Letter of Credit Forum

Hello

Simply?

a)      FCA - Buyer pays the freight at destination

b)      CPT or CIP – Seller pays the freight at origin, without risks in transit.

c)       DDU – Seller pays freight at origin with risk of delivery to a destination place, inland, beyond the port.

There is, however, much more to it that this.

For example, EXW FOB/FAS and CFR/CIF as well as DES and DEQ could be used in containerised activity – it isn’t recommended though. You might even squeeze DAF into the equation, although I have no actual experience of a DAF contract being containerised.

Rather, if you wish to look at the physical reality of the operation, then look at the intentions of the parties in the contract and to how this translates into where the seller can physically control the cargo to i.e. at what point does the seller relinquish physical control?

If the reality of it is that the seller must hand over to the buyer’s carrier at a point prior to the ship, then the term will be FCA (freight collect) or if the seller is handing over to their own carrier at the same place then CPT/CIP (freight prepaid). Now, if the reality of a containerised operation is that the seller must also hand over to the buyer’s carrier (FCA) or their (the seller's) chosen carrier (CPT/CIP) prior to the ship, you have a match. But you will have a similar match without containers – hence FCA in airfreight for example. So it isn't the container that is dictating the term, but rather the point of handover.

At the other end, if the reality is that the buyer cannot access the container in the port area, then the place of handover must be beyond this point – hence DDU...and it is common in containerized traffic (although not 100% guaranteed) that this restriction will be placed on the buyer. The port is generally a restricted area and the buyer cannot ‘receive’ in that place. That does not stop the seller and buyer using (say) DES for containerised traffic; it just means that the physical reality is mismatched to the contractual intentions, and so on.

One final point - INCOTERMS are not the only way to express contractual intentions. You must be sure that INCOTERMS actually apply to the seller and buyer's contract before using INCOTERMS to interpret their intentions.

However, I am sure someone with first-hand (or first-world) knowledge could elaborate on this further...

cheers

phill doran

"...in armour bright, the merchant men..."