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Relationship to INCOTERMS

The significance of INCOTERMS 2000 is explained below:-

  1. If the sale is ex-works, the risk passes when goods are made available at the seller’s works or factory  Even the loading of the goods is normally at the buyer’s risk and the buyer should insure accordingly.
  2. If the sale is FOB (free on board), the risk of loss or damage is transferred from the seller to the buyer when the goods pass the ships rail.  Both seller and buyer therefore have a portion of risk to insure.
  3. If the sale involves through transport to the Continent, FOB is inappropriate and the term ‘free carrier’ should be selected and under the latter Incoterm, the risk passes at a named point at which the goods are handed over to the carrier.  This could, for instance, be the carrier’s consolidation warehouse.  Again, both buyer and seller will have a portion of risk to insure.
  4. In a CFR (cost and freight) sale, the risk passes at the ship’s rail but the buyer is responsible for effecting and paying for insurance of the entire transit.
  5. In a CIF (cost, insurance and freight) sale, the risk also passes at the ship’s rail but the seller is responsible for effecting and paying insurance of the entire transit.
  6. In a DDP (delivered duty paid) sale, the seller bears the risk in the goods until they have been delivered at a named place of destination in the country of importation.  The seller should insure duty and VAT accordingly.

For any further information please contact FirstBase Freight Ltd, Tel: 0844 272 6731.

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