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Professional & Management Liability Property & Casualty Accident & Health Surety Bonds Industry Solutions Claims Services Loss Control Services
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EXW- EX WORKS, named place The seller makes the goods available to the buyer at his premises on a specified date or within a specified time period. Responsibility for loss or damage: The buyer becomes responsible for loss or damage to the goods on the agreed upon date, or when the goods are picked up within the specified time period, or on expiration of the specified time period. Unless specifically agreed to, the seller is not responsible for loading the goods onto the conveyance at his premises. Ocean cargo insurance: because the buyer is responsible for loss or damage during the "main carriage" EXW shipments would be insured under the buyer's ocean cargo policy. Since most ocean cargo policies attach on individual shipments when they leave the warehouse of origin (i.e. The Warehouse To Warehouse provisions of the Open Policy), the buyer may not have insurance for the period of time the goods may be on the premises of the seller, or during loading onto the conveyance, or after loading while awaiting transit even though he is responsible for loss or damage. Therefore, when purchasing goods EXW the buyer should seek an insurer that will provide coverage during these situations. Chubb's Open Cargo Policy automatically insures these exposures. FCA- Free Carrier, named place Responsibility for loss or damage: The seller is responsible for loss or damage until the goods are delivered to the carrier at the named point or place. The buyer becoming responsible thereafter. Ocean cargo insurance: Because the buyer is responsible for loss or damage during the "main carriage" FCA shipments would be insured under his ocean cargo policy. Insurance would attach at the time the goods are delivered to the carrier as agreed. When buying goods FCA it is important for the buyer to understand that in allowing delivery at a place other than the port or airport of shipment he is extending his exposure to loss or damage to additional hazards of transportation which may be unique to the country of origin, such as: additional storage, additional handling exposures, exposure to the elements and exposure to theft, hijack or pilferage. Depending upon the country the goods are being shipped from these additional hazards can be severe and loss or damage can adversely affect the placement and costs of insurance. Before agreeing to FCA terms it may be in a buyer's interest to review the country exposures with their insurer. One advantage to a buyer in using FCA terms is when he uses FCA Seller's Warehouse versus EXW. As commented on in EXW, the buyer is responsible for loss or damage during loading of the goods onto the conveyance at the place of origin, an exposure not usually covered by ocean cargo policies. By selecting FCA Seller's Warehouse the responsibility for loading is placed on the seller. FAS-Free Alongside Vessel, named port of shipment Responsibility for loss or damage: The seller is responsible for loss or damage until the goods are delivered to the port as agreed. The buyer being responsible from that point on. Ocean cargo insurance: Because the buyer is responsible for loss or damage during the "main carriage" FAS shipments would be covered under his ocean cargo policy. Insurance would attach either at the time the goods are place alongside the vessel, or after being loaded onto lighters if customary to the port. Quite often insurance companies use the date of issuance of a Dock Receipt or a Received For Shipment Bill of Lading, or similar document issued by the carrier, to determine when risk of loss passes from the seller to the buyer. FOB-Free On Board Vessel, named port of shipment Responsibility for loss or damage: The seller is responsible for loss or damage until the goods "pass the ship's rail". The buyer being responsible from that point on. Ocean cargo insurance: Because the buyer is responsible for loss or damage during the "main carriage" FOB shipments would be insured under his ocean cargo policy. Insurance, under INCOTERMS definition, would attach once the goods "pass the ship's rail". In practice most insurance companies use the date on which the On Board bill of lading is issued. CFR-Cost and Freight, named port of destination Responsibility for loss or damage: The seller is responsible for loss or damage until the goods "pass the ship's rail" at the port of shipment. The buyer being responsible from that point on. Ocean cargo insurance: Because the buyer is responsible for loss or damage during the "main carriage" CFR shipments would be insured under his ocean cargo policy. Similar to FOB shipments, insurance, under INCOTERMS definition would attach once the goods "pass the ship's rail". In practice most insurance companies use the date on which the On Board Bill of Lading is issued. CPT- Carriage Paid To, named place of destination Responsibility for loss or damage: The same as FCA terms. See comments under that term. Ocean cargo insurance: The same as FCA terms. See comments under that term.
