Sample Bill of Exchange The bill of exchange, commonly referred to as the draft or the bill, is an unconditional order in writing, signed and addressed by the drawer (the exporter usually) to the drawee (the confirming bank or the issuing bank usually), requiring the drawee to pay the drawer a certain sum of money at sight or at a fixed or determinable future time.
The draft is widely used in international trade, most frequently in the payment against a letter of credit (L/C). It is also used in the open account without any L/C involved.

Drafts Drawn On the Bank:

The "No." (number) in the sample draft may be used for the exporter's reference number. Blank drafts are available at the paying bank.
First of Exchange (Second Unpaid) and
Second of Exchange (First Unpaid)

In practice, it is not uncommon that two drafts are drawn on the drawee bank in a letter of credit (L/C) to ensure that at least one draft reaches the drawee when they are dispatched separately. The issuance of more than one draft in a letter of credit follows the same logic as in the issuance of bill of lading in more than one original.

At times even three drafts may be drawn on the drawee bank, this practice was not uncommon before in certain countries. In contrast, normally one draft (sola bill) is issued in a documentary collection where the draft is drawn on the importer.

The sample draft shown here is the first draft, marked "First of Exchange (Second Unpaid)" and the number "1".

In the second draft, if any is issued, is marked "Second of Exchange (First Unpaid)" and the number "2". Some drafts may not be numbered "1" or "2".

Instructions Every Exporter Should Give To The Buyer Before Issuing LC
Exporters often land up in problems when the buyer issuers them an LC which is ambiguous and imprecise. In order to avoid the unpleasantness of the Documents getting rejected at the banks, it is better to the follwoing instructions to the LC issuers so that all transactions relating to LC and exporter's sale go through smoothly.

Dear Buyer,
We have indicated below those terms and conditions that we would find acceptable in a letter of credit issued by your bank.
Your efforts to gain compliance with these terms and conditions in the issuance of this letter of credit will ensure prompt dispatch of your order.
If your bank is unable to issue the credit within the following guidelines, please contact us providing information on those areas that must be altered. This will eliminate needless delay and costs involved with amendments after the credit has been opened. Only those items marked with an "X" will apply.
1. [ ] The letter of credit is to be irrevocable and subject to the Uniform Customs and practice for Documentary Credits, as published and updated from time to time by the International Chamber of Commerce.
2. [ ] The letter of credit is to be [ ] Advised [ ] Confirmed by our bank: AAA Bank Attn: International Operations
SWIFT No. ABA.:
3. [ ] The beneficiary is to be shown as:
4. [ ] The letter of credit is to be payable upon presentation of drafts drawn at: A. [ ] At sight B. [ ] ___ days after the date of the transport document (i.e., 90 days after date of B/L) C. [ ] ___ days after sight (i.e., 90 days after sight) D. [ ] Other: ____________________________ 5. [ ] The letter of credit is to be available by negotiation with any bank.
6. [ ] The letter of credit is to be payable in: [ ] mention currency here in ISO code like USD, EUR
7. [ ] The amount of the letter of credit is to be specific as: [ ] "Not to exceed “_____________ [ ] "About “_______________
8. [ ] The following documents are normally provided if required in the letter of credit. Please avoid the requirement for any other documents without prior agreement on our part. A. [ ] Signed Commercial Invoice, one original and ______ copies. B. [ ] Packing List in ______ copies. C. [ ] Negotiable Marine/Air Insurance policy or certificate in duplicate for 110% of invoice value covering all risks and war risks and ____________________________ D. [ ] Full set of clean on board ocean bills of lading issued to order of : __________________________ E. [ ] Clean air waybill consigned to: __________________________________________ F. [ ] Other documents:
9. [ ] The letter of credit is to specify shipment of: ___________________________________________ ____________________________________________
10. [ ] Shipment is to be: [ ] FOB ___________ From: __________________ [ ] CFR ___________ To: ____________________ [ ] CIF___________ [ ] EXW__________ [ ] Other __________ (i.e.: FCA, FAS, CIP, etc.)
11. [ ] The Bill of Lading is to be marked: [ ] Freight Prepaid [ ] Freight Collect
12. [ ] Transshipments: [ ] Are permitted [ ] Are not permitted
13. [ ] Partial shipments: [ ] Are permitted [ ] Are not permitted
14. [ ] Latest Shipment Date __________________
15. [ ] Latest Presentation Date of Documents to the Negotiating bank to be ____ days after each shipment date.
16. [ ] Expiration Date of letter of credit to be __________________
17. [ ] The letter of credit should specify that all banking charges outside the country of the applicant are for the account of the [ ] applicant [ ] beneficiary.
18. [ ] letter of credit to be transferable.
19. [ ] Other special instructions.

