Familiarity with types of international cargo transportation contracts
In the realm of cross-border trade, the movement of goods without a clear legal framework can entail significant financial risks. International transport contracts clarify the relationships between the cargo owner (shipper), transport companies (carriers/freight forwarders), and the consignee, while defining responsibilities, costs, and risks.
In this article, we review the most popular and important types of international contracts in the logistics industry.
1. Incoterms-based contracts
Incoterms (International Commercial Terms), developed by the International Chamber of Commerce (ICC), specify the rights and obligations of the buyer and seller in the delivery of goods.
The most important groups of Incoterms are:
- Group E (EXW): Delivery of goods at the seller’s factory door (least responsibility for the seller).
- Group F (FOB, FCA): The seller delivers the goods to the carrier designated by the buyer.
- Group C (CIF, CFR, CPT): The seller pays the cost of transportation to the destination, but the risk of the goods passes after loading.
- Group D (DDP, DAP): Delivery of goods at the final destination with maximum responsibility of the seller.
2. Carrier Contract and Forwarder Contract
There are two main types of actors in transportation, with different types of contracts:
- Carrier Contract: Direct undertaking of cargo transportation by private fleet (truck, ship or aircraft). Direct responsibility for the physical integrity of the cargo lies with the carrier.
- Forwarder Contract: The forwarder company acts as an intermediary and supply chain designer and is responsible for coordination, documentation, transit, and selection of the best carriers.
3. Legal documents and conventions that replace or supplement the contract
In international transportation, certain documents serve as a formal contract of carriage:
+———————-+—————————————————-+
| Document / Convention | Application and description |
+———————-+—————————————————-+
| Bill of Lading | Document of ownership of goods and official sea/multi-way transport document |
| CMR Convention | Legal Agreement of International Road Transport Document |
| Air Waybill (AWB) | Airline Delivery Receipt (Non-transferable) |
| Rail waybill (CIM/SMGS) | Legal document for international rail freight transport |
+———————-+—————————————————-+
Key points that should be included in the contract text
- Accuracy of product specifications and packaging conditions.
- Accurate determination of liability for insurance of goods and possible damages.
- Specifying penalties for late delivery (Damages for Delay).
- Dispute resolution authority and the laws governing the contract.
