Exercise 19 a) Read the text about Incoterms

B) Answer the following questions.

1. What are main risks in international trade? 2. Why are Incoterms used? 3. How is cost of the cargo related to the insurance cover?
4. What cases does a comprehensive all-risk policy cover? 5. What factors should be taken into account while receiving compensation?
6. Is it true that without insurance there is only minimum protection for the goods? Why?

Incoterms were created by the International Chamber of Commerce in 1936. They are used to create a bridge between different members of the industry by acting as a uniform language. According to the Incoterms 2010 taken effect on January 1^st 2011, there are 11 different terms, each of which helps users deal with different situations involving the movement of goods. These Incoterms are:

Sea and Inland Waterway Transport only

1. CFR (Cost & Freight + named destination port) – вартість та фрахт (the seller pays the costs and freight to bring the goods to the port of destination, risk is transferred to the buyer once the goods have crossed the ship’s rail, insurance for the goods is not included, it is at the cost of the buyer)

2. CIF (Cost, Insurance and Freight + named destination port) – вартість, страхування та фрахт (exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer)

3. FAS (Free Alongside Ship + named loading port) – франко вздовж борта судна (the seller must place the goods alongside the ship at the named port, clear the goods for export; it is NOT used for multimodal sea transport in containers, typically used for heavy-lift or bulk cargo)

4. FOB (Free on Board + named loading port) – франко борт судна (the seller must themselves load the goods on board the ship nominated by the buyer, cost and risk being divided at the ship’s rail, the seller must clear the goods for export, the buyer must instruct the seller the details of the vessel and port where the goods are the be loaded, not for multimodal sea transport in containers)

Any Mode of Transport

5. CIP (Carriage and Insurance Paid to + named place of destination) – перевезення та страховка сплачені до (the containerised transport/multimodal equivalent to CIF, the seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier)

6. CPT (Carriage Paid to + named place of destination) – перевезення сплачено до (the general/containerised/multimodal equivalent of CFR, the seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier)

7. DAP (Delivered at Place + named place) – поставка у місці призначення (under it, delivery is when the seller puts the goods at the disposal of the buyer at a named place, on a vehicle ready for unloading, but not unloaded)

8. DAT (Delivered at Terminal + named place) – поставка на терміналі (delivery under it takes place when the seller puts the goods at the disposal of the buyer unloaded at the named terminal)

9. DDP (Delivered, Duty Paid + named destination place) – сплачена доставка та мито (the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty)

10. EXW (ex works + named place) – франко завод (the seller makes the goods available at his premises, the buyer is responsible for all charges, it places the greatest responsibility on the buyer and minimum obligation on the seller)

11. FCA (Free Carrier + named place) – франко перевізник (the seller hands over the goods, cleared for export, into the custody of the first carrier, named by the buyer, at the name place, it is suitable for all modes of transport, including carriage by air, rail, road, and containerised/multimodal sea transport)

b) You are a British exporter. What were the Incoterms here?

1. You paid for the goods to be transported to the docks at Harwich. Afterwards they become the buyer’s responsibility. 2. You made the goods ready for collection, but the buyer had to do everything else.
3. You paid all the costs involved in getting the goods to Spain, but left the costs of unloading to the importer. 4. You paid all the costs involved in getting the goods to Mexico, but the buyer took over the risk from the time the goods were loaded onto the ship in London. 5. You paid for the goods to be transported to Dover and loaded onto the ship, but that was all.

Exercise 20 a) Read the letters below and find the information to complete the following chart. In what sequence were the letters sent?

Type of goods _______________________________ Type of packing ______________________________ Number of packages __________________________ Value of goods ______________________________ Shipment from _____________ to _____________ Type of insurance ___________________________ Premium rate______________________________ Effective from_______________________________ Insurance paid by Exporter [ ] Importer [ ] Other [ ] Shipping company____________________________ Vessel _____________________________________  

Letter 1

Dear Sirs

We thank you for your reply to our letter of … and your quotation. The premium you quote, namely at a rate of 90% of the declared value is satisfactory. Please note that the A\R policy is to include cover against breakages and theft and is to be effective from the moment the goods leave our warehouse. We would therefore like you to prepare the policy, and in the meantime, to issue us with a cover note. Please charge the costs to our account.

Your faithfully

Letter 2

Dear Sirs

Thank you for your letter of ….. enquiring about all risks cover for a consignment valued at ₤1500 c.i.f., to be shipped from your warehouse to Alexandria. Unfortunately we are unable to quote you our rates for this policy as we need to know the goods are to be packed, when the shipment is to take place, and the name or the shipping company and vessel. As soon as you send us this information, we will be able to send you our quotation. Assuring you of our best attention.

Yours faithfully

Letter 3

Dear Sirs

Thank you for your letter of …... We must apologise for omitting to supply you with various essential details concerning this shipment.

The consignment will be packed in six stout wooden crates under the careful supervision of our own warehouse stuff. The crates will be marked EH in square, ALEXANDRIA, and will be numbered 1-6. The goods will be taken from our warehouse on 22 June 2010 and loaded onto MV Blue Rose of the Blue Ribbon Shipping Company, Plc, which is to sail on 26 June. We hope you will now have all the information you require to send us a quote by return of post.

Yours faithfully

Letter 4

Dear Sirs

Thank you for your instructions to arrange cover for the shipment of food processors from Manchester to Alexandria. We confirm that the policy is to cover all risks, including breakages and pilferage, and is to be effective from the moment the goods leave your warehouse. As requested, please find enclosed our statement of charges and the cover note. In accordance with your instructions, we will be charging the premium to your account in due course.

Yours faithfully

b) Complete the sentences with the words and expressions from the above letters.

1. The ….. for this cover will be at the rate of 90% of the ….. value of ₤1500. 2. We would be grateful if you would quote us our rate for ….. against all ….. for this consignment. 3. Thank you for your letter of 10^th December, 2010 asking us to ….. our ….. for cover of your consignment of food processors to Alexandria. 4. The goods are ….. at ₤1500 …... 5. As soon as we receive your acceptance of your quotation, we will ….. you with a …... 6. We are shortly to despatch a ….. of food processors from our ….. in Manchester to Alexandria.

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