Some More Shipping Terms!

Marine Insurance Clauses A&C:Clauses A covers most risks of losses during transit as opposed to Clauses C which is a restricted form of cover.

Mates Receipts: A document that is issued by the Mate of the vessel as the cargo is loaded on board. The Mates Receipt will usually contain remarks regarding the condition of the cargo or its packaging. Traditionally, Mate's Receipts form the basis of the bill of lading which is subsequently issued.

Mother Vessel: Typically, a large container or unitized load vessel which services the main hub (large transhipment ports) of a liner service. See feeder vessel.

Multi modal: Bill of lading, similar to through transport/combined transport bill of lading. It covers the transport of goods through different modes of transport such as rail, truck, ship, for example.

Notify Party: Is the party who needs to be notified regarding the delivery of the cargo. Usually, the bank will be the consignee and the notify party will be the bank's client i.e. the receiver of the cargo.

NVOCC - Non Vessel Owning Common Carrier: A party who takes on the liabilities of the carrier, but who does not own or operate the vessel. Sometimes described as a contractual carrier as opposed to a physical carrier.

On Deck Stowage: A clause appearing in a bill of lading or charter party, which states the cargo will be loaded on the deck of the vessel is usually carried at the cargo owner's risk. Cargoes that might get damaged because of waves washing over the decks, sea spray and other elements of the weather should not be carried on deck. Cargo owners may have difficulty exercising a claim for damage of the cargo against the carrier for an on-deck stowed cargo.

Owners Bill of Lading: A bill of lading issued by, or on behalf of, the Master or owner of the vessel. This makes the owner directly responsible for the carriage of the cargo. This is best from a cargo owner's point of view.

Panamax: A vessel of the optimum size for transiting the Panama Canal. Usually able to carry from 55,000 to 80,000 tonnes of cargo.

Part Shipment: Where the total cargo may be split into smaller parts and carried on different vessels or voyages.

P & I Club - (Protection and Indemnity Club): The ship owner's liability underwriter, which usually covers liabilities such as damage to or loss of the cargo in transit. Also the organization which will, in some cases, post financial bonds to release a vessel from arrest. Often, a Club will issue a letter of guarantee, which is generally considered as good as a bank guarantee.

Place of Receipt: The place (usually the container yard) where the cargo has been received by the carrier for shipment.

Port of Loading: The port at which the cargo is loaded on board the ship.

Port of Discharge: The port where the cargo is discharged from the vessel.

Port of Delivery: The port where the cargo is delivered by the carrier to the consignee or to the bill of lading holder. This could be an inland container terminal.

Ro-Ro: (Roll on, Roll off): A vessel that is designed for trailers to be driven off the ship through ramps on the side, bow or stern of the vessel.

Said to Contain: A clause appearing on a bill of lading stating that the shipowner does not know precisely what is inside the container. It indicates that the description of the cargo appearing on the bill of lading is what the shipper declared as being its contents. Shipowners have no liability if the contents of the container at the point of delivery are different to those described on the face of the bill of lading provided there is no evidence that the goods were stolen in transit.

