Page 40 - Banking Finance June 2021

ARTICLE

case he needs the same. Similar to FOB, the buyer has also 9. DPU - Delivered at Place Unloaded (named
to bear the cost of unloading and transportation of the place of destination):
goods from the arrival port to the final destination.
Under this Incoterms®, the seller is obliged to deliver the
goods unloaded at the named place of destination. The
6. CIF - Cost, Insurance and Freight (named port
seller has to bear the cost of transport which includes the
of destination): export fees, carriage, unloading from main carrier at
In this term, the seller is obliged to bear the cost of the destination port and destination port charges. The seller also
insurance cover and freight cost of the goods up to the has to assume all the risks until the arrival of the goods at
named port of destination. The seller has to insure the goods the destination port of terminal. The terminal can either be
for 110 % of the contract value under Institute Cargo a port, Airport or an Inland container depot with the facility
Clauses (A) of the Institute of London Underwriters or any to receive the shipment. All the charges after unloading like
similar set of clauses, unless otherwise mutually agreed import duty, taxes and on-carriage expenses are to the
upon by both buyer and seller. The insurance policy should account of the buyer. But, any delay or demurrage charges
be in the same currency as that of the sale contract. The at the terminal are normally to the account of the seller.
seller has to provide the three basic documents such as the This is the only Incoterm under which the cost of unloading
invoice, the insurance policy and the bill of lading which at destination is to the account of the Seller.
represent the cost, insurance and freight of the goods to
the buyer in order to fulfill his obligations under this term. 10. DAP - Delivered At Place (named place of
The transfer of risk of damage to goods from seller to buyer destination):
takes place once the goods are loaded on board the ship. Under this rule, once the goods are ready for shipment, the
seller at his cost completes the necessary packing of the
7. CPT - Carriage Paid To (named place of same so that the goods reach the final destination safely.
destination): The seller also completes the necessary legal formalities in
Under this Incoterms®, the seller is obliged to pay for the the exporting country at his own cost and risk to clear the
carrier up to the named place of destination. But, the goods goods for export. Once the goods reach the country of
are considered delivered by the seller once they are handed destination, the customs clearance formalities at the
over to the first or main carrier, so that the risk transfers to importing country is to be completed by the buyer at his
the buyer from that point onwards. The seller has to bear cost. All carriage expenses including any terminal expenses
the cost of export clearance and freight costs for carriage are to be borne by the seller up to the named place of
up to the named place of destination. This named place of destination as per the agreement. But the unloading cost
destination may either be the seller's premises or a port in at the final destination is to be borne by the buyer under
the destination country as mutually agreed between the DAP terms.
buyer and seller.
11. DDP - Delivered Duty Paid (named place of

8. CIP - Carriage and Insurance Paid To (named destination):
Under this rule, the seller is obliged to deliver the goods to
place of destination):
the named place in the country of the buyer. The seller also
This Incoterms® is similar to the above term CPT except that has to pay all the costs in bringing the goods to the
the seller has to provide insurance cover for the goods during destination which includes the import duties and taxes. But
the transit period. Under CIP, the seller is required to provide the seller is not responsible for unloading the goods. While
insurance for 110 % of the contract value of the goods under the obligation of the seller is the maximum under this term,
Institute Cargo Clauses (A) of the Institute of London the obligation of the buyer is at the minimum level. The risk
underwriters. This policy should also be in the same currency is transferred to the buyer on delivery of goods at the named
as that of the contract and should permit the Buyer, the place of destination. The seller should be aware of the rules
Seller and anyone else with an insurable interest in the goods and regulations of the importing country as he is not only
to be able to make a claim. obliged to bear the import duty and taxes but also is

40 | 2021 | JUNE | BANKING FINANCE