Can you distinguish international trade terms?
In the process of international trade, freight is often a key point, different trade terms freight price is not the same, the risk is not the same. Below is a brief overview of common trade terms, for further information if necessary.
FOB(Free on Board): The seller quotes a price including the cost of delivering goods to the nearest port. The buyer bears all the shipping expenses and is responsible to get the products from that port to its final destination. In simple terms, FOB price means the buyer has to bear the shipping costs completely. This is one of the most used shipping terms by international buyers and sellers.
EXW(Ex-Works): The seller has no involvement with the transportation costs and risks. The buyer has to collect the goods from the seller’s site and get them to the final destination. All the costs and risks are borne by the buyer. It is advisable that the buyer purchases insurance since the goods can get damaged in transit. EXW is ideal when the buyer and seller are in the same country or region.
CFR(Cost and Freight): The seller pays the loading and freight costs from his premises up to the destination port. Then, the buyer has to arrange for the goods to be transported from the port to his premises. The seller is only responsible for the cost of shipping the products to the destination port. CFR is used for products transported by sea or inland waterways only. The seller does not bear the risk of loss or damage during transit.
CIF(Cost, Insurance, and Freight): If the buyer opts for CIF price, the seller pays for the loading and freight costs right from his premises up to the destination port as well as insurance. In the case of damage or loss, the seller bears the risk completely. The buyer has to arrange for transportation of the goods from the port to his premises. CIF is a safer option than CFR since the goods are insured by the seller up to their arrival at the destination port.
DAP(Delivered at Place): It was previously known as DDU, Delivery Duty Unpaid. In this case, the seller is responsible for getting the goods from his own
In the process of trade, it is inevitable that there will be conflicts and disputes between buyers and sellers, and mastering the knowledge of trade terms can help you avoid stepping on pits and being deceived.
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