Seal and Seal Numbers: The seal is usually a strip of metal or plastic which fits around the locking bars in such a way that if the container is opened the seal will have to be broken. It should therefore be a visable sign of the container being broken into. The seal number is a set of numbers or alphabets identifying the seal. This information often appears on a bill of lading. A container with its original seal intact is an indication that the container has not been breached in transit. At least that is the theory - IMB experts know of numerous ways in which a container can be breached without any sign that the original seal has been broken into or interfered with.

Shipper:The party who ships the cargo - usually, but not always, the seller or exporter.

Shippers load stow and count: Similar to "Said to Contain". With the insertion of this clause on the bill of lading, the shipowners try to avoid liability for any damge that may occur, as the loading, stowage or the number of packages inside the container is the responsibility of the shippers, provided there is no evidence the loss or damage occured in transit.

Stowage Plan: A diagram that indicates where the different cargoes are loaded on board a ship.

Suezmax: A ship designed with optimum dimensions to transit the Suez Canal, typically between 120,000 and 200,000 tonnes deadweight.

Tanker: A vessel designed to carry bulk liquid cargoes. There are different types of tankers such as chemical carriers, vegetable oil carriers, product tankers and crude carriers. Crude carriers carry crude oil. More refined oil products are carried in product carriers. Chemical tankers have specially lined tanks to carry chemicals. Vegetable oil tankers are designed to carry products such as palm oil and other vegetable oils. It is unusual to load an oil cargo on a tanker not designed for the trade. Tankers do not carry dry bulk or general cargo.

Time Charter: An agreement by which the shipowner agrees to hire his vessel to a charterer for an agreed period of time, and is paid hire by the day, usually fourteen days in advance. In many time charterparties, a charterer is authorized by the shipowner to sign and release bills of lading on his behalf.

Through Transport Bill of Lading: Similar to a Multi Modal or a Combined Transport Bill of Lading. The liability of the carrier remains for the complete chain of transport covering many different modes such as truck, rail and ship.

Transhipment: Where a cargo is discharged from one vessel and subsequently loaded on to a different ship for transport to the destination. Some letters of credit will specifically not allow for transhipment because transhipment might damage the cargo. Transhipment is a custom of the containerized trade where a container may be loaded on a feeder ship, then on to a mother ship and back to a feeder ship before it reaches its destination.

VLCC (Very large Crude Carrier): A large crude oil tanker usually capable of carrying over 200,000 tonnes od crude oil.

Voyage charter: An agreement by which the shipowner agrees to let his vessel to the charterer for a voyage, in return for which the charterer pays the shipowner freight on a lumpsum or per tonne basis. In a voyage charter party the shipowner usually retains greater control over the issue of the bill of lading.

Warehouse to Warehouse: Associated with insurance policies indicating that the insurance policy covers loss or damage to the cargo form the shippers' warehouse to the consignees' warehouse.

ULCC (Ultra large Crude Carrier): A crude carrier which is capable of carrying, usually over 300,000 tonnes of cargo.

Under Deck Stowage: Cargoes which are loaded in the holds of the vessel, under deck, protected from the sea and weather.

Get Familiar With Some Common Shipping Terms

Bunker Adjustment Factor (BAF): Indicates that the freight rate may change depending upon movements in the price of bunkers. Bill of lading holders should be aware that if the BAF comes into effect, additional sums might need to be paid before the ship owner delivers the cargo to the bill of lading holder.

Booking Note: A contract of carriage giving the conditions negotiated between the cargo owner and the ship owner/charterer.

Cape Size: Vessels having the economically optimum size to go around the Cape of Good Hope. Typically over 80,00 tonnes deadweight.

Carrier: The party that undertakes the liability to carry the cargo to the destination, on the terms, conditions and exceptions stated. Beware of a carrier, which does not have the financial capacity or, insurances in place, to meet its liabilities on your cargo.

Cellular Container Vessel: A ship which is built, exclusively, to carry containers. A container vessel cannot carry break-bulk cargo, general cargo and definitely not bulk liquids unless containerized.

