Incoterms: FAS, FOB, CIP, CPT Explained

Incoterms: FAS, FOB, CIP, and CPT

What kind of cargo is used for FAS? Why?

Containers are used for FAS because the goods are carried on board a ship.

Which are the two possible cases of delivery for FCA?

• When the goods have been loaded on the transport designated by the buyer or by a person acting on its behalf.
• When the goods are made available to the seller's carrier transport, without being discharged.

Allocation of Costs and Risk for FAS and FOB

The seller is required to deliver the goods alongside the actual ship on the pier. From that point forward, the buyer bears all costs (loading cost, freight, insurance) and risks. Under FAS terms, the buyer is required to clear the goods for export and pay the cost of loading the goods.

Why is it so important for the seller to have the bill of lading? Which Incoterm allows this?

The bill of lading from the carrier to the shipper can be used as evidence of the contract of carriage. It proves that the carrier has received the goods and will deliver them. In this case, the bill of lading is used as a contract of carriage between the seller and the carrier.

Explain the rules for naming Incoterms

The naming convention for Incoterms follows the format: Letter 2, Place 3, ICC 2010.

What are the Incoterms CIP and CPT created for?

CIP: The seller delivers the goods to the carrier, pays the transport cost, and takes care of the transport insurance.

CPT: The seller delivers the goods to the carrier's warehouse and pays the costs of transporting the goods to the destination but does not assume the transport risks.

Which transport document is used for all Incoterms?

FBL (Forwarder Bill of Lading)

Other Transport Documents:

• Train: Railway Bill of Lading
• Plane: Air Waybill
• Lorry: CMR

Who gets those documents with CPT?

The buyer gets and accepts the transport documents if they comply with the contract.

In CPT, who pays for the main transport?

The seller pays all transportation costs to bring the goods to the agreed destination point.

Differences between the delivery point and the destination point?

The delivery point is where the goods are delivered to the freight forwarder, and international transport begins. The destination point is where the goods have arrived at their final destination and will be picked up by the buyer.

When does the seller pass the risk to the buyer? What does it mean?

The risk is transferred from the seller to the buyer when the seller gives the carrier the cargo and the cargo documents at the port of export.

We say that the seller gets insurance for the buyer to avoid financial risk. Why? Explain it. Which are the three clauses for Marine Insurance?

The seller may obtain insurance for the buyer to protect against potential loss or damage to the goods during transit. This minimizes the buyer's financial risk.

Marine Insurance Clauses:

• Clause C: Covers loss or damage due to fire and explosion, stranding, sinking, capsizing, overturning of a lorry or train, collision, total loss of vehicle, general average sacrifice, and jettison.
• Clause B: Includes all coverage in Clause C plus washing overboard, sea, lake, river, water damage, and total loss of package during loading/unloading.
• Clause A: Includes all coverage in Clause B plus rainwater damage, malicious damage, breakage, partial loss, shortage, pilferage, and theft.

Which insurance does the Incoterm CIP oblige the seller to get?

CIP requires the seller to obtain a minimum insurance coverage of Clause C.

Sometimes the seller pays for insurance, and the buyer gets another insurance for the same goods. Can you explain the reason?

The buyer might obtain additional insurance coverage beyond the minimum required by CIP (Clause C) to have more comprehensive protection against potential risks (e.g., Clause B or A).

Allocation of Costs for Seller and Buyer in CIP

Seller:

• All costs relating to the goods until they have been delivered at the agreed point of destination.
• Transport and the cost of loading the goods at the destination, if required by the contract.
• Insurance cost.
• The cost of unloading at the destination and the cost of customs clearance for export.

Buyer:

• All costs relating to the goods from the time of delivery by the seller.
• Unloading charges and all duties, taxes, and other charges, as well as the cost of import clearance.

How do we calculate the insurance charge in CIP?

CIP: Obligation. We will have 3 clauses (C, B, A). Insurance requirement is minimum cover (Clause C). The buyer may pay for additional coverage (Clause B or A).

Formula:

I = 1 – (i x S)

I = 1 – (i x 1.1)

Who pays for customs inspections for CIP or CPT?

The seller pays for loading the goods. The buyer pays for unloading the goods.