Explanation of Trade Terms



Explanation of Trade Terms :




Trade terms are defined in great detail in a publication of the International Chamber of Commerce entitled Incoterms. Explanations of four of the most common terms are :


CFR : “Cost and Freight” to the named port of destination. The seller loads the goods on board the carrying vessel at his expense, prepays the freight and supplies the buyer with a “clean” negotiable “on board” ocean bill of lading. Insurance of the goods is the buyer’s responsibility.


CIF : “Cost, Insurance and Freight” to the named port of destination. The seller loads the goods on board at the port of shipment at his expense, prepays the freight and cost of marine insurance and supplies the buyer with a negotiable marine insurance policy and a “clean” negotiable, “on board” ocean bill of lading.


FOB : “Free On Board” to the named port of shipment. The seller delivers the goods on board the carrying vessel and bears all costs and risks until goods pass over the ship’s rail. The seller supplies the buyer with a “clean” negotiable “on board” bill of lading. The buyer is responsible for payment of freight and insurance.


FAS : “Free Alongside Ship”. The seller delivers the goods alongside the vessel at the loading berth named by the buyer. At this point the seller’s obligations are fulfilled. This means the buyer bears all costs and risks of loss or damage to the goods from that moment. Unlike FOB, this term requires the buyer to clear the goods for export and pay loading costs in addition to freight and insurance.




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