongside Ship
The seller fulfills their obligation by placing the goods alongside the vessel (such as on a quay or barge) designated by the buyer at the specified port of shipment. The risk of loss or damage transfers to the buyer once the goods are alongside the ship. From that point forward, the buyer assumes all costs.
CIF - Cost, Insurance and Freight
The seller delivers the goods by placing them on board the vessel or ensures they are already loaded. The risk of loss or damage transfers to the buyer once the goods are on the ship. The seller is responsible for arranging and covering the costs of transportation and freight to the designated port of destination, as well as securing insurance to cover the buyer’s risk of loss or damage during transit. However, under CIF terms, the seller is only required to provide minimum insurance coverage. If the buyer desires additional insurance protection, they must either negotiate this with the seller or arrange extra coverage independently.
DDP - Delivered Duty Paid
"The seller fulfills their delivery obligation when the goods are made available to the buyer, cleared for import, on the arriving transport, and ready for unloading at the specified destination. The seller is responsible for all costs and risks associated with transporting the goods to this destination. This includes clearing the goods for both export and import, paying any applicable duties, and handling all necessary customs formalities."
Remember to check your insurance cover
Marine insurance provides coverage to protect goods from losses or damage during transit. As cargo moves through various stages of the logistics chain: loading, unloading, transportation, and storage, the cargo faces potential risks at each stage. Despite careful measures to secure the cargo and the use of specialised service providers, unforeseen events can still happen. A carrier’s liability is capped at the maximum amount specified in the Terms and Conditions of the waybill. In the event of a claim, the carrier’s liability is based on their revenue, not the value of your cargo. Due to this limitation, it is crucial to ensure your marine insurance policy provides adequate coverage.