There is a series of sales terms that are used by businesses throughout the world. These are international commercial terms or Incoterms, the usage of which makes international trade easier. With these terms transaction costs and responsibilities between buyer and seller are divided. The main goal of Incoterms is to reflect the developments in international trade. The following Incoterms are used by businesses and are used in four different areas.
Terms at Place of Origin
EXW – Ex Works
EXW means the seller's responsibility is to make the goods available at the seller's premises. This is when the seller is not responsible for loading the goods on the vehicle provided by the buyer. Ex Works is followed by a named place, for example EXW Dallas.
Carriage Paid by the Buyer
FCA – Free Carrier
This means that the seller delivers the goods cleared for export to the carrier nominated by the buyer at the required place. But if the buyer hasn’t indicated the distinct point, it means that the seller may choose within the place or range stipulated where the carrier shall take the goods into its charge.
FAS – Free Alongside Ship
This is followed by a named port of shipment and should be used only for ocean shipments since risk and responsibility shift from seller to buyer when the goods are placed within the reach of the ship's crane. The seller is responsible for the cost of transporting and delivering goods alongside a vessel in a port in his country.
FOB – Free On Board
The seller place all goods on board at a port of shipment named in the sales agreement. In case of the damage of the goods, the buyer will pay all the expenses as he is responsible for those goods. But the cost of loading the goods is paid by the seller. FOB means Free On Board and is followed by the named port of shipment.
Carriage Paid by the Seller
CFR - Cost And Freight
With CFR the seller is required to pay the expenses and freight needed for bringing the goods to the destination that is required. Furthermore, the risk of loss or damage to the goods is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. The buyer should purchase the insurance.
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