Hi,

Country A is a land-locked country that does not have its own seaports. Exports to country A are shipped to a seaport of its neighbouring country B. From this seaport, the goods are trucked across to country A and unloaded at a bonded warehouse where Customs conduct their inspection formality before the goods are released. Let's call the location where the bonded warehouse is located as "XYZ, Country A".

An importer from country A wants us to sell them by delivering the goods up to the bonded warehouse in country A.

We are wondering what is the appropriate Incoterms to use. Is it:
(a) "CIF XYZ, Country A" [assuming we arrange insurance]
(b) "CFR XYZ, Country A" [assuming we do not arrange insurance]
(c) "DDU XYZ, Country A"
(d) Another term?

Thanks.

Replying to [kai1]:

In your situation, it seems that the best way to deliver is not to use waterway or by sea.

If you wish to include cargo insurance in your (exporting) country, you may use DAF (Delivered At Frontier). This term is used when the delivery is to be made not at the port but at a place on LAND.

Frontier means a point on land at the adjoining border either in the country of the seller or in the country of the buyer. In this regard, the point of delivery must be precisely named in the LC.

Replying to [kai1]:

Thanks for advice.

We could not avoid using combined sea and land transport mode because our buyer in country A requires that we deliver to the said bonded warehouse in their country.

Actually our concern is not about security of the cargo because this is the same procedure for most exporters who sell to country A, i.e. ship cargo to seaport in country B then from there truck to country A.

Our concern is really wanting to know the the correct Incoterms to use so we minimise possibility of confusion and dispute, especially since we are using L/C in this transaction.

Three additional questions:
(i) It seems that Incoterms "DAF" by itself does not show whether the seller (our company) has procured insurance for this cargo. Are we correct to say this?

(ii) Incoterms "CIF"/"CFR" seem appropriate only when cargo destination is a seaport but not land point. Are we correct?

(iii) What is difference between "DDU" and "DAF"?

Thanks to all for your kind assistance.

Replying to [kai1]:

(i) It seems that Incoterms "DAF" by itself does not show whether the seller (our company) has procured insurance for this cargo. Are we correct to say this?


Cargo insurance under DAF should be procured by the seller. This is because the seller has the insurable interest while the goods are in transit until they are delivered to the buyer. In other words, the seller in responsible to ensure the safety of the goods before they are delivered. In the event the goods are damaged while in transit, the seller is obligated to replace or provide monetary compensation to the buyer.

Even though Incoterms 2000 stated under A3 (Contract of carriage and insurance) as ‘no obligation’, but this does not mean the seller should not procure the insurance. It is an indication to the seller that procuring of insurance under DAF is not something the seller owes to the buyer. It is an independent act on the part of the seller based on common sense. Failing to procure of insurance does not violate or breach the Sales contract. But, the seller may be exposed to high risk should adverse events happened.

(ii) Incoterms "CIF"/"CFR" seem appropriate only when cargo destination is a seaport but not land point. Are we correct?

Yes, you are absolutely correct.

(iii) What is difference between "DDU" and "DAF"?

Term DDU is only appropriate when goods are to be transported by passing through another country either by rail or road. Whereas, DAF is only up to the named frontier or border.

.



For example, the seller is in Singapore and he is selling to the buyer who is in Thailand. The agreed mode of transport is by truck and delivery is at a named place in Thailand.

Hence, the truck will have to pass Malaysia before it enters Thailand. In this case, duty, custom formalities, import authorization and charges related to the goods in transit in Malaysia are borne by the buyer.

Replying to [kai1]:

Hi,

Im no expert but in my opinion it all depends on what position you hold in all this. If you are the seller you want to hold the least amount of responsibility for delivery of the goods. However if you are the purchaser you want assurance your goods will be delivered safely and on time.

From a sellers point of view I would prefer to pass the title or ownership of the goods over to the buyer ASAP thus use FOB where possible.

There are 13 Incoterms in totals, you can find them all here: http://www.iccwbo.org/incoterms/wallchart/wallchart.pdf

Firstly FAS, FOB, CFR CIF DES & DEQ are to be used for sea and Inland waterways ONLY. Seing as you are transporting over land also, that eliminates these!

So really we need terms used in multi-model transport which are:
CPT CIP DAF DDU & DDP [there are 2 others EXW & FCA but we know it's not these]

However in this case and to get back to the real question here. I believe the correct term to use if you want to give the buyer full protection [ie: insurance through all carriers] is in fact:

"DDU XYZ, Country A" [Delivered duty unpaid]

If you would like less responsibility for the goods and you want me to explain in detail the other terms please ask!
I've been through it myself thats why I learned them all inside out

Regards
Dermot