DAF- Delivered At Frontier, named place Responsibility for loss or damage: The seller is responsible for loss or damage until delivered to the named place. The buyer being responsible from that point on. Ocean cargo insurance: Many ocean cargo policies do not provide automatic coverage for overland shipments, or when the assured is responsible for loss or damage solely within the country or origin, or solely within the country of destination. However, extensions can usually be added to provide the necessary coverage. If selling or buying on DAF terms you should review your specific insurance needs with your insurer. In general terms, the seller will want to arrange coverage which will cover his interest until he has delivered the goods to the place named in the sale contract. The buyer will want to arrange coverage from that point forward, including during any storage awaiting pickup by the carrier. Depending upon the actual extent of exposure, insurance on DAF shipments may be added to domestic transit or property insurance policies. CIF-Cost, Insurance and Freight, named port of destination Responsibility for loss or damage: The same as for FOB and CFR terms. The seller is responsible for loss or damage until the goods are delivered on board the overseas vessel at the port of shipment. Ocean cargo insurance: Although the buyer is responsible for loss or damage during the "main carriage", under CIF terms the seller agrees to provide insurance for the buyer's account. Therefore, CIF shipments are insured under the seller's ocean cargo policy. (This is one of only two INCOTERMS which contains an obligation to provide insurance. The other term is CIP.) The sale contract should clearly state the type of insurance to be provided. INCOTERMS state that "lacking agreement, minimum cover of the Institute Cargo Clauses be provided". This is essentially "named perils" coverage which is rarely adequate for the needs of the buyer. Insurance must also be in negotiable form enabling losses to be payable to the buyer or other party having an insurable interest in the shipment at the time of loss. Proof, or evidence, of insurance is required which is usually accomplished by issuance of a Special Cargo Policy or Certificate of Insurance by the seller or his insurer. Insurance should cover the shipment from the place of origin to the final destination of the buyer. One potential area of conflict between the requirements of CIF terms and insurance coverage is when insurance actually ceases. By definition CIF refers to the port of destination. CIF also obligates the seller to provide insurance covering the buyer's risk of loss or damage which in almost all cases extends until the goods are delivered to his place of destination. Banks are usually involved in the financing of CIF shipments. If a Letter of Credit stipulates CIF port of destination and the insurance certificate stipulates another place, the bank may reject the certificate. Conversely, if the certificate shows the port of destination as the final place of insurance in order to comply with the Letter of Credit, the buyer will have no insurance for transit beyond the port of destination. Therefore, it is important for the actual place of insured destination to be shown clearly in the sales contract, invoice, letter of credit instructions and the certificate. A suggestion would be: Name of Buyer's Warehouse, Street Address, City, State/Province, Country, or other appropriately identified location. CIP-Carriage and Insurance Paid To, named place of destination Responsibility for loss or damage: The same as under FCA and CPT terms. Ocean cargo insurance: CIP terms obligate the seller to provide insurance on behalf of the buyer and therefore CIP shipments would be insured under the seller's ocean cargo policy. (See CIF comments also.) DES-Delivered EX Ship, named port of destination Responsibility for loss or damage: The seller is responsible for loss or damage until the overseas vessel arrives at the point of unloading at the port of destination. The buyer is responsible from that point on, including during unloading from the vessel and during any lighterage if required. Ocean cargo insurance: Because the seller is responsible for loss or damage during the "main carriage" DES shipments would be covered under his ocean cargo policy. Insurance usually attaches when the goods leave the place of origin and ceases when the overseas vessel arrives at the point of unloading at the port of destination. DEQ-Delivered Ex Quay, named port of destination Responsibility for loss or damage: The seller is responsible for loss or damage until the goods are delivered to the named place, including during unloading from the overseas vessel and during lighterage if required. The buyer being responsible from then on. Ocean cargo insurance: Because the seller is responsible for loss or damage during the "main carriage", DEQ shipments would be covered under his ocean cargo policy. Insurance usually attaches when the goods leave the place of origin and ceases when the seller's responsibility ceases upon delivery of the goods to the named place. In practice, the named place at destination used with DEQ terms is a Customs Warehouse. Duty, taxes and other import charges may, or may not, be paid by the seller. Depending upon who pay these charges, the actual wording used for this term in sale contracts and on invoices may be shown as: DEQ (Duty Unpaid) Customs Warehouse, named port; or DEQ (Duty paid) Customs Warehouse, named port. DDU-Delivered Duty Unpaid, named destination Responsibility for loss or damage: The seller is responsible for loss or damage until the goods are deliver to the agreed place. The buyer being responsible from that point on. Ocean cargo insurance: Because the seller is responsible for loss or damage during the "main carriage" DDU shipments would be insured under his ocean cargo policy. Insurance usually attaches when the goods leave the place of origin and ceases when the seller's responsibility ceases upon delivery at the agreed place. DDP-Delivered Duty Paid, named place Responsibility for loss or damage: See comments under DDU which apply to DDP shipments also. Ocean cargo insurance: See comments under DDU which apply to DDP shipments also. Insurance Notes On DDU and DDP Shipments: The contract of sale must clearly show the place to which goods are to be delivered; especially if it is a location other than the buyer's warehouse. Consider showing the full name of the location, Street Address, City, State/Province, and Country. If left to chance, insurance coverage may cease at an inappropriate place. General Insurance Comments
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