In the complex field of international trade, foreign trade terms play a vital role as a bridge for communication between buyers and sellers. They not only clarify the responsibilities, costs, and risk division of the two parties to the transaction but also promote the smooth progress of global trade. The following is an introduction to some commonly used foreign trade terms to help you better understand and apply them.
As one of the most basic trade terms, FOB means "free on board". Under this term, the seller is responsible for loading the goods onto the ship designated by the buyer and completing the delivery after the goods cross the ship's rail. Thereafter, all risks and costs of the goods are borne by the buyer. FOB applies to sea or inland waterway transportation, especially for buyers who want to arrange transportation and insurance by themselves.
CFR, which means "cost plus freight", requires the seller to pay the freight to transport the goods to the designated port of destination. Compared with FOB, the seller's responsibilities under the CFR term are increased, but the risks and additional costs of the goods after crossing the ship's rail at the port of shipment are still borne by the buyer. Therefore, the buyer needs to purchase insurance on his own to cover the risks during transportation. CFR is suitable for buyers who want to control transportation costs but do not want to take too much risk.
CIF, which means "cost, insurance and freight", is one of the most commonly used terms in international trade. It not only includes all the responsibilities that the seller needs to bear under the CFR term but also requires the seller to purchase insurance for the goods and pay the insurance premium. In this way, the buyer does not need to worry about any transportation risks before the goods arrive at the destination port. CIF provides comprehensive protection for buyers, making the transaction process safer and more convenient. However, this also means that the seller needs to bear higher costs and risks.
FCA, which means "free carrier", is a flexible trade term. It allows the seller to hand over the goods to the carrier designated by the buyer at a designated place and bear all costs and risks before delivery. FCA applies to any mode of transportation, including sea, air, land, etc. It gives buyers and sellers more options and can flexibly arrange transportation matters according to actual conditions.
DDP, which means "delivery after payment of duties", is a trade term with the greatest responsibility of the seller. Under this term, the seller is responsible for all responsibilities and costs of transporting the goods to the designated destination and completing all import formalities (including payment of tariffs, value-added tax, etc.). DDP provides great convenience for buyers, eliminating the need to pay attention to the tedious affairs of the import process. However, this also makes the seller bear higher costs and risks.
The above are only some of the foreign trade terms commonly used in international trade. In actual operation, buyers and sellers should choose appropriate terms according to the specific circumstances and stipulate the rights and obligations of both parties in the contract. By using foreign trade terms reasonably, transaction costs can be effectively reduced, transaction efficiency can be improved, and the prosperity and development of international trade can be promoted.
In addition to the commonly used foreign trade terms such as FOB, CFR, CIF, FCA, and DDP mentioned above, several other important foreign trade terms are worth knowing. These terms play a key role in international trade and clarify the responsibilities, risks, and costs of buyers and sellers at different stages. The following are some additional common foreign trade terms:
Factory delivery. This term means that the delivery is completed when the seller hands over the goods to the buyer at its location (such as a factory, warehouse, etc.). The seller does not handle export customs clearance or load the goods onto any means of transport, nor does it bear any transportation risks and costs. All subsequent work, including transportation, insurance, export customs clearance, etc., is the responsibility of the buyer.
Free Alongside Ship. This term applies to sea or inland waterway transport. The seller needs to deliver the goods to the ship designated by the buyer at the designated port of shipment, which means the delivery is completed. After that, the risk and cost of the goods shall be borne by the buyer. Under the FAS term, the seller needs to handle the export customs clearance procedures but is not responsible for loading the goods on board.
Delivered at Terminal. Under this term, the seller is responsible for transporting the goods to the destination port or other designated terminal, completing the export and import customs clearance procedures (if applicable), and completing the delivery after unloading at the terminal. The DAT term provides greater convenience for buyers because all transportation and customs clearance work is the responsibility of the seller.
Delivered after unloading at the destination. This term means that the seller needs to unload the goods at the designated destination and hand over the goods to the buyer's disposal to complete the delivery. The seller bears the transportation risks and costs of transporting the goods to the designated destination (except import costs) and is responsible for unloading. Under the DPU term, the buyer does not need to worry about the transportation and unloading of the goods.
Delivered at the destination. This term is similar to DPU, but the seller completes the delivery by placing the goods under the control of the buyer at the designated destination, without necessarily unloading the goods. The seller bears all risks and costs of transporting the goods to the designated destination (except import costs). The DAP term provides more flexible options for buyers and sellers.
Carriage paid to. This term means that the seller must pay the freight for the goods to the designated destination and transfer the risk to the buyer when the goods are handed over to the first carrier. CPT applies to any mode of transportation and provides buyers with protection for transportation costs.
Carriage and Insurance Paid To. Similar to CPT, under the CIP term, the seller must also purchase insurance for the goods and pay the insurance premium. In this way, the buyer can obtain more comprehensive protection during the transportation of the goods. The CIP term is also applicable to any mode of transportation.
These foreign trade terms play an important role in international trade. They not only regulate the transaction behavior of buyers and sellers but also reduce transaction costs and risks. Therefore, when conducting international trade, buyers and sellers should fully understand and use these terms reasonably.
Get Inquiry
Please leave the message you want to inquiry. We will reply you as soon as possible within 24 hours.