Page 45 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes clearance of cargo shall be the duty of the exporter and loading of the cargo shall be done
on the expenses of importer.
3. FOB – Free On Board (named port of shipment): FOB is the most popular term used in
international trade and is the most favoured and widely used Incoterms by exporters in
today’s times. Under this incoterm, the exporter shall be responsible for delivering goods to
the named port of shipment from where the journey to the place of destination will begin.
Under this incoterms, the exporter is under obligation to prepare export-import documents,
getting goods inspected, export customs clearance and loading of cargo on the vessel.

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Caution Under these Incoterms the responsibilities of exporter are over once the goods are
loaded on the ship and those of the importer begin. Any damages and losses to the cargo,
before it is loaded on vessel shall be borne by the exporter.

When the F Terms are used, exporter should remember that:
Shipping terms such as FAS and FOB are mono-modal and such incoterms are used when
the transportation of goods is by sea route only from the country of origin to country of
destination. The bill of lading is a prerequisite document to be used during transportation
under the FAS and FOB Incoterms. FOB and FAS Incoterms cannot be used on any other
type of transport such as air transport, post parcel, railways and road transport of cargo to
the destined country.

The handling, loading, stowage and other port charges of cargo under FOB shall be the
responsibility of the exporter. On the other hand under the FCA shipping terms, such
charges have to be borne by the importer.
Group ‘C’ – Main Carriage Paid by Seller

1. CFR – Cost and Freight (...named port of destination): Under this incoterm, the exporter
is required to cover all costs related to customs clearance of export shipment, delivering
the cargo to the named port of destination and discharging the cargo from the ship,
including all port charges. However the risks of the exporter shall be limited to loading of
cargo on to the ship at the named port of shipment. This incoterm can be used only in case
of inland water and seaway transportation of goods. This shipping term was previously
known as C&F or CAF under Incoterms 1990.

2. CIF – Cost, Insurance and Freight (...named port of destination): The Incoterm CIF is
much similar to the shipping term CFR. The only additional responsibility that the exporter
has to bear is that he has to arrange the marine insurance of cargo. Usually, the exporter is
advised to procure the insurance cover having minimal cost to exporter. All other
responsibilities shall remain the same as in case of CFR Incoterm. This incoterm can be
used only in case of inland water and seaway transportation of goods.
3. CPT – Carriage paid to (...name place of destination): The shipping term refers to the
responsibilities of the exporter up to the delivery of the goods at the named Place of
Destination, Container Freight Station, Inland Container Depo, Frontier or Terminal or
Quay as nominated by the importer in the country of destination.
The exporter shall also be responsible for all inland freight charges in the country of the
importer. Under this shipping term, the importer is responsible for all expenses that are
related to customs clearance and other duties payable on consignment, taxes and any
other costs that are payable in the country of destination. CPT Incoterm is used for
multimodal transport.

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