Charter Party: Contract of carriage between the shipowner and the charterer detailing the terms and conditions of carriage. It provides inter alia for the amount and mode of payment of freight/hire, lien on the cargo and the issuance of bills of lading.

Charterparty Bills of Lading: Bills of lading, which are subject to the terms, conditions and exceptions of a charter party. It binds the bill of lading holder to the terms of a contract, which the holder may have no knowledge of. It may allow the carrier to hold on to the cargo if there has been a breach of the terms by the charterer, such as non-payment of freight, demurrage, etc.

Clean on Board: A statement by the carrier on the bill of lading that a cargo has been received without damage on board the ship. He is thus bound to deliver the cargo at the destination in the same condition.

Claused Bill of Lading: A bill of lading which contains remarks with respect to the condition of the cargo or the payment of freight. A claused bill of lading is not usually accepted under letters of credit, which call for a clean bill of lading.

Combined transport bills of lading (or a through transport bill of lading): This is a bill of lading, which covers the transport of a cargo through different modes, for example, truck - ship - train - truck. The carrier remains liable from the point of delivery of the cargo to the final destination stated on the bill of lading. This is not usually applicable to bulk liquid cargo flowing through pipelines! It is usually associated with unitized cargoes like containers. It is not to be used for bulk liquid cargoes except where they are loaded in special containers or by other unitized means.

Conline Bill of Lading: A bill of lading usually used for liner shipments.

Container Numbers: Every container has a unique number, which identifies the container. The first four digits indicate the owner of the container. There is a system of check digits that can confirm whether the container number is genuine. In today's containerized transport it is impossible to try and locate a cargo without a container number. Bankers, beware of bills of lading for container cargoes without container numbers.

Container Seal Numbers: When a cargo is stuffed into a container, the container is sealed. The seal has a seal number, which identifies it. The seal number is often on the shipping documents. If a seal is found broken at the point of discharging, it would normally indicate that there is a possiblity that the container was broken into in transit.

Consignee: The party to whom the cargo on the bill of lading is consigned to. In cases where the cargoes are financed by letters of credit, the consignee is usually the financing bank.

Currency Adjustment Factor (CAF): If this appears on the shipping documents, it would indicate that if the currencies in which the freight is paid fluctuate widely then the ship owner might apply a currency adjustment factor to the freight. Unless this additional sum is paid, the ship owner may hold on to the cargo.

CY/CY (Container Yard to Container Yard): Indicates that the duration of transit covered by the bill of lading is from the container yard, where delivery of the container was taken by the carrier, to the container yard where the container is to be delivered to the consignee.

Dates - Received for Shipment: The date that the container (usually) is received by the carrier for shipment. Some letters of credit allow for payment upon the containers "being received for shipment" by the carrier. In practice, it may be the case that the names of the vessels stated on a received for shipment bill of lading might not be the ones that finally carry the cargo. This notation does not mean that the cargo has been loaded on board the ship.

Dates - Loaded on Board/Shipped on Board: The date the cargo physically goes on board the vessel. This is often the date which is manipulated by sellers, NVOCCs and ships agents to match the final date of shipment specified in the letter of credit.

Dates - Issue of Bill of Lading: The date the bill of lading is issued by the carrier. Under a letter of credit, the presentation of the documents have to take place usually within a specified period after the date of issue of the bill of lading.

Deadweight (DWT): A unit of the vessel's carrying capacity including cargo, stores and provisions.

Demurrage: A payment in damages by the charterer to the shipowner if the vessel exceeds the agreed period for loading or discharging the cargo. In certain circumstances the shipowner has a lien on the cargo for the payment for demurrage and may try to prevent delivery of the cargo until demurrage is paid.

Feeder Vessel: Typically, large mother ships transport containers between the main hubs (large transhipment ports) around the world. Feeder ships carry the cargoes to and from the main hubs to the ports of origin and destination. In containerized shipments, the name of the vessel appearing on the bill of lading may be either the feeder vessel or the mother ship.

