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ABBREVIATES

MARINE ABBREVIATIONS

MARINE TERMS

P&I  GLOSSARY

INCOTERMS 2000

THE PHONETIC ALPHABET

THE PHONETIC ALPHABET

A = Alpha B = Bravo C = Charley
D = Delta E = Echo F = Foxtrot or just Fox
G = Golf H = Hotel I = India
J = Juliet K = Kilo L = Lima
M = Mike N = November O = Oscar
P = Papa Q = Quebec R = Romeo
S = Sierra T = Tango U = Uniform
V = Victor W = Whiskey X = X-ray
Y = Yankee Z = Zulu

INCOTERMS 2000


Incoterms" is an abbreviation of International Commercial Terms, which were first published in 1936 by the International Chamber of Commerce (ICC). Since that time there have been six different revisions and updates to the Incoterms. The Incoterms provide a common set of rules for the most often used international terms of trade.

The goal of the Incoterms is to alleviate or reduce confusion over interpretations of shipping terms, by outlining exactly who is obligated to take control of and/or insure goods at a particular point in the shipping process. Further, the terms will outline the obligations for the clearance of the goods for export or import, and requirements on the packing of items. The Incoterms are used quite frequently in international contracts, and a specific version of the Incoterms should be referenced in the text of the contract.

Although the Incoterms are widely used and exceedingly handy, they are not meant for every type of contract. Specifically, the terms used in a contract state exactly when the shipper unloads and relinquishes obligation, and when the buyer takes over for carriage and insurance. The Incoterms are not meant to replace statements in a contract of sale that outline transfers of ownership or title to goods. Therefore, the Incoterms may not be of use when looking to resolve disputes that may arise regarding payment or ownership of goods.

Use of Incoterms

Incoterms are not implied into contracts for the sale of goods. If you desire to use Incoterms, you must specifically include them in your contract. Further, your contract should expressly refer to the rules of interpretation as defined in the latest revision of Incoterms, for example, Incoterms 2000, and you should ensure the proper application of the terms by additional contract provisions. Also, Incoterms are not “laws.” In case of a dispute, courts and arbitrators will look at: 1) the sales contract, 2) who has possession of the goods, and 3) what payment, if any, has been made. See International Contracts, also by World Trade Press.

Illustrated Guide to Incoterms

This guide was designed to give a graphic representation of the buyer’s and seller’s risks and costs under each Incoterm. The material on each facing page gives a summary of seller and buyer responsibilities.

Incoterms Do
Incoterms 2000 may be included in a sales contract if the parties desire the following:

1.       To complete a sale of goods.

2.       To indicate each contracting party’s costs, risks, and obligations with regard to delivery of the goods as follows:

a.       When is the delivery completed?

b.       How does a party ensure that the other party has met that standard of conduct?

c.       Which party must comply with requisite licenses and government-imposed formalities?

d.       What are the mode and terms of carriage?

e.       What are the delivery terms and what is required as proof of delivery?

f.        When is the risk of loss transferred from the seller to the buyer?

g.       How will transport costs be divided between the parties?

h.       What notices are the parties required to give to each other regarding the transport and transfer of the goods?

3.       To establish basic terms of transport and delivery in a short format.

Incoterms Do Not
Incoterms 2000 are not sufficient on their own to express the full intent of the parties. They will not:

1. Apply to contracts for services.

2. Define contractual rights and obligations other than for delivery.

3. Specify details of the transfer, transport, and delivery of the goods.

4. Determine how title to the goods will be transferred.

5. Protect a party from his/her own risk of loss.

6. Cover the goods before or after delivery.

7. Define the remedies for breach of contract.

  • Tip: Incoterms can be quite useful, but their use has limitations. If you use them incorrectly, your contract may be ambiguous, if not impossible to perform. It is therefore important to understand the scope and purpose of Incoterms—when and why you might use them—before you rely on them to define such important terms as mode of delivery, customs clearance, passage of title, and transfer of risk.

