Trade terms have been developed to illustrate the transferring of risk, passageof title, and the responsiblities of the buyer and seller. It is veryimportant that these terms be understood by both the buyer and seller.
Ex-Works (Named Location)
The Term Ex-Works is intended to be used when the buyer is going to takeresponsibility for picking the goods up from you factory and arrange fortransportation, forwarding, insurance, etc. The seller may, however, enterinto an agreement to assist the buyer in obtaining documents and makingtransportation arrangements.
FCA Free Carrier (named Location)
The term Free Carrier should be used when the buyer is going to takeresponsibility for selecting the carrier to be used to transport the goodsto the foreign port of unloading, and arrange for transportation, forwarding,insurance, etc. It is the intent of this term that the buyer contract forthe transportation of the goods by selecting the carrier and forwarder.
FAS Free Alongside Ship (named port of shipment)
Under this trade term, the seller fulfills its responsibilities once thegoods have been delivered to the carrier and placed alongside the vessel.Since it is not the general practice of ocean carriers to issue and "ALONGSIDERECIEPT", it can be assumed that delivery to the terminal used by the carrierwill be sufficient. However, a more practical term to be used when evidenceof delivery is important would be FCA. Under the FDA terms, the seller wouldonly need to deliver the goods to the carrier and obtain a receipt for thegoods.
FOB Free on Board (Named Port of Shipment)
Under this trade term, the seller has accomplished its responsibilities oncethe goods loaded "ON BOARD" the ocean vessel. Not unlike the term FAS, theocean carrier does not in general practice issue and "ON BOARD" receipt,in addition to the on board notation on the ocean bill of lading when used.Once again, a suitable substitute for this trade term would be FCA, whichonly requires delivery to the carrier.
CFR Cost and Freight (Named Port of Destination)
This trade term requires that the seller contract for the carriage and deliverythe goods to the carrier. This term specifically excludes the requirementfor the buyer to purchase marine insurance, but is would be a wise choicefor the seller to purchase contingency insurance to cover the insurable interestup to the time that the goods were loaded on board the vessel and beyond,to cover the goods in the event that the buyer refuses the gods, or had failedto purchase the necessary coverage.
CIF Cost, Insurance and Freight (Named Port of Destination)
This trade term requires that the seller select the carrier and the forwarder,since the seller is responsible for all documentation required by the buyerto import the goods. The seller is responsible for the performance of boththe carrier and the forwarder in one is retained to assist the exportformalities.
CPT Carriage Paid To (Named Port of Destination)
This trade term is most suitable to the transportation of air freight andocean containers and roll-on roll-off cargo. It allows for the cargo to bedelivered to the carrier at any location including multi-modal shipmentsthat might be accepted by the carrier at your dock.
CIP Carriage and Insurance Paid To (Named Place of Destination)
This term can be used for ocean container, roll-on roll-off and multi-modalocean freight shipments and shipments by air freight. The only differencebetween this term and CPT is the fact that the seller will take responsibilityfor insuring the freight.