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Productivity / Growth

Shipping Incoterm codes defined – Part 2

Shipping Incoterm codes defined: Incoterms® are three-letter codes maintained by the International Chamber of Commerce (ICC) for the purpose of importing and exporting. Find out more.

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Below are four short descriptions for sea and inland waterway transport from the Incoterms® 2010 edition (Shipping Incoterm codes defined). These should be read in the context of the full official text of the rules.

Key Shipping Incoterm codes defined

FAS:  “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g. on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss or of damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

FOB: “Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

CFR: “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

"These three letter terms ensure that you and your business partners fully understand your international commercial transaction responsibilities. "

CIF: “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

As you can see, having the shipping Incoterm codes defined and knowing these three letter terms ensures that you and your business partners fully understand your international commercial transaction responsibilities.

Shipping Incoterm codes defined part 1 is available here.

What are your experiences with incoterms?

Caterina Zaini

We provide a customised logistics service for business owners to help make importing easy and stress-free. We offer 30 minute initial phone or Skype consultations.

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