Trading Terms & Conditions

Free On Board - FOB
What Does Free On Board - FOB Mean?
A trade term requiring the seller to deliver goods on board a vessel designated by the

buyer. The seller fulfills its obligations to deliver when the goods have passed over the

ship's rail.
When used in trade terms, the word "free" means the seller has an obligation to deliver

goods to a named place for transfer to a carrier.
An international trade term of sale in which, for the quoted price, the

seller/exporter/manufacturer clears the goods for export and is responsible for the costs

and risks of delivering the goods past the ship’s rail at the named port of shipment. The

Free On Board term is used only for ocean or inland waterway transport.
Why ship FOB?
Buying Free On Board has two major benefits over CIF, more competitive freight rates and

enhanced shipment control. When shipping CIF, companies must be careful that they’re

shipping rates are competitive since overseas suppliers are inclined to mark up their

freight cost for the extra service provided in arranging shipments. U.S. importers quickly

learn that they can obtain very competitive shipping rates even with small to medium freight

volumes. While cost is always important, there is another major reason for buying FOB.
Increased supply chain visibility and control is a critical FOB benefit. By taking title to

the goods as they cross the ship’s rail at the overseas port of shipment, importers are

better able to obtain accurate and timely shipment information by working with the third

party logistics provider of their choosing. In this way, they are assured their freight

partner is working in their best interest, not that of their supplier’s.

Cost and Freight - CFR
What Does Cost and Freight - CFR Mean?
A trade term requiring the seller to arrange for the carriage of goods by sea to a port of

destination, and provide the buyer with the documents necessary to obtain the goods from the

carrier. Under CFR, the seller does not have to procure marine insurance against the risk of

loss or damage to the goods during transit.
COST AND FREIGHT means the seller must pay the costs and freight necessary to bring the

goods to the named port of destination.
The risk of loss or of damage to the goods, as well as any additional costs due to events

occurring after the time the goods have been delivered on board the vessel, is transferred

from the seller to the buyer when the goods pass the ship's rail in the port of shipment.If

the buyer does not insure the shipment and if the goods are damaged, you may run the risk of

not being paid
COST AND FREIGHT requires the seller to clear the goods for export
COST AND FREIGHT can only be used for sea or inland waterway transport.

Cost, Insurance and Freight - CIF
What Does Cost, Insurance and Freight - CIF Mean?
A trade term requiring the seller to arrange for the carriage of goods by sea to a port of

destination, and provide the buyer with the documents necessary to obtain the goods from the

carrier.
An international trade term of sale in which, for the quoted price, the

seller/exporter/manufacturer clears the goods past the ship’s rail at the port of shipment

(not destination). The seller is also responsible for paying for the costs associated with

transport of the goods to the named port at destination. However, once the goods pass the

ship’s rail at the port of shipment, the buyer assumes responsibility for risk of loss or

damage as well as any additional transport costs. The seller is also responsible for

procuring and paying for marine insurance in the buyer’s name for the shipment. The Cost

and Freight term is used only for ocean or inland waterway transport.
Why ship CIF?
Generally speaking, importers prefer CIF terms when either they’re new to international

trade or they have relatively little freight volume. These importers often find CIF simpler

in that their suppliers are responsible for arranging freight and insurance details. Under

these terms the importer relinquishes control of choosing freight carriers, routing and

other shipping specifics. For these companies, convenience outweighs the need for enhanced

shipment control and associated freight savings.
Shipping CIF grows increasingly difficult as companies increase their number of overseas

suppliers and overall freight volume. The greater the number of CIF shipments, the more

problems can occur with obtaining accurate shipment information. Overseas suppliers are not

well positioned to handle service issues that develop in-transit. What’s more, they are not

required to arrange anything past the port of destination, so final delivery concerns,

monitoring of penalty situations (demurrage, per diem), etc. are all the responsibility of

the importer. Regular importers quickly grow tired of the hassle of relying on suppliers and

their freight agents for shipment information.

Currency Adjustment Factor - CAF
What Does Currency Adjustment Factor - CAF Mean?
A type of charge applied on top of freight costs by carriers servicing trade between the

United States and Pacific Rim countries. The charge was developed due to costs that carriers

incur from constantly changing exchange rates between the U.S. dollar and other foreign

currencies.

Delivered Ex Quay - DEQ
What Does Delivered Ex Quay - DEQ Mean?
In international trade, a contract specification where the seller must deliver the goods to

the wharf at the destination port. Delivered ex quay may be noted as having duty paid or

unpaid. If it is marked as paid, the seller is responsible for any costs, such as duty, and

risks associated with the delivery. The buyer must pay the costs and duty when the DEQ is

marked as "duty unpaid."

Delivered Ex Ship - DES
What Does Delivered Ex Ship - DES Mean?
A trade term requiring the seller to deliver goods to a buyer at an agreed port of arrival.

The seller remains responsible for the goods until they are delivered.

Delivery Duty Paid - DDP
What Does Delivered Ex Ship - DES Mean?
A trade term requiring the seller to deliver goods to a buyer at an agreed port of arrival.

The seller remains responsible for the goods until they are delivered.
DELIVERED DUTY PAID means the seller fulfills its obligation when the goods arrive by any

means of transportation to the named place of destination.
The seller has to bear the costs and risks involved in bringing the goods thereto (including

duties, taxes and other official charges payable upon importation) as well as the costs and

risks of carrying out customs formalities.
The seller pays the duty.
DELIVERED DUTY PAID represents the seller's maximum obligation.
The buyer has to pay any additional costs and to bear any risks caused by its failure to

clear the goods for import in time.
DELIVERED DUTY PAID should not be used if the seller is unable to obtain an import license.
If the parties wish the seller not to carry out customs formalities and bear the costs and

risks, or not pay any taxes, this has to be made clear by adding words to this effect.
DELIVERED DUTY PAID can be used for all modes of transport

Ex Works - EXW
What Does Ex Works - EXW Mean?
A trade term requiring the seller to deliver goods at his or her own place of business. All

other transportation costs and risks are assumed by the buyer.
EX WORKS means that the seller fulfills its obligation to deliver when it has made the goods

available at its premises (i.e. works, factory, warehouse, etc.) to the buyer.
The seller is not responsible for loading the goods on the vehicle provided by the buyer.
Unless otherwise agreed, the seller is not responsible for clearing the goods for export.
EX WORKS represents the minimum obligation for the seller.
EX WORKS should not be used when the buyer cannot carry out, directly or indirectly, the

export formalities.

Free Alongside - FAS
What Does Free Alongside - FAS Mean?
A trade term requiring the seller to deliver goods to a named port alongside a vessel

designated by the buyer. "Alongside" means that the goods are within reach of a ship's

lifting tackle.
When used in trade terms, the word "free" means the seller has an obligation to deliver

goods to a named place for transfer to a carrier.