Organization of Incoterms

Incoterms are grouped into four categories:

1.       The "E" term (EXW)-The only term where the seller/exporter makes the goods available at his or her own premises to the buyer/importer.

2.       The "F" terms (FCA, FAS and FOB)-Terms where the seller/exporter is responsible to deliver the goods to a carrier named by the buyer.

3.       The "C" terms (CFR, CIF, CPT and CIP)-Terms where the seller/exporter/manufacturer is responsible for contracting and paying for carriage of the goods, but not responsible for additional costs or risk of loss or damage to the goods once they have been shipped. C terms evidence "shipment" (as opposed to "arrival") contracts.

4.       The "D" terms (DAF, DES, DEQ, DDU and DDP)-Terms where the seller/exporter/manufacturer is responsible for all costs and risks associated with bringing the goods to the place of destination. D terms evidence "arrival" contracts.

The following table sets out these categories.

Incoterms 2000

Group E
Departure
EXW Ex Works
(...named place)

Title and risk pass to buyer including payment of all transportation and insurance cost from the seller's door. Used for any mode of transportation.

Group F
Main Carriage Unpaid
FCA Free Carrier
(...named place)

Title and risk pass to buyer including transportation and insurance cost when the seller delivers goods cleared for export to the carrier. Seller is obligated to load the goods on the Buyer's collecting vehicle; it is the Buyer's obligation to receive the Seller's arriving vehicle unloaded.

FAS Free Alongside Ship
(...named port of shipment)

Title and risk pass to buyer including payment of all transportation and insurance cost once delivered alongside ship by the seller. Used for sea or inland waterway transportation. The export clearance obligation rests with the seller.

FOB Free On Board
(...named port of shipment)

Title and risk pass to buyer including payment of all transportation and insurance cost once delivered on board the ship by the seller. Used for sea or inland waterway transportation.

Group C
Main Carriage Paid
CFR  C&F Cost and Freight
(...named port of destination)
Title, risk and insurance cost pass to buyer when delivered on board the ship by seller who pays the transportation cost to the destination port. Used for sea or inland waterway transportation.
CIF Cost, Insurance and Freight
(...named port of destination)

Title and risk pass to buyer when delivered on board the ship by seller who pays transportation and insurance cost to destination port. Used for sea or inland waterway transportation.

CPT Carriage Paid To
(...named port of destination)

Title, risk and insurance cost pass to buyer when delivered to carrier by seller who pays transportation cost to destination. Used for any mode of transportation.

CIP Carriage and Insurance Paid To
(...named port of destination)
Title and risk pass to buyer when delivered to carrier by seller who pays transportation and insurance cost to destination. Used for any mode of transportation.
Group D
Arrival
DAF Delivered at Frontier
(a named place)

Title, risk and responsibility for import clearance pass to buyer when delivered to named border point by seller. Used for any mode of transportation.

DES Delivered Ex Ship
(...named port of destination)
Title, risk, responsibility for vessel discharge and import clearance pass to buyer when seller delivers goods on board the ship to destination port. Used for sea or inland waterway transportation.
DEQ Delivered Ex Quay
(...named port of destination)
Title and risk pass to buyer when delivered on board the ship at the destination point by the seller who delivers goods on dock at destination point cleared for import. Used for sea or inland waterway transportation.
DDU Delivered Duty Unpaid
(...named port of destination)

Title, risk and responsibility of import clearance pass to buyer when seller delivers goods to named destination point. Used for any mode of transportation. Buyer is obligated for import clearance -- Seller fulfills his obligation when goods have been made available at teh named place in the country of importation

DDP Delivered Duty Paid
(...named port of destination)

Title and risk pass to buyer when seller delivers goods to named destination point cleared for import. Used for any mode of transportation.

