Terms of sale
Below is a glossary on terms of sale that will give you some order in the field of international shipping.
Terms of sale - international commercial terms
There are 13 universal terms of sale pertaining to the subject of international trade such as: CIP, FOB, DDU, when developed in 1936 by the International Chamber of Commerce and intended to regulate 3 main points:
1. When does the burden of expenditure pass from seller to buyer
2. When The insurance affiliation passes from the seller to the buyer
3. When does the burden of responsibility pass from the seller to the buyer
the terms are divided into 4 groups according to the first letter of the term: E, F, C, D
Terms of sale
EXW Ex Works
From the factory gate
Free Alongside Ship
Free On Board
Delivery to carrier
Delivery next to the ship
Including loading for the ship
Cost and Freight
Cost, Insurance and Freight
Carriage Paid To
Carriage and Insurance Paid To
Cost and freight
Cost of insurance and transportation fees
Payment to carrier
Payment to carrier and insurer
Delivered At Frontier
Delivered Ex Ship
Delivered Ex Quay
Delivered Duty Unpaid
Delivered Duty Paid
Delivery at the border crossing
Delivery aboard the ship
Delivery on the platform
Free customs clearance
Shipping includes customs payment
The terms can be written in various forms such as: CIF, cif, C.I.F
In all these terms one should list the name of the term and then a relevant landmark such as: CIF Haifa
Ex Works – EXW
Sale at the factory gate. Upon placing the goods at the buyer’s disposal in the seller’s warehouse, the burden of expenses and liability and the insurance connection pass from the seller to the buyer.
The buyer must arrange for the collection and loading of the goods into a truck / container from the seller’s yard.
The buyer must take care of all the approvals, export licenses if required. In addition he must bear all the various fee and tax payments at the export ports. In the above contract the buyer bears all the costs and risks involved in transporting the cargo from door to door.
In this group the cost of international transportation applies to the buyer and the seller is obliged to deliver the goods at a specified point, determined by the buyer.
Free Carrier – FCA
The seller is obliged to deliver the goods at a point agreed upon in advance with the above carrier, accompanied by the necessary documents, and thus, ends his obligations to the customer.
Upon delivery of the goods to the carrier, the insurance affiliation, the burden of expenses and the responsibility pass from the seller to the buyer.
The term FCA can actually be used instead of the term FOB (see below) when it comes to shipping partial cargo by sea or air.
Free Alongside Ship – FAS
The term is only used in sea shipping. The seller is obliged to deliver the goods to the side of the ship and thus ends his obligations to the buyer. Upon delivery of the goods on the wharf, next to the ship, the responsibility passes from the seller to the buyer, including all expenses involved in transporting the goods, the insurance affiliation and obtaining the necessary approvals / licenses, if any.
Free On Board – FOB
The term is only used in sea shipping. The seller is obligated to deliver the goods to the ship, including loading the goods on the ship, and to take care of all necessary procedures at export customs.
The buyer should take care of sea transportation, insurance and other expenses.
In this group the cost of transportation applies to the seller and he is also responsible for delivering the goods to the destination port.
Cost and Freight – CFR
The term is only used in sea shipping and has come to replace the term C&F.
The seller is responsible for transporting the goods to the destination port. All expenses up to the arrival of the goods at the destination port apply to the seller. The buyer is responsible for the insurance and additional expenses at the destination port.
Cost, Insurance and Freight – CIF
The term is only used in sea shipping. All expenses and responsibilities associated with transporting the cargo to the destination port, apply to the seller, including insurance premiums.
Carriage Paid To – CPT
The above term is identical to the term CFR and is also used in air freight
Carriage and Insurance Paid To – CIP
The above term is identical to the term CIF and is also used in air freight
In this group, the seller has an obligation to arrange and pay for the transport of the goods to the determined destination.
Delivered At Frontier – DAF
The seller is responsible for transporting the goods to a pre-agreed point on the border, or near it.
Delivered Ex ship – DES
Refers only to sea shipping. The seller is responsible for transporting the goods to the destination port and delivering the goods on board the ship. The buyer must unload the goods and clear them from customs.
Delivered Ex Quay – DEQ
Refers only to sea shipping. The seller is responsible for transporting the goods to the destination port, including unloading and customs clearance. The buyer is responsible for overland transportation.
Delivered Duty Unpaid – DDU
The seller bears all expenses until the cargo is delivered at the point determined by the customer in the destination country. The seller is not responsible for customs payments and import taxes nor for the unloading of goods at the destination point.
Delivered Duty Paid – DDP
The term is similar to the term DDU except that the seller bears all the expenses including customs clearance and customs clearance.
In many cases it is agreed that the seller will bear all the expenses, except the payment of VAT. In these cases, the term DDP VAT UNPAID is used.