Fixture Recap: A summary in short form, between brokers, of the terms of a charter party, which have been negotiated and agreed between their respective principals. The charter party is a formality and usually follows much later. Cargoes are often carried based upon the fixture recap.

Free in: Where the cargo owner pays for the costs of loading the cargo on to the vessel.

Free out: Where the cargo owner pays the costs of discharging the cargo from the vessel.

Free in/out stowed (FIOS): A combination of free in and out, but including the costs of stowage of the cargo on board a ship.

Freight pre-paid: A clause on a bill of lading which indicates that the freight has been paid to the shipowners. In practice, the freight is often paid after a freight pre-paid bill of lading has been issued. A freight pre-paid bill of lading in the hands of a third party consignee would be deemed to be prima-facie evidence that the freight has been paid.

Freight Collect: A clause that appears on the bill of lading indicating that freight is to be paid before the cargo is delivered to the consignee at the discharge port. If this freight is not paid the owners may be able to execute a lien on the cargo for freight.

General cargo vessel: A vessel capable of carrying break-bulk general cargo as opposed to containerized/unitized cargo.

Gross Registered Tonnage (GRT): A unit based on a calculation of the volume of certain enclosed areas of a vessel. It has nothing to do with weight.

Handy size: Handy size refers to bulk carriers usually from 10,000 to 35,000 tonnes deadweight.

Liner discharge (Liner out): Where the ship owner is obliged to pay the costs of the discharge of the cargo. This term appears on the bill of lading.

Liner in: Where the ship owner is obliged to pay the costs of the loading of the cargo. A term that appears on the bill of lading.

Liner Terms: A combination of liner in / liner out.

LO/LO: A vessel where the cargo has to be lifted off the ship or lifted into the ship as opposed to RoRo.

Here are some samples of the drafting group's current thinking.

Please note this is highly provisional in nature, and that much may still change during the revision cycles that are scheduled for the next few months.

• The expression 'on its face' (in the context of document examination) has long been a source of confusion - for example, it can be taken to mean the front of the document as opposed to the back. So the current thinking is that the next UCP will have no references to 'on its face'
• Time limits for examination of documents. The current formulation is 'a reasonable time, not to exceed seven banking days'. The phrase 'reasonable time' will probably be removed. It is hoped that the maximum time for examination will be reduced to either five days or six days.
• There has been extensive discussion on whether UCP should refer to the issuers, advisers of L/Cs etc. as banks or as parties. Current thinking is that the term 'banks' should be retained, notwithstanding the recognition by the ICC that non-banks can issue L/Cs - as is commonplace for larger US companies when dealing with suppliers in Asia.
• There is a majority view that that the practice of discounting deferred payment undertakings should be recognised by the new UCP. However the drafting of an appropriate article will require considerable thought!
• It is likely that the obligations of the Advising bank will be expanded. At present the Advising Bank only has to verify the authenticity of the L/C that it has been advised. In the next UCP, it may also have to certify that the document that it advises to the beneficiary is the same as the document that it has received.
• Beneficiary's response to an amendment. The current UCP presents a problem for document examiners, in that there is no obligation on the beneficiary to explicitly accept or reject an amendment. It follows that only by examining the documents can the bank determine whether the beneficiary is seeking to comply with the amended L/C or the original one!
• Current thinking is that the new UCP will put the onus on the beneficiary to accept or reject the amendment. However it is not clear how this issue should best be handled.
• The issue of inconsistency within the document dataset remains difficult to resolve. There is a general recognition that many minor variations between the data elements in documents should, when put in their correct context, not constitute discrepancies. On the other hand it is very difficult to express such an aim in the form of a practical rule.
• The input from the various country committees included a number of very frank admissions from some banks in Asia that re-examination of documents represented a very significant source of fee income!
• Notice of refusal. The current UCP only gives the examining bank two options in the event of discrepancies - hold documents pending instructions from the applicant or return the documents.
  