Each group's letter makes up the first letter of Incoterm. For example, if your agreement with a buyer calls for the release of goods by the seller to occur at the seller's location, the Ex Works (EXW) Incoterm would be used. This term states among other things that the buyer is to take over carriage and insurance responsibilities at the sellers dock. Alternatively, if the seller were to deliver goods to the buyers dock, including all carriage and insurance, a term from the Arrival group such as DDP would be appropriate. The DDP term stands for Delivered Duty Paid and includes in its definition that the seller will deliver goods to the buyers dock with all carriage, insurance, and duties paid. DDP represents the most obligations for the seller, whereas EXW represents the least.

Caution must be exercised when using Incoterms because the Incoterms relate to particular modes of transportation. For example, some of the Incoterms deal solely with transport by sea. Terms such as FOB and CIF can be used only for ocean bound freight. FOB, meaning Free on Board, translates to the shipper (seller) having upheld his/her part of the agreement when the goods pass the ship's rails at the port of exit. The receiving party (buyer) assumes risk and costs associated with the goods once they pass the ship's rail in the seller's home port. Due to the specific mention of the ship's rails, an aircraft or other mode of transport could not be used with FOB. For a shipment scheduled for delivery by air, rail, or some other form of transport with the same agreement as FOB one would need to use the Incoterm FCA, or Free Carrier. FCA can include other modes of transportation such as road, rail, interland waterway, and air. Whereas transfer under FOB takes place when the cargo passes the ship's rails, transfer with FCA occurs when delivery of goods has been made at a destination previously outlined by the buying party.

Mode of Transport

Not all Incoterms are appropriate for all modes of transport. Some terms were designed with sea vessels in mind while others were designed to be applicable to all modes. The following table sets out which terms are appropriate for each mode of transport.

Incoterms 2000

All modes of transport including multimodal EXW Ex Works
(...named place)
FCA Free Carrier (...named place)
CPT Carriage Paid To
(...named port of destination)
CIP Carriage and Insurance Paid To
(...named port of destination)
DAF Delivered at Frontier
(...named place)
DDU Delivered Duty Unpaid
DDP Delivered Duty Paid
Sea and inland waterway transport FAS Free Alongside Ship
(...named port of shipment)
FOB Free On Board
(...named port of shipment)
CFR C&F Cost and Freight
(...named port of destination)
CIF Cost, Insurance and Freight
(...named port of destination)
DES Delivered Ex Ship
(...named port of destination)
DEQ Delivered Ex Quay
(...named port of destination)

Helpful Definitions

Pre-carriage-The initial transport of goods from the seller's premises to the main port of shipment. Usually by truck, rail or on inland waterways.

Main carriage-The primary transport of goods, generally for the longest part of the journey and generally from one country to another. Usually by sea vessel or by airplane, but can be by truck or rail as well.

On-carriage-Transport from the port of arrival in the country of destination to the buyer's premises. Usually by truck, rail or on inland waterways.

Notes on Incoterms

1.       Underlying Contract—Incoterms were designed to be used within the context of a written contract for the sale of goods. Incoterms, therefore, refer to the contract of sale, rather than the contract of carriage of the goods. Buyers and sellers should specify that their contract be governed by Incoterms 2000.

2.       EXW and FCA—If you buy Ex Works or Free Carrier you will need to arrange for the contract of carriage. Also, since the shipper will not receive a bill of lading, using a letter of credit requiring a bill of lading will not be possible.

3.       EDI: Electronic Data Interchange—It is increasingly common for sellers to prepare and transmit documents electronically. Incoterms provides for EDI so long as buyers and sellers agree on their use in the sales contract.

4.       Insurable Interest—Note that in many cases either the buyer or the seller is not obligated to provide insurance. In a number of cases neither party is obligated to provide insurance. However, both the seller and buyer should be aware that they may have insurable interest in the goods and prudence dictates purchase of insurance coverage.

5.       Customs of the Port or Trade—Incoterms are an attempt to standardize trade terms for all nations and all trades. However, different ports and different trades have their own customs and practices. It is best if specific customs and practices are specified in the sales contract.

