Important Trade Terms in International Trade¶

CIF (Cost, Insurance, and Freight)¶

Explanation: CIF is a trade term where the seller is responsible for arranging and paying for transportation of the goods to the destination port, as well as insurance coverage against the risk of loss or damage during transit. The seller bears the costs and risks until the goods are delivered to the port of destination.
Example: Seller A in China sells 1,000 smartphones to Buyer B in the United States on CIF terms. Seller A arranges for the shipment of the smartphones to the port of Los Angeles and purchases insurance to cover any potential damages during transit. Seller A's responsibility ends once the smartphones are loaded onto the vessel in China.

Explanation: F.O.B signifies that the seller delivers the goods, clears them for export, and loads them onto the vessel nominated by the buyer at the named port of shipment. The risk of loss or damage transfers from the seller to the buyer once the goods are loaded onto the vessel.
Example: Seller X in Brazil sells 500 bags of coffee beans to Buyer Y in Europe on F.O.B terms. Seller X delivers the bags of coffee beans to the port of Santos and loads them onto the vessel specified by Buyer Y. The risk passes to Buyer Y once the bags are on board the vessel.

Explanation: Similar to F.O.B, but with additional services provided by the seller, such as arranging transportation beyond loading onto the vessel. The specifics of additional services should be clearly outlined in the contract.
Example: Seller C in Japan agrees to an F.O.B contract with additional services to transport 200 bicycles to Buyer D in Australia. In addition to loading the bicycles onto the vessel, Seller C also arranges for transportation from the port of Kobe to the final destination in Sydney as per Buyer D's request.

Explanation: In this scenario, the buyer contracts directly with the carrier for transportation of goods. The seller's responsibility ends when the goods are loaded onto the vessel nominated by the buyer. The risk of loss or damage transfers to the buyer at this point.
Example: Buyer E in Canada arranges an F.O.B contract with a carrier to ship 100 barrels of maple syrup from Seller F's warehouse in Montreal to a port in China. Seller F is responsible for loading the barrels onto the vessel nominated by Buyer E. The risk shifts to Buyer E once the barrels are on board.

Explanation: FAS means that the seller is responsible for delivering the goods alongside the vessel at the named port of shipment. The seller bears the costs and risks until the goods are placed alongside the vessel.
Example: Seller G in India agrees to sell 300 sacks of rice to Buyer H in Africa on FAS terms. Seller G delivers the sacks of rice to the dock at the port of Mumbai, where they are placed alongside the vessel nominated by Buyer H. The risk passes to Buyer H at this point.

Explanation: EX SHIP indicates that the seller delivers the goods to the buyer when they are placed at the disposal of the buyer on board the ship, not cleared for import. Arrival Contracts specify that delivery occurs when the goods arrive at the named destination port.
Example: Seller I in South Korea sells a consignment of electronic gadgets to Buyer J in Europe on an EX SHIP basis. Seller I delivers the goods to the port of Rotterdam, where they are placed at Buyer J's disposal on board the ship. The risk transfers to Buyer J at this point. Alternatively, an Arrival Contract would specify delivery when the goods arrive at a designated port, such as Rotterdam.

Explanation: C&F is similar to CIF, but without insurance coverage. The seller is responsible for arranging and paying for transportation of the goods to the destination port, but the buyer must arrange insurance against the risk of loss or damage during transit.
Example: Seller K in Australia agrees to sell 400 surfboards to Buyer L in Hawaii on C&F terms. Seller K arranges for the transportation of the surfboards to the port of Honolulu but does not provide insurance coverage. Buyer L is responsible for purchasing insurance once the surfboards are in transit.

Explanation: EX WORKS means the seller's responsibility ends when the goods are made available to the buyer at the seller's premises or another named place (e.g., factory or warehouse). EX STORE contracts specify delivery to occur at a specific place of storage.
Example: Seller M in Germany sells machinery to Buyer N in Mexico on an EX WORKS basis. Seller M prepares the machinery at their factory in Berlin, and Buyer N arranges for transportation and assumes all risks and costs from Seller M's premises. Alternatively, an EX STORE contract might specify delivery at a designated storage facility, such as Seller M's warehouse.

Explanation: FOR signifies that the seller delivers the goods, clears them for export, and loads them onto the train at the named railway station. The risk of loss or damage transfers from the seller to the buyer once the goods are loaded onto the train.
Example: Seller O in Russia sells 200 tons of timber to Buyer P in China on FOR terms. Seller O delivers the timber to the railway station in Moscow and loads it onto the train specified by Buyer P. The risk shifts to Buyer P once the timber is loaded onto the train.

Explanation: Sale of a Cargo refers to the sale of goods already loaded onto a vessel. EX-QUAY contracts specify that delivery occurs when the goods are placed at the disposal of the buyer on the quay (wharf) at the destination port.
Example: Seller Q in Brazil sells a shipment of automobiles to Buyer R in the Middle East on a Sale of a Cargo basis. The automobiles are already loaded onto a vessel bound for the port of Dubai. Alternatively, an EX-QUAY contract might specify delivery when the automobiles are placed at Buyer R's disposal on the quay at the port of Dubai.

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