INCOTERMS QUESTIONS

QUESTION 1

Imagine that your are responsible for presenting incoterms on conference in Kigali. After your
presentation, one of the conference participants asks the following question. (10 marks)

“I still have some doubts as to whether my company is using the correct incoterms rule for our
transactions. We are an exporter of manufactured goods and usually arrange for our goods to be
loaded into containers by freight forwarder, at their terminal. given this standard process, what
would be the most appropriate incoterms 2010 rule to offer our customers when we are prepared
to contract for pre-carriage and also clear the goods for export, but we do not wish to contract for
the main carriage? What would be your answer? FCA (free carrier)

QUESTION 2

You have agreed to export a shipment of cotton from Nairobi Kenya to Istanbul in turkey on a
vessel you have chartered for the consignment. You have no obligation to insure the goods. You
have agreed with the buyer to.

• Contract for carriage of the cotton to Istanbul port

• Organize and pay for loading charges at the port of shipment

• Clear goods for export and pay any related charges

• The goods are delivered when placed on board the vessel at the port of shipment

What is the most appropriate incoterm rule for you to use in this scenario? Briefly explain the
appropriate incoterm rule. CFR (cost and freight)

QUESTION 3

You are exporting a twenty foot container of goods by truck from Rwanda (Kigali) to Uganda
(kampala) your primary obligations agreed with the buyer in kampala in relation to delivery of
the goods are to:

• Deliver the container by truck to unloading bay at a named terminal in kampala

• Pay all charges in respect of transport of goods up to the place of delivery

• Clear the goods for export- but not import and pay any related costs.

• The goods are delivered when they are placed at the requisite bay in in the named
terminal in kampala.
What is the most appropriate incoterm rule for you to use in this scenario? Briefly explain that
appropriate incoterm you can use. DAP (Delivered at place)

QUESTION 4

You are importing goods from Kenya (Nairobi) to Rwanda (Kigali). You do not wish to procure
an export license required for export clearance in Kenya. However, you have agreed with the
seller to:

 Provide the means of transport for the seller to load the goods at his premises.
 Manage and absorb any cost in respect of the transport of the goods
 Clear the goods for import and pay any related costs
 Delivery point is when the goods are loaded on the means of transport at the sellers
premises.

What is the most appropriate incoterm rule for you to use in this scenario? Briefly explain the
appropriate incoterm rule. FCA (free carrier)

QUESTION 5

You are shipping goods from Rwanda (Kigali) to turkey (Istanbul). You have the following
obligations in relation to the delivery of the goods:

 Transport of goods by air to Istanbul.

 Insurance against the buyer’s risk of loss or damage to the goods in transit.
 Pay freight charges in respect of carriage
 Customs and security clearance in Rwanda
 The goods are delivered when handed over to the carrier in Istanbul.

What is the most appropriate incoterm rule for you to use in this scenario? CIP (carriage and
insurance paid)

QUESTION 6

You are importing a 40 foot container of consumer goods from Istanbul to Kigali. The seller is
undertaking the following obligations.

 Deliver the goods to your warehouse in Kigali

 Pay any charges related to export and import clearance
 Clear goods for export and import
 Delivery point is when the goods are delivered to your warehouse in Kigali ready for
unloading.

What is the most appropriate incoterm rule for to use in this scenario? DDP (delivery duty paid)
QUESTION 7: Incoterms 2010

Imagine that you are responsible for presenting incoterms on a conference in Kigali. After your
presentation, one of the conference participants asks the following question.

“we are an importer of manufactured goods and more often than not we are unaware of the
practice of loading ports charging terminal handling charges (THC). Our objective is to avoid
any responsibility for such charges. When we raise this issue, our seller often reply stating that
they are only willing to sell goods on FCA named terminal basis. What is the best solution to this
problem? We have thought of” Select the correct answer

Proposed solution

A. Insisting on FOB terms

B. Using FCA but with the addition of “THC to be paid by seller” x

QUESTION 8: Incoterms 2010

Imagine that you are responsible for presenting incoterms on a conference in Kigali. After your
presentation one of the conference participants asks the following question;

“We agreed with our buyer to ship goods on a FOB basis. Our buyer failed to nominate the
vessel within agreed period and as result, we have been incurring storage expenses. We have
now been advised that the warehouse where the goods were being held caught fire and the goods
have been destroyed. It seems that the fire started as a result of a bolt lightning a recent storm. Is
the buyer liable for the costs and risks”? What would your answer be? Please tick the correct
answer. Proposed solutions

A. No. the buyer is not liable if the goods have not been placed on board the vessel.
B. “The buyer is only liable if the goods have been identified as the contract goods”x
C. The buyer is liable as he has committed a breach of contract in not nominating the vessel
in good time.