6.       Precise Point of Delivery—In some cases it may not be possible for the buyer to name the precise point of delivery at contract. However, if the buyer does not do so in a timely manner, it may give the seller the option to make delivery within a range of places that is within the terms of the contract. For example, the original terms of sale may state CFR Port of Rotterdam. The Port of Rotterdam is huge and the buyer may find that a particular point within the port is best and should so state in the sales contract and in the trade term. Also, since the buyer becomes liable for the goods once they arrive, he or she may be responsible for unloading, storage and other charges once the goods have been made available at the place named.

7.       Export and Import Customs Clearance—It is usually desirable that export customs formalities be handled by the seller and import customs formalities be handled by the buyer. However, some trade terms require that the buyer handle export formalities and others require that the seller handle import formalities. In each case the buyer and seller will have to assume risk from export and import restrictions and prohibitions. In some cases foreign exporters may not be able to obtain import licenses in the country of import. This should be researched before accepting final terms.

8.       Added Wording—It is possible, and in many cases desirable, that the seller and buyer agree to additional wording to an Incoterm. For example, if the seller agrees to DDP terms, agreeing to pay for customs formalities and import duties, but not for VAT (Value Added Taxes) the term “DDP VAT Unpaid” may be used.

9.       Packing—It is the responsibility of the seller to provide packaging unless the goods shipped are customarily shipped in bulk (usually commodities such as oil or grain). In most situations it is best if the buyer and seller agree in the sales contract on the type and extent of packing required. However, it may not be possible to know beforehand the type or duration of transport. As a result, it is the responsibility of the seller to provide for safe and appropriate packaging, but only to the extent that the buyer has made the circumstances of the transport known to the seller beforehand.
If the seller is responsible for packing goods in an ocean or air freight container it is also his responsibility to pack the container properly to withstand shipment.

10.   Inspection—These are several issues related to inspections: a) the seller is responsible for costs of inspection to make certain the quantity and quality of the shipment is in conformity with the sales contract, b) pre-shipment inspections as required by the export authority are the responsibility of the party responsible for export formalities, c) import inspections as required by the import authority are the responsibility of the party responsible for import formalities, and d) third-party inspections for independent verification of quality and quantity (if required) are generally the responsibility of the buyer. The buyer may require such an inspection and inspection document as a condition of payment.

11.   Passing of Risks and Costs—The general rule is that risks and costs pass from the seller to the buyer once the buyer has delivered the goods to the point and place named in the trade term.

( P&I ) Protection & Insurance Glossary

ADVANCE CALL RATE

Means in relation to an entered ship (not being a ship entered under Rule * on terms that a fixed premium is payable) the rate per entered ton determined in accordance with Rule **.

APPLICANT

Means any person seeking to enter a ship on his own or another’s behalf or on whose behalf an application is made.

AFFILIATED COMPANY

A company affiliated to or associated with any Member or Co-assured and which is not named in the Certificate of Entry.

BII&D CLAIMS

Means Bodily injury, illness and death claims.

BYE-LAW

Means the Bye-Laws for the time being of the Club.

CALLS

Means any monies payable to the Association in respect of an Entered Ship pursuant to Rule *.

CALL RATE

In relation to any Entered Ship, the rate per ton of the Entered Tonnage at which Advance Calls are payable to the Association in accordance with Rule * and the Certificate of Entry of such Ship.
CASUALTY
Each accident or occurrence or series of accidents arising out of the same event.
CATASTROPHE CLAIM
Means the Club’s contribution to a claim on the Club under the Rules or terms of entry of an entered ship, or under the terms of the Pooling Agreement, when that claim exceeds or may exceed the limit of the Group Excess Loss Reinsurance Contract.

