Incoterms
Below is a description of the International Commercial Terms used in the industry and commonly recognised by the buyer and seller. These are extremely important as these identify where the sellers responsibilities end and where the buyers begins.
CIF (Cost, Insurance & Freight), CFR (Cost & Freight)
This essentially means the seller is to cover costs to arrival port / depot, there is only one major difference between either of these terms and that is CIF has insurance covered by the seller up to delivery point stipulated on the bill of lading. CFR means that once the cargo is loaded on the vessel the seller no longer covers insurance of the goods which then falls upon the buyer to arrange.
FOB (Free on Board)
FOB means seller has responsibility to get the cargo loaded on the vessel and then buyer takes over from that point onward taking costs for freight and other associated charges on top of the destination costs once arrived at destination. It is up to the buyer to arrange insurance once loaded on board the vessel.
Ex-Works
Buyer takes all costs for the movement including collection from sellers warehouse, export entry, freight and local charges at destination including delivery. Seller has much reduced risk while buyer has greatly increased risk.
DDU (Delivered Duty Unpaid), DDP (Delivered Duty Paid)
This is more or less the opposite of shipping under ex-works terms where shipper covers all costs to door, the only difference being is under DDU terms the buyer pays the duties due at destination and under DDP terms Duties and taxes are paid by the seller
CIF (Cost, Insurance & Freight), CFR (Cost & Freight)
This essentially means the seller is to cover costs to arrival port / depot, there is only one major difference between either of these terms and that is CIF has insurance covered by the seller up to delivery point stipulated on the bill of lading. CFR means that once the cargo is loaded on the vessel the seller no longer covers insurance of the goods which then falls upon the buyer to arrange.
FOB (Free on Board)
FOB means seller has responsibility to get the cargo loaded on the vessel and then buyer takes over from that point onward taking costs for freight and other associated charges on top of the destination costs once arrived at destination. It is up to the buyer to arrange insurance once loaded on board the vessel.
Ex-Works
Buyer takes all costs for the movement including collection from sellers warehouse, export entry, freight and local charges at destination including delivery. Seller has much reduced risk while buyer has greatly increased risk.
DDU (Delivered Duty Unpaid), DDP (Delivered Duty Paid)
This is more or less the opposite of shipping under ex-works terms where shipper covers all costs to door, the only difference being is under DDU terms the buyer pays the duties due at destination and under DDP terms Duties and taxes are paid by the seller
