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1. The transfer of risk of possible loss/damage to goods during
the transport operation.
2. The division of costs: the seller having to pay costs
necessary for the goods to reach the agreed point of delivery and the
buyer paying the further costs beyond this point.
3. The document (or equivalent electronic message) to be provided
by the seller to the buyer as proof of shipment or delivery to the
Incoterms are based on the main principle that the party best positioned
to undertake the function to clear the goods and to pay the duties and
other costs in connection with export and import should be so. Thus:
» Under all terms (FCA, FAS, FOB) the
seller should do what is necessary to clear the goods for export.
» Under all terms (CPT, CFR, CIF,
CIP) the seller assumes the obligation with respect to export and the
buyer assumes the obligations with respect to import.
» Under all D terms (DDU, DDP, DAF,
DES and DEQ) except DDP, the buyer should do what is necessary to clear
the goods for import.
» Under EXW the buyer has to assume
the obligations with respect to export as well as imports (this is an
exemption from the main principle, following from the nature of EXW to
express the sellers minimum obligation)
» The parties are reminded in the
preamble to DDP that it may be appropriate to exclude from the seller's
obligations some of the costs such as VAT payable upon import of goods.
Incoterms deal only identifies the sellers' obligation to take out
insurance to the benefit of the buyer under CIF and CIP terms. Under all
other terms, it is for the buyer and the seller to arrange the insurance
as they think fit.
The sellers' insurance obligations to the benefit of the buyer stems
from the following:
» Nature of the C-term, which
requires the seller to contract for the carriage-without assuming the
risks of loss or damage to the goods in transit.
» Requires the seller to take out
insurance only on minimum terms (Cover under the Institute cargo Clause
of the London Underwriters)
» Invites the buyer to agree with the
seller to arrange additional insurance or to arrange additional
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