CATASTROPHE RESERVE

Any reserve maintained by the Association to meet a catastrophe claim or claims.
CERTIFICATE OF ENTRY
A document and any endorsement thereto issued by the Association in accordance with these Rules and the Articles of Association which records the names of Members interested in, and evidences the contract of insurance in respect of an Entered Ship.
CHARTER’S ENTRY
An entry which insurers (inter alia) as a Member a chartered (other than a demise chartered) not being a Chartered Jointly Insured under an Owner’s Entry.
CHARTERED JOINTLY INSURED UNDER AN OWNER’S ENTRY
A chartered (other than by demise) which is affiliated to or associated with persons insured under an Owner’s Entry in accordance with Rule * and which is named in the terms of the Owner’s Entry as a joint member.
CLOSED POLICY-YEAR
A Policy Year of the Association which the Directors shall have declared to be closed in accordance with Rule *.
CO-ASSURED
Means a person who is named in a Certificate of Entry as a person capable of benefiting and/or accepting obligations from such Entry in addition to or in substitution for the named Member.
COMMERCIAL TOTAL LOSS
An insured vessel is a commercial total loss if, for whatever reason: (a) it is abandoned because its actual total loss appears to the Member on reasonable grounds to be unavoidable, or (b) it would cost more to repair (if damaged), to recover (if the Member has been deprived of its possession) or otherwise to preserve from actual total loss than its market value when repaired, recovered or preserved as the case may be.
CONTRIBUTION
Includes Advance, Supplementary or Overspill Call or Fixed Premium which may be due from an Owner (levied by the Association pursuant to Rule *).
CREW
Officers, including Master, and seamen contractually obliged to serve on board the Ship, including substitutes and including such persons while proceeding to or from the Ship.
DEFENCE DIRECTORS
Those Directors nominated from time to time by the Directors to consider matters falling within Rule *.
DEMISE CHARTERED
Means a Chartered who has sole possession of the ship and sole control of its management and crew.
EFFECTS
Includes clothes, documents, navigation and other technical instruments and tools, but does not include cash.
ENTERED SHIP
Means a ship which has been entered in the Club for any of the risks enumerated herein in the manner provided in the Bye-Laws or under these Rules.
EVENT
Incident or occurrence that may give rise to a claim on the Association.
F.F.O.
Fixed and Floating Objects.
FINES
Includes penalties and other impositions similar in nature to fines imposed in respect of any entered ship by any court, tribunal or authority of competent jurisdiction.
FIXED PREMIUM
A fixed premium payable to the Association in respect of an entered ship pursuant to Rule *.
FLEET ENTRY
The entry of more than one Ship by one or more Members on the basis that those Ships will be treated together as a fleet for underwriting purposes.
GENERAL EXCESS LOSS REINSURANCE CONTRACT
Means the excess of loss reinsurance policies effected by parties to the Pooling Agreement.
GROUP EXCESS REINSURANCE POLICIES
Means the excess of loss reinsurance policies effected by parties to the Pooling Agreement.
GROUP RATING AGREEMENT
Means any agreement whereby the contribution of an entered ship are assesses by reference to the record of any other ships which are or were entered through the group in the Club, whether the ships are in the same registered or beneficial ownership or not.
HULL POLICIES
Means Policies effected on the Hull and Machinery of a ship, including Excess Liability Policies.
INCIDENT
Means any one accident or occurrence (save that a series of incidents having the same origin shall be treated as one incident taking place at the time of the first of them).
JOINT MEMBERS
Where the Ship is entered in the names of more than one person, the named persons.
LIMITATION AMOUNT
The amount to which the registered owner of an Entered Ship could have limited its liability in respect of the relevant matter had it sought and not been denied the right to limit.
LOSS
Shall include damage, costs and expenses.
MANAGERS
Means the Managers for the time being of the Club.
MEMBER
An Owner, Operator or Chartered of a ship entered in the Association and whose name appears in the Certificate of Entry.
MONETARY RATE
Means the amount of money per ton of the entered tonnage of any insured vessel agreed between the Member concerned and the Managers for the purpose of ascertaining the basic rate of contribution upon which Calls are payable to the Association.
OIL POLLUTION
