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Incoterms

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 carrier.

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 and Insurance:

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 insurance him/herself.
Please visit
www.iccwbo.org/index_incoterms.asp for brief information.

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