Trade Terms
FOB (Free On Board)
Definition
The seller delivers when the goods are placed on board the vessel nominated by the buyer at the named port of shipment, or when the seller procures goods already delivered in this way.
Seller's Obligations
- Load the goods on board the vessel nominated by the buyer at the agreed port of shipment and within the contract period
- Bear all costs and risks until the goods are loaded on board
- Carry out export customs clearance
- Provide the commercial invoice and the usual evidence that the goods have been delivered on board
Buyer's Obligations
- Contract for carriage, book shipping space and pay the ocean freight; notify the seller of the sailing schedule and vessel name
- Bear all costs and risks after the goods are loaded on board
- Carry out import customs clearance
- Accept the documents provided by the seller and pay the price
Mode of Transport
Sea and inland waterway transport only.
CIF (Cost, Insurance and Freight)
Definition
The seller delivers when the goods are placed on board the vessel at the port of shipment, or procures goods already delivered in this way. The seller must pay the freight and insurance premium necessary to bring the goods to the named port of destination.
Seller's Obligations
- Contract for carriage and pay the ocean freight
- Arrange cargo transport insurance and pay the premium
- Bear all costs and risks until the goods are loaded on board
- Carry out export customs clearance
Buyer's Obligations
- Bear all costs and risks after loading (other than freight and insurance premium)
- Carry out import customs clearance
- Accept the documents and pay the price
Notes
- CIF price = FOB price + freight + insurance premium
- Minimum insurance requirement: Institute Cargo Clauses (C)
EXW (Ex Works)
Definition
The seller delivers when the goods are placed at the buyer's disposal at the seller's premises or another named place (e.g. factory or warehouse).
Characteristics
- Minimum obligation for the seller
- The buyer bears all costs and risks involved in moving the goods from the seller's premises to the final destination
DAP (Delivered at Place)
Definition
The seller delivers when the goods are placed at the buyer's disposal on the arriving means of transport, ready for unloading, at the named place of destination.
Seller's Obligations
- Bear all costs and risks involved in bringing the goods to the named destination
- Carry out export customs clearance
Buyer's Obligations
- Carry out import customs clearance
- Bear the cost of unloading
For further details, refer to the ICC Incoterms® 2020 rules.