Cargo Insurance Terms

Terms of Sale

Cargo Insurance

©Incoterms 2000 : Internationally accepted commercial terms defining the respective roles of the buyer and seller in the arrangement of transportation and other responsibilities and clarify when the ownership of the merchandise takes place. They are used in conjunction with a sales agreement or other method of transacting the sale. Visit the International Chamber of Commerce Web site for more information.

The terms of sale spell out who is responsible for

  • Risk of loss 
  • Delivery 
  • Export license and customs clearance 
  • Contract of carriage, and 
  • Cargo of insurance

"E" Terms: Seller fulfills obligation to buyer when the goods to be shipped are available for pick up ath the seller's premises.

EXW - Ex Works: Title and risk pass to buyer including payment of all transportation and insurance cost from the seller's door. Used for any mode of transportation.

"F" Terms: Seller fulfills obligation to buyer when the goods to be shipped are delivered over to the carrier at the named shipment location. 

FCA - Free Carrier + (Named Shipment Location): Title and risk pass to buyer including transportation and insurance cost when the seller delivers goods to the carrier cleared for export to the port of shipment. It obligates the seller to load the goods on the buyer's collecting vehicle (ocean, rail or air carrier); it is the buyer s obligation to receive the seller's arriving vehicle unloaded.

FAS - Free Alongside Ship + (Named Shipment Location): Title and risk pass to buyer including payment of all transportation and insurance cost once delivered alongside ship or in lighters by the seller at the named port of shipment. Used for sea or inland waterway transportation. The export clearance obligation rests with the seller.

FOB - Free On Board + (Named Shipment Location): Title and risk pass to buyer including payment of all transportation and insurance cost once delivered on board the ship by the seller. Seller obtains all export licenses and clearance. The buyer must contract for carriage and insurance. Used for sea or inland waterway transportation.

"C" Terms: Seller fulfills the purchase contract in the country of shipment, but the point at which risk of loss transfers from buyer to seller, varies.

CFR - Cost and Freight + ( destination port): Title passes to the buyer when delivered on board the ship by seller who pays the transportation costs to the destination port. The seller must clear the goods for export. Once the goods clear the rail, the buyer is responsible for all expenses and risk thereafter and the buyer purchases insurance for the remainder of the shipment to cover his risk. This term can only be used for sea or inland waterway transportation.
CIF - Cost, Insurance and Freight + ( destination port): Like CFR, title passes to the buyer when delivered on board the ship by seller who pays the transportation costs to the destination port but after the goods clear the rail, the buyer is responsible for all expenses and risk. AND, the seller is required to purchase the marine cargo insurance to insure the buyer's risk of loss during the shipment. However, seller only has to purchase minimum limits of insurance. Buyer should consider buying cargo insurance, as well. This is only used for sea or inland waterway transportation.
CPT - Carriage Paid To + (place of destination) : Title and risk pass to buyer when delivered to carrier by the seller who also arranges carriage, pays costs of transportation to an agreed destination. The buyer bears all risk and cost once the goods have been delivered to the carrier. Buyer buys insurance. Used for any mode of transportation.
CIP - Carriage and Insurance Paid To + (place of destination): Title and risk pass to buyer when delivered to carrier by the seller who also arranges carriage, pays costs of transportation and insurance cost to a destination. However, seller only has to purchase minimum limits of insurance. Buyer should consider buying cargo insurance, as well. Used for any mode of transportation.

"D" Terms: These are destination or arrival terms. Seller bears all risks and costs and export clearances up to the point of delivery at the named location.

DAF - Delivered at Frontier (+named place): Shipped goods are available to the buyer at the named border (either the country of export or the country of destination) still loaded, export cleared. Title, risk and responsibility for import clearance pass to buyer when delivered to named border point by seller. Used for any mode of transportation, but mostly for rail shipment.
DES - Delivered Ex Ship + (place of destination): Title, risk, responsibility for vessel discharge and import clearance pass to buyer when seller delivers goods on board the ship to destination port. There is no requirement fo import clearances of insurance beyond that point. Used for sea or inland waterway transportation.
DEQ - Delivered Ex Quay (Duty Paid) + (place of destination): Title and risk pass to buyer from the seller when the good are delivered on dock at destination point cleared for import. Seller is responsible for all import clearances, duties and fees. There is no obligation for insurance, but, since risk is with seller until the goods are on the dock, seller buys insurance to that point. Used for sea or inland waterway transportation.
DDU - Delivered Duty Unpaid + (place of destination): Title, risk and responsibility of import clearance pass to buyer when seller delivers goods to named destination point. Used for any mode of transportation. Buyer is obligated for import clearance. Seller fulfills his obligation when goods have been made available at the named place in the country of importation
DDP - Delivered Duty Paid + (place of destination): Title and risk pass to buyer when seller delivers goods to named destination point cleared for import and all duties and cost paid. This is the maximum obligation for the seller. Used for anymode of transportation.

(Note: EXW, CPT, CIP, DAF, DDU and DDP are commonly used for any mode of transportation. FAS, FOB, CFR, CIF, DES, and DEQ are used for sea and inland waterway.)

tod's cyber monday