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What is INCOTERMS? (International Common Trade Terms) |
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Frequently, parties to a contract are unaware of the different trading practices in their respective countries. This can give rise to misunderstandings, disputes and litigation with all the waste of time and money that this entails. In order to remedy these problems the International Chamber of Commerce published a set of international rules for the interpretation of trade terms. These rules were known as "INCOTERMS "
The purpose of " INCOTERMS " is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree. |
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What is FOB? (Free On Board)
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Under this trade term, the seller is responsible to deliver the goods from his premises until loaded on board the vessel at his own cost and risk. Therefore the seller bears the risk before loading for which he can arrange inland transit cover. Thereafter the goods are at buyer's risks. |
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What is CFR? (Cost and Freight) |
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The seller's responsibility is the same as FOB trade term. In addition he has to bear all shipping and forwarding expenses. |
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What is CIF? (Cost, Insurance and Freight) |
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The seller undertakes to arrange and pay for all costs of delivering the goods and insurance up to final destination because the buyer has paid for these in the sale price. The insurance policy is assigned to the buyer and he can claim under the policy as though he had arranged for the insurance himself. |
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What is Double Tax Deduction? |
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The Malaysian Government allows the local importer/Exporter to claim for "Double Tax Deduction" on premium paid for marine cargo insurance if it is insured with a locally incorporated Insurance Company such as BGI. If RM100 is paid as marine insurance premium, RM200 can be deducted as an expenses for tax deduction. |
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Who should arrange the Marine Cargo Insurance? |
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The trade term stated on the sales contract between the seller and the buyer will determine where and by whom an import or export of goods is insured. It is therefore necessary to understand when the risk and ownership of the goods passes from the seller to the buyer under the different types of contract of sale by referring to the INCOTERMS. This is because in the event of loss of or damage to the goods, it is essential to establish which party must bear the loss and be indemnified according to the provisions of the insurance policy |
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