QUESTION 9: Incoterms 2010

Imagine that you are responsible for presenting incoterms on a conference in Kigali. After your
presentation, one of the conference participants asks the following question:

“My company is an exporter of manufactured goods and we wish to avoid the requirements to
pay unloading costs in the country of destination. Which of the following incoterms rules should
we apply?” what would your answer be? Please tick the correct answer with a “x” proposed
solution.

A.CFR
B.CPT

C.DAP

D.DAT

QUESTIO 10: Incoterms 2010

Imagine hat you are responsible for presenting incoterms on a conference in Kigali. After your
presentation, one of the conference participants asks the following question:

“We are an exporter of high tech drilling equipment for use in the mining of precious metals. We
made a recent shipment under DDP incoterms 2010 rules. Due to a local workers trade union
dispute additional costs were incurred to unload the goods from the means of transport at the
named place of destination. The buyer maintains that as DDP involves the maximum obligations
of the seller so we must bear this additional and unanticipated unloading cost at the named place
of destination. Which party, seller or buyer is responsible for these additional costs?” what would
your answer be? Proposed solution

A. Seller –as DDP involves maximum obligation of seller.

B. Buyer- as buyer must pay all costs from time goods are delivered ready for
unloading.
C. Neither party-as not specifically agreed in the contract of sale.

QUESTION 11: Incoterms 2010

Which of the following statements best defines how the incoterms rules apply to domestic and
international contracts of sale? Proposed solutions

 Incoterms rules become part of the contract of sale by express incorporation by the
seller and the buyer.
 Incoterms rules become applicable to sellers and buyers when adopted by national
governments, as they represent global regulations.
 Incoterms rules automatically become applicable to the international carriage of goods
between sellers and buyers as they represent international law.

QUESTION 12: Incoterms 2010

Under incoterm rules starting with the letter C or D, it is for the buyer to make the contract of
carriage with the carrier. Proposed solutions

 True
 False

QUESTION 13: Incoterms 2010

The incoterms rules CIF and CIP require the seller to provide insurance with maximum cover
including, as a minimum, institute cargo clause (A). Proposed solutions

 True
 False

QUESTION 14: Incoterms 2010

At which point does risk transfer from seller to buyer under CIF (named port of destination)
incoterms rules 2010. Proposed solutions

 At the seller’s premises, ready for loading

 When delivered to the carrier at the port of loading
 On board the vessel at the port of loading
 On board the vessel at the destination port

QUESTION 15: Incoterms 2010

According to the incoterms rule CIF the amount of insurance cover required is: proposed
solutions

 The price provided in the contract

 The price provided in the contract plus 110%
 The price provided in the contract plus 10%

QUESTION 16: Incoterms 2010

Under which list of the incoterms rules has the seller the obligation to insure the goods?
Proposed solutions

 FOB, CFR, FCA, CPT

 CIF, CIP
 CIF, CIP, DAT, DAP, DDP
 CPT, CIF, CIP, DDP

QUESTION 17: Incoterms 2010

In which incoterms rule is there no requirement for the seller to arrange the export clearance of
the goods. Proposed solutions

 DDP
 CPT
 FCA
 EXW
QUESTION 18: Incoterms 2010

In the context of the incoterms 2010 rules, which two of the following elements are included in
the definition of packaging? Proposed solutions

 The packaging of the goods to comply with any requirements under the agreed
contract of sale.
 The packaging of the goods so that they are fit for transport
 The stowage of the packed goods within a container or other means of transport.

QUESTION 19: Insurance

You are importing manufactured goods to (Rwanda) Kigali from Germany (Hamburg) via
different transport modes. You agreed with the seller of the manufactured goods to run the
import under incoterm CIP.

A. Who is responsible to arrange for appropriate insurance cover and what is the appropriate
institute cargo clause?
 Seller is responsible to arrange insurance agreements. He is obliged to take out
minimum coverage as provided in institute cargo clauses “o”
B. In general what is the duration of insurance coverage under the institute cargo clauses? be
as precise as possible
 Insurance coverage starts with the first movement in the warehouse at the place of
storage at the destination named in the contract of insurance.
 On completion of unloading from the carrying vehicle at any other warehouse which
the assured elects to use for storage other than in the ordinary course of transit.
 When the assured elects to use any carrying vehicle or any container for storage other
than in the ordinary course of transit.
 After the expiry of 60 days after completion of discharge of the subject matter insured
from the oversea vessel at the final port of discharge