Shipping conditions

The prevailing set of commercial terms is called Incoterms 2000. Incoterms are standard trade definitions commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they establish the contractual obligations of the seller and the buyer under the price quotation and sales agreement. They distinguish when the responsibility or risk of the shipment transfers from the supplier to the buyer and what obligations each party is responsible for.

The table below lists the most widely used terms:

Multimodal transport Air Ocean Rail
EXW
FCA
CPJ
CIP
DAF
DDU
DDP		 FCA FAS
FOB
CFR
CIF
DES
DEQ		 FCA

Below are definitions most commonly used:

Term Definition Risk Cost
EXW
(Ex Works)		 Buyer arranges for pick up of goods at the seller’s location.

Seller is responsible for packing, labeling, and preparing goods for shipment on a specified date or time frame.

 Buyer assumes all risk. Buyer pays all transportation costs.
FCA
(Free Carrier)		 Seller is responsible for costs until the buyer’s named freight carrier takes charge. Seller and Buyer Seller and Buyer, split evenly
FAS
(Free Alongside Ship)		 Buyer arranges for ocean transport.

Seller is responsible for packing, labeling, preparing goods for shipment and delivering the goods to the dock.

 Seller: until the goods reach the dock.

Buyer: from dock to destination.

 Buyer pays all ocean transport costs.

Seller is responsible for costs associated with transporting the goods to the dock.
FOB
(Free On Board)		 Seller arranges for ocean transport of the goods, preparing goods for shipment, and loading the goods onto the vessel. Buyer once the items are on board. Seller pays wharfage (charges to load the goods onto the ship) and freight forwarder fees.
CFR
(Cost and Freight)		 Seller has the same responsibilities as when shipping FOB, but shipping costs are prepaid by the seller. Seller assumes risk until the shipment reaches the overseas dock. Seller pays costs of freight fees up to destination.
CIF
(Cost, Insurance, and Freight)		 Seller has the same responsibilities as when shipping CFR with the addition of including a marine insurance policy. Seller assumes risk until the shipment reaches the overseas dock. Seller pays insurance and freight forwarder fees.