Global Sales Model

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Common Information (For Reference)

Note:
SETsafe | SETfuse does not guarantee timely updates to common information.
In case of any discrepancies, the correct information shall prevail.

FOB, CFR, CIF, CPT, DDP Terms

In international trade, there are 13 common trade terms. They are listed in ascending order of the seller's responsibility: EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU, DDP.

Relationship between Contract Type and Trade Terms

Departure Contracts

"Group E" terms (e.g., EXW) are departure contracts. Under these contracts, the seller fulfills their delivery obligation simply by placing the goods at the buyer's disposal at the point of departure (e.g., factory or warehouse). The seller is not responsible for loading the goods onto the transport vehicle or handling export customs clearance formalities.

Shipment Contracts

"Group F" and "Group C" terms (e.g., FCA, FOB, CFR, CIF, CPT, CIP) are shipment contracts. Under these contracts, the seller is responsible for loading the goods onto the transport vehicle and handling export customs clearance formalities. The seller completes their delivery obligation once the goods are loaded onto the transport vehicle; subsequent risks and costs fall to the buyer.

Arrival Contracts

"Group D" terms (e.g., DAF, DES, DEQ, DDU, DDP) are arrival contracts. Under these contracts, the seller bears all risks and costs until the goods arrive at the destination, including transport, insurance, export customs clearance, and potentially import customs clearance formalities. The seller completes their delivery obligation only when the goods arrive at the destination and are placed at the buyer's disposal.

Applicability of Trade Terms

Applicable Only to Sea or Inland Waterway Transport

FAS, FOB, CFR, CIF, DES, DEQ, etc., apply only to sea or inland waterway transport. These terms are typically closely associated with maritime elements like ports and vessels.

Applicable to Any Mode(s) of Transport

EXW, FCA, CPT, CIP, DAF, DDU, DDP are applicable to any mode(s) of transport, including road, rail, air, etc. These terms offer greater flexibility and can adapt to different transport requirements.

EXW - Ex Works

Under EXW (Ex Works) terms, the transaction process concludes when the seller places the goods at the buyer's disposal at their own premises (e.g., workshop, factory, or warehouse at the named place). Beyond this point, all administrative procedures related to export clearance and the physical loading of the goods are not the seller's responsibility. This division of responsibility makes EXW the trade term with the clearest boundary for the seller's obligations.

FCA - Free Carrier

FCA means Free Carrier. Simply put, the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. At this point, delivery is considered complete. It's important to note: because FCA applies to any mode(s) of transport, the point of delivery depends on the chosen mode and the named place.

If delivery occurs at the seller's premises, the seller completes delivery when the goods are loaded onto the transport vehicle provided by the buyer's nominated carrier.

If delivery occurs at a place designated by the buyer, the seller completes delivery when the goods are placed at the disposal of the buyer's nominated carrier on the seller's means of transport, without being unloaded.

FAS - Free Alongside Ship

FAS (Free Alongside Ship) means the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) at the named port of shipment. From that moment, all risks of loss or damage to the goods pass to the buyer.

FOB - Free On Board

FOB (Free On Board) stipulates that the seller fulfills their delivery obligation by delivering the goods on board the vessel nominated by the buyer at the named port of shipment within the contracted shipment period.

The seller bears all responsibilities, costs, and risks prior to the goods being loaded on board. It is specifically noted that risk transfers when the goods pass the ship's rail. If the vessel arrives at the port of shipment as agreed, but the seller fails to load the goods promptly due to lack of readiness, any resulting dead freight or demurrage charges shall be borne by the seller. For example, during loading by crane, if the crane hook breaks and the goods fall onto the deck instead of into the sea, the risk has already passed to the buyer, and the related responsibility lies with the buyer.

FOB Variants

FOB Liner Terms: Loading charges are borne by the party paying the freight (i.e., the buyer).

FOB Under Tackle: The seller places the goods within reach of the ship's tackle; loading costs from the point of lifting begin are borne by the buyer.

FOB Stowed, FOBS: The seller loads the goods into the ship's hold and bears the loading costs, including stowing charges.

FOB Trimmed, FOBT: The seller loads the goods into the ship's hold and bears the loading costs, including trimming charges.

FOB Stowed and Trimmed, FOBST: The seller loads the goods into the ship's hold and bears the loading costs, including both stowing and trimming charges.