The current thinking is that the new UCP will introduce two further options:
(1) handle the documents according to prior instructions given by the presenter; (2) hold the documents whilst seeking a waiver from the applicant - which is what many banks do now as a matter of convenience. The first of these options covers the case where the beneficiary wants to be consulted before the bank acts on the applicant's waiver - because if the market price for the goods has increased, the seller now has an opportunity!

• Negotiation needs to be redefined in the new UCP. A new definition is in preparation.

The future of ISBP: Of the 200 paragraphs in ISBP, a significant proportion will be carried over in some form into UCP 600. This raises the question of what now happens to ISBP. It is not sensible to revise ISBP until there is some experience of how the new UCP is working. There is also the question of the status of those provisions in ISBP which do not merit incorporation into UCP. There will be a temptation to regard these as somehow carrying less force than hitherto, and it may be necessary to re-assert the significance of ISBP as a set of recommendations for good practice.
When will it be ready? The current target dates are approval of the final draft around October 2006, with implementation in July 2007. However this is dependent on a swift resolution of all the remaining contentious issues; so slippage of these dates is quite possible.

UCP 600 To Arrive Soon!

The Uniform Customs and Practice for Documentary Credits (UCP), ICC Publication number 500, the currently operative document effective since January 1, 1994 that governs the use of LCs worldwide soon may give way for the brand new UCP 600. The ICC Banking Commission is now working on the process of revision which has been going on for the last three years. The final revision is expected to be completed in October. On Thursday 26 October, ICC Events will host a conference on the UCP 600 in Paris where the final seal of approval is likely to be put on UCP 600. What's new in UCP 600? The revision is expected to address some of the issues that continue to dog the documentary credits trade and UCP 600 it is sais, has new provisions which bankers, exporters and lawyers will need to know. Some of the issues like the definition of the term 'applicant', all credits being irrevocable as the default option, the tricky matter of 'drafts', clear definition of the term 'negotiation' (not resolved since 1933), and other issues that continue to baffle the experts may get a look-in this time. The changes proposed are as follows:

• The total length reduced to 39 articles rather than 49 as in UCP 500.
• A new section that brings all sundry definitions together at one place.
• Yet another attempt to define 'negotiation'.
• A replacement of the term 'reasonable time' with a definite number of days for examining and determining compliance of documents.
• Re-drafted transport articles aimed as resolving confusion over the identification of carriers and agents.

Some of the new articles in UCP 600 have adopted practices in International Standard Banking Practices (ISBP) and followed principles of International Standby Practices (ISP 98), besides providing new articles in examination, documentation and other aspects for issuing the letters of credit for companies involved in foreign trade. Hopefully, UCP 600 would be more user-friendly than its previous versions have been. In the meanwhile, if one happens to be a banker, and has anything to do with letters of credit, one should master ISBP simultaneously with the provisions of UCP 600. Training people will be a challenge to the banks, for several reasons. Firstly, the time available prior to the date if introduction of UCP 600 will be just a little over six months. Next, no published material, viz., comparison between UCP 500 and UCP 600, rationale for certain new provisions, modifications, revisions etc. is yet available for guidance. Trainers with complete mastery over UCP 500 and also a good grasp of UCP 600 are few and far between (remember that UCP 600 is not expected to be finalised before the end of October 2006). Keep visiting this site for further updates!

Get To Know The Trade Terms!
"EXW": This designation stands for "EX WORKS (... named place). This term means that the seller fulfils his obligation to deliver the goods to the buyer, when he has made them available at his factory, mill, warehouse, plantation, etc.; in other words, the seller is not responsible for loading the goods on the vehicle provided by the buyer or for clearing the goods for export, unless otherwise agreed.

"FCA": stands for "FREE CARRIER (... named place). It means that the seller fulfils his obligation to deliver the goods to the buyer, when he has handed them over, cleared for export, into the charge of the carrier named by the buyer at the named place or point. When, according to commercial practice, seller’s assistance is required in making the contract with the carrier, the seller may act at buyer’s risk and expense. FCA may be used for any mode of transport, including multimodal transport.

