A contract of trade is completed with several documents. The seller must provide a commercial invoice and possibly some other proof of the goods. He must also prove that he has delivered the goods. The buyer must prove that he has taken the delivery. The carrier must prove that he has taken over the goods and that he has handed them over.
Incoterms uses the term ”usual transport document”. A usual transport document may have several roles. It is a proof of delivery and/or taking delivery. It is a contract of carriage or an evidence of it. If goods are delivered to a terminal, the proof may be a note of the receipt of goods. In transport by sea, a bill of lading is often used. It has got one special feature: it is also a document of title.
The documents may be paper documents or electronic records or procedures. If electronic records or procedures are used, the parties should agree about it in advance.
Export- and import formalities cover export- and import clearance, customs clearance, payment of duties and other costs and charges related to export and import of the goods. Examples of them are VAT (e.g. in EU-trade), port dues, etc. The cost or charge may be debited by the state, by the municipal unit or other civil authority. Formalities are many and Incoterms cannot possibly name all of them.
Contact of carriage and delivery
Contract of trade is a contract between the seller and the buyer. The term of delivery is a part of it and it defines the mutual obligations of the seller and the buyer. Contract of carriage is a contract between the consignor and the carrier. Contract of carriage defines their mutual obligations.
According to the most of terms of delivery the delivery takes place either when the carrier receives goods for carriage or when he hands over the goods to the receiver. According to FCA, FAS and FOB the seller delivers goods to the carrier named by the buyer. According to CPT, CIP, CFR and CIF the seller delivers goods to the carrier named by the seller. According to DAT, DAP and DDP the carrier named by the seller delivers good to the buyer. In all above mentioned cases the exact moment of delivery depends on the contract of carriage
The comparison between the contract of trade and the contract of carriage shows that the liability of the carrier is usually smaller or more limited than the liability of the seller or the buyer. The carrier may limit his liability financially or because of reason of damage.
Risk and insurance
According to all Incoterms 2010 terms of delivery the risk passes from the seller to the buyer at the delivery. The goods must be in conformity with the contract of sale and in the right place at the right time. The commercial invoice and any other required evidence should be in conformity with the contract.
According to CIP and CIF the seller must insure the goods at his expense and on behalf of the buyer with an insurance company of good repute. The insured value is the value on the commercial invoice + 10% and the insurance must cover the goods from the place /port of delivery to the place/port of destination, unless otherwise agreed. The insurance must be contracted at least with minimum terms. In practice widest possible terms are recommended.
According to other terms it is up to the either party to insure his own risk.
The transport insurance covers the loss of goods, damage to the goods or costs of General Average.
According to all terms of delivery the seller must package the goods for the transport. Some goods may be sold unpackaged. Parties may agree on specific package requirements.
According to the principles of Incoterms the contracting parties should assist each other at the cost of the assisted party. This concerns especially documents or information related to the goods or security, which may be needed for the transportation, export or import of the goods.