Means loss, damage or contamination caused by or incurred in consequence of the discharge or escape of oil (or threat of such escape or discharge) from any vessel (including the insured vessel) or from any other property whatsoever or the cost of any measures taken at any time by any person for the purpose of preventing or reducing any such loss, damage or contamination and/or a fine or civil penalty imposed in connection with an actual or threatened escape or discharge of oil as aforesaid.
OIL POLLUTION CLAIM
Means claims for liabilities, costs and expenses (including fines) arising out of or in connection with oil pollution and includes liabilities, costs and expenses incurred for the purpose of avoiding or minimising such claims.
OVERSPILL CLAIM
Means the Club’s proportion of that part of any claim, including the costs and expenses associated therewith, (whether arising out of the terms of entry of any entered ship or out of the terms of the Pooling Agreement) which exceeds or may exceed the maximum sum recoverable in respect of that claim under the General Excess Loss Reinsurance Contract.
OWNER
Includes an owner, owners in partnership, owners holding separate shares in severalty, a part owner, and a trustee, mortgage, chartered, operator or manager, builder, insurer or re insurer who enters a ship in the Club or who is a Principal Assured, Joint Entrant or Co-Assured.
PASSENGER
Means any person carried on board an entered ship by virtue of holding a ticket of passage.
PERIOD OF INSURANCE
In relation to an insured vessel, means the period of time during which (according to the terms of any contract of insurance) the Association is at risk as regards the occurrence of events in relation to that vessel which may give rise to liability on the part of the Association to indemnify the Member concerned.
PERSONAL EFFECTS
Personal property brought on board, or being taken to or from the Ship by a Crew member, but excluding cash, valuables or any other article which in opinion of the Association is not an essential requirement of a Crew member.
POLICY-YEAR
Means the year from noon G.M.T on the 20th February to noon G.M.T on the 20th February next ensuing.
POOLING AGREEMENT
Means the agreement to which the Club is a party, between the International Group of Protection and Indemnity Associations, dated 20th February, 1989, and any addendum to, or variation or replacement of, the said agreement.
PREMIUM RATING
The agreed rating per ton entered for insurance upon which Calls are payable to the Association according to the terms of such ship’s entry for insurance in the Association.
PROHIBITED AREA
An area, port or place which the Association from time to time may declare to be a prohibited area for the purposes of the War Risk Exclusion in Rule *.
SALVAGE OPERATIONS
Means operations in the nature of salvage to any property in danger whatsoever, whether or not a recognized subject of salvage under maritime law, or operations in connection with the raising, removal, destruction or rendering harmless of a vessel which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such a vessel.
SEAMAN
Means any person (including the Master and apprentices) engaged or employed in any capacity in connection with the business of any entered ship as part of such ship’s complement (or any substitute for such person) and includes a supernumerary.
SENIOR MEMBER
In respect of an Entered Ship that Member whose name stands first in the Register in respect of such Ship who shall be the Member whose name stands first on the Certificate of Entry of such Ship.
SHIP
Means any ship, boat, hydrofoil, hovercraft or other description of vessel (including a lighter, barge or similar vessel howsoever propelled but excluding a fixed platform or a fixed rig) used or intended to be used for any purpose whatsoever in navigation or otherwise on, under, over or in water or any part of such ship, boat, hydrofoil, hovercraft or other description of vessel or any proportion of the tonnage thereof or any share therein.
SUCCESSORS
Means the heirs, executors, administrators, personal representatives, assigns (when permitted under these Rules), receiver, curator or other person authorized to act on behalf of one who becomes incapable by reason of mental disorder of managing his property or affairs, trustee in bankruptcy, liquidator and other successors whatsoever.
SUPERNUMERARY
Means any relative of a seaman, or any other person, whom an Owner has agreed to maintain or carry on board an entered ship (except a passenger) and includes any person engaged under articles of agreement for nominal pay.
STATUTORY OBLIGATION
Includes any direction, obligation or liability imposed by enactment, decree, order or regulation having the force of law.
Note: * and ** denotes corresponding Rules


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