"FAS": "Free alongside Ship (... named port of shipment) means that the seller fulfils his obligation to deliver the goods when they have been placed alongside the vessel on the quay (or wharf) or in lighters (barges) used for loading and unloading ships, usually offshore) at the named port of shipment. This means that the buyer has to bear all costs and risk of loss of or damage to the goods from that moment. This term should not be used if the buyer is unable to carry out, directly or indirectly, the export formalities. FAS can only be used for sea or inland waterway transport.

"FOB": " Free On Board ( ... named port of shipment ) means that the seller fulfils his obligation to deliver the goods when they have passed over the ship’s rail at the named port of shipment- The buyer has to bear all costs and risks of loss of or damage to the goods from that point. FOB requires the seller to clear the goods for export. This term call only be used for sea or inland waterway transport when the ship’s rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the FCA term is more appropriate to use.

"CFR": "Cost and Freight (... named port or destination). The seller must in this case pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment. CFR requires the seller to clear the goods for export. It call only be used for sea and inland waterway transport. When the ship’s rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the CPT term is more appropriate to use

"CIF" : " Cost, Insurance and Freight ( ... named port or destination) means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage. The seller contracts for the insurance and pays the insurance premium. CIF requires the seller to clear the goods for export. It can only be used for sea and inland waterway transport. When the ship’s rail serves no practical purpose such as in the case of roll-on/roll-off or container traffic, the CIP term is more appropriate to use.

"CPT": "Carriage Paid To (... named place of destination). The seller pays the freight for the carriage of the goods to the named place of destination. The risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered to the carrier, is transferred from the seller to the buyer when the goods have been delivered into the custody of the carrier. The term "CARRIER" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of carriage, by rail, road, sea, air, inland waterway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. CPT requires the seller to clear the goods for export. It may be used for any mode of transport including multimodal transport.

"CIP": "Carriage and Insurance Paid to (... named place of destination). The seller has the same obligations as under CPT, but with the addition that he has to procure cargo insurance against the buyer’s risk of loss of or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium. CIP requires the seller to clear the goods for export. It may be used for any mode of transport including multimodal transport.

"DAF" : " Delivered At Frontier (… named place). The seller fulfills his obligations to deliver the goods to the buyer when the goods have been made available, cleared for export, at the named point and place at the frontier, but before the customs border of the adjoining country. The term " frontier " may be used for any frontier including that of the country of export. This term is primarily intended to be used when goods are to be carried by rail or road.

"DES": "Delivered Ex Ship" (... named port of destination) . The seller fulfills his obligation to deliver the goods to the buyer when the goods have been made available to the buyer on board the ship uncleared for import at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination. This can only be used for sea or inland waterway transport.

"DEQ" : "Delivered Ex Quay (duty paid) ( ... named port of destination). The seller fulfills his obligation to deliver the goods to the buyer when he has made them available to the buyer on the quay (wharf) at the named port of destination, cleared for importation. The seller has to bear all risks and costs including duties, taxes and other charges of delivering the goods to this point. This term should not be used if the seller is unable, directly or indirectly, to obtain the import license. If the buyer is to clear the goods for importation and the duty, the words "duty paid "should be used instead of "duty unpaid". This term can only be used for sea or inland waterway transport.

"DDU" : " Delivered Duty Unpaid ( ... named place of destination). The seller fulfills his obligation to deliver the goods to the buyer when the goods have been made available at the named place in the country of importation. The seller has to bear the costs and risks involved in bringing the goods to this point (excluding duties taxes and other official charges payable upon importation as well as the cost and risks of carrying out customs formalities). The buyer must pay any additional costs and bear any risks caused by his failure to clear the goods for import in time. This term may be used irrespective or the mode of transport.

"DDP" : " Delivered Duty Paid ( ... named place of destination). The seller fulfills his obligation to deliver the goods to the buyer when the goods have been made available at the named place in the country of importation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods to this point, cleared for importation. DDP represents the maximum obligation for the seller. This term may be used irrespective of the mode of transport.