Tip: FOB variants only clarify who bears the loading costs; they do not alter the place of delivery or the point of risk transfer.

CFR - Cost and Freight

CFR (Cost and Freight) means the seller delivers when the goods pass the ship's rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination.

However, any loss or damage to the goods, or any additional costs incurred due to events occurring after the goods have passed the ship's rail, transfer from the seller to the buyer.

It is specifically noted that CFR applies only to sea or inland waterway transport. If the parties do not intend delivery at the ship's rail, the CPT term should be used.

CFR Variants

CFR Liner Terms: The seller or shipping line bears the discharge (unloading) costs, including lighterage and wharfage charges.

CFR Landed: The seller bears the discharge costs, including lighterage and wharfage charges.

CFR Ex Tackle: The seller bears the costs up to the point where the goods are lifted from the ship's hold and discharged over the ship's rail onto the quay or lighter at the port of discharge. (Costs stop when the hook is released).

CFR Ex Ship's Hold: The buyer bears all costs of discharging the goods from the ship's hold at the port of destination, including lifting onto the quay.

Note: CFR variants only clarify who bears the unloading costs; they do not alter the place of delivery or the point of risk transfer.

CIF - Cost, Insurance and Freight

CIF (Cost, Insurance and Freight) means the seller delivers when the goods pass the ship's rail in the port of shipment.

This term applies only to sea and inland waterway transport. If the parties do not intend delivery at the ship's rail, the CIP term should be used.

CIF variants are identical in type and cost allocation to the CFR variants listed above.

CPT - Carriage Paid To

CPT (Carriage Paid To) means the seller delivers the goods to the carrier (or the first carrier in multimodal transport) nominated by themselves at the agreed place within the contracted time, at which point delivery is complete.

The seller must promptly notify the buyer after delivery. This term is suitable for any mode(s) of transport, especially containerized transport and multimodal transport.

The seller only pays the normal freight cost from the place of delivery to the named place of destination, including loading and unloading charges. All other costs are borne by the buyer.

CIP - Carriage and Insurance Paid To

CIP (Carriage and Insurance Paid To) means the seller delivers the goods to the international freight forwarder nominated by them. Additionally, the seller must pay the freight cost necessary to bring the goods to the destination.

From the moment the seller delivers the goods, the buyer bears all risks of loss or damage to the goods and any additional costs incurred thereafter.

This term is suitable for any mode(s) of transport, including multimodal transport.

DAF - Delivered At Frontier

DAF (Delivered At Frontier) means the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport (not unloaded) at the named point at the frontier. At this point, the seller's delivery obligation is fulfilled.

The point for division of risk and cost is when the goods are placed at the buyer's disposal at the named frontier point.

This term is used when delivery is to take place at a land frontier by any mode(s) of transport, including rail or road.

DES - Delivered Ex Ship

DES (Delivered Ex Ship) means the seller delivers when the goods are placed at the disposal of the buyer on board the ship at the named port of destination, not cleared for import (Seller handles export clearance, buyer handles import clearance).

This term applies only when the goods are to be delivered on board the ship at the port of destination, whether by sea, inland waterway, or multimodal transport.

DEQ - Delivered Ex Quay

DEQ (Delivered Ex Quay) means the seller delivers when the goods are placed at the disposal of the buyer's nominated carrier at the named place, cleared for export. Delivery is considered complete at this point.

It is specifically noted that the choice of the delivery place will directly affect the division of obligations for loading and unloading at that location.

This term is suitable for any mode(s) of transport, including multimodal transport.

DDU - Delivered Duty Unpaid

DDU (Delivered Duty Unpaid) means the seller delivers when the goods are placed at the disposal of the buyer at the named place of destination, not unloaded from any arriving means of transport and not cleared for import (Buyer handles import clearance formalities).

This term may be used for any mode(s) of transport. However, if delivery is intended to take place on board the ship or on the quay at the port of destination, the DES or DEQ terms should be used.

DDP - Delivered Duty Paid

DDP (Delivered Duty Paid) means the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport (not unloaded) at the named place of destination, having been cleared for import.

Given that the seller bears maximum responsibility under DDP, if the seller is unable to obtain the import license directly or indirectly, this term should not be used. If the parties wish the buyer to bear the risks and costs of import, the DDU term should be chosen.

This term may be used for any mode(s) of transport. However, if delivery is intended to take place on board the ship or on the quay at the port of destination, the DES or DEQ terms should be preferred.

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