In international trade, the obligations of buyers and sellers affect the price of goods. In the long-term practice of international trade, gradually formed some closely related terms of trade and prices are directly linked together, forming a number of quotation patterns.
Each model defines the obligations of buyers and sellers in certain terms of trade. The term used to describe this obligation is called a trade term. So what are the most common trade terms in foreign trade freight forwarders?
- EXW (EX Works)
EXW is one of the international trade terms. It refers to the completion of delivery when the seller puts the goods at the disposal of the buyer at its place or other designated place (such as a factory, factory or warehouse) without the seller clearing the goods for export or loading the goods on any means of transport. This term is the least liability of the seller. The buyer must bear all the costs and risks of taking delivery of the goods at the seller’s place. However, if both parties wish the seller to be responsible for loading the goods at the time of shipment and bear all the costs and risks of loading the goods, this shall be clearly stated in the sales contract. This term should not be used when the buyer cannot directly or indirectly handle the export formalities. Instead, FCA should be used if the seller agrees to load the goods and bear the costs and risks.
- FCA (Free carrier)
Refers to the seller as long as the goods are in the designated place to the buyer’s designated carrier, and handles the export customs clearance procedures, that is, complete delivery.
- CPT (Carriagepaid to)
It means that the seller shall deliver the goods to the carrier designated by him, pay the freight for transporting the goods to the destination, and clear the customs for export. That is, the buyer bears all risks and other expenses after delivery.
- CIP (Carriage and insurance paid to)
Delivery means that the seller delivers the goods to the carrier nominated by the seller, during which time the Seller must pay the freight for transporting the goods to the destination and insure the Buyer against the risk of loss or damage of the goods in transit. That is, the buyer bears all risks and additional costs after the seller delivers the goods.
- DAT (Delivered at the terminal)
Delivery is completed when the seller delivers the goods to the buyer’s disposal after unloading the goods at a depot at a designated destination or port of destination. The term destination includes a port. The Seller shall bear all risks and expenses (except import charges) for bringing the goods to the terminal at the named destination or port of destination.
- DAP (Delivered at place)
Also known as “FOB”, is one of the commonly used trade terms in international trade. In fob transactions, the Buyer shall send a vessel to take delivery of the goods, and the Seller shall load the goods on a vessel appointed by the Buyer at the port of shipment and within the time specified in the contract and notify the Buyer in time. When the goods cross the ship’s rail while being loaded, the risk passes from the seller to the buyer.
This term applies to one or more of any modes of transport and means that the goods to be unloaded on the arriving means of transport at the named destination are delivered by the Seller at the buyer’s disposal and the Seller bears all risks of transporting the goods to the named place. It is desirable for the parties to state clearly the place within the agreed destination as the risk of reaching such place is borne by the Seller.
- CFR (Cost and freight)
The price of the goods consists of the usual freight from the port of shipment to the agreed port of destination and the agreed insurance premium, so the seller, in addition to having the same obligations as in CFR terms, shall insure the goods for the Buyer and pay the insurance premium. According to the general practice of international trade, the seller shall insure the goods for an additional 10% of the CIF price.
If no specific risks are agreed upon between the buyer and the seller, the Seller shall obtain only the minimum risks of insurance. If additional insurance against war risks is required by the Buyer, the Seller shall extend the insurance, provided that the premium is borne by the Buyer, and the Seller shall, if possible, insure in the currency of the Contract.
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