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Incoterms – Who’s responsible for goods in transit?

To many of you the International Chamber of Commerce’s terms of sale, or “Incoterms”, will be all too familiar, and when your stock is ordered or your product loaded you will be comfortable in the knowledge that the terms of sale are clear and understood by both parties.

The standard Incoterms allow both parties to have certainty over their obligations when it comes to arranging and insuring goods in transit, as long as both parties have consented to the same terms – it is not uncommon for bothpexels-photo-1267329 parties to assume their standard T&Cs take precedence without noticing that the other parties’ T&Cs take a different approach.

It is also common for a supplier to think that they insure the goods until they have been delivered to their customer, only to find that their standard terms and conditions specify that goods are sold “Ex Works”, which can cause problems when their client is left with a damaged product and no insurance cover to reimburse them.

It is vital that anyone that relies on freight, either for incoming goods or delivering their products, takes the time to ensure they know exactly under which terms they do so and that this understanding is backed up in writing between both parties.

In the event of a claim your Goods in Transit/Marine Cargo insurers will need to establish who is actually responsible for the shipment at the time of loss/damage and having this documented can quickly resolve these queries.

As a general guide, the incoterms can be broken down into the following three categories. When selecting your terms of sale please seek professional advice and ensure your T&Cs are drafted by a qualified legal advisor.

Main carriage at buyer’s risk: EXW, FCA, FAS, FOB
Main carriage at buyer’s risk, but arranged by seller: CPT, CIP, CFR, CIF
Main carriage at seller’s risk: DPU, DAP, DDP

For further information about Incoterms visit the ICC website – https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/

For further information about Goods in Transit and Marine Cargo insurance please get in contact on 01226 744716.

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