Freight Trading Lingo Demystified | RefinerLink
Cor
Cor

RL Blogs

image
Freight Trading Lingo Demystified

By Simon Jacques

Apr 27, 2020
 

Simplifying how oil traders make deals on various freight transactions terms.

 
 

Have you ever wondered about the meaning of commodity trading terms, or Incoterms?  FOB…DES…DDP. Say What?!?

 

Incoterms were established by the International Chamber of Commerce (ICC), a non-governmental organization, to standardize the interpretation of major trade terms.

 

Sales contracts using Incoterms define the obligations and risks of both the seller and the buyer. The obligations cover the period while the merchandise is in transit, whether by land, sea, air or a combination of modes.

 

Incoterms are divided into four categories:

 

  1.  “E” terms

seller makes the goods available to the buyer at the seller’s premises

 

  2.  “F” terms

seller is called upon to deliver the goods to a carrier appointed by the buyer

 

  3.  “C” terms

seller has to contract for carriage, but without assuming the risk of loss or of damage to the goods or additional costs due to events occurring after shipment and dispatch

 

  4.  “D” terms
seller has to bear all costs and risks needed to bring the goods to the country of destination

  

 

The listing below summarizes the various Incoterms used today and the responsibilities of the selling and purchasing party.

 

 

 

CFR:   Cost and Freight

 

Means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination. The risk of loss or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment.

 

  • Requires the seller to clear the goods for export
  • Can only be used for sea or inland waterway transport

 

CIF:   Cost, Insurance and Freight 

 

Means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer’s risk of loss or of damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium.

 

  • Requires the buyer to clear the goods for export
  • Can only be used for sea and inland waterway transport
  • Even if seller pays insurance and freight, risk changes from seller to buyer at load port

 

CIP:   Carriage and Insurance Paid

 

Means that the seller has the same obligation as under CPT, but with the addition that the seller has to procure cargo insurance against the buyer’s risk of loss of or damage to the goods during the carriage.

 

  • Seller contracts for insurance and pays the insurance premium
  • Requires the seller to clear the goods for export
  • Can be used for any mode of transport including multimodal transport

 

CPT:   Carriage Paid To

 

Means that the seller pays the freight for the carriage of the goods to the named destination. The risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered to the carrier, is transferred from the seller to the buyer when the goods have been delivered into the carrier’s custody.

 

If subsequent carriers are used for carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier.

 

  • Requires the seller to clear the goods for export
  • Can be used for any mode of transport, including multimodal transport

 

DAF:   Delivered At Frontier 

 

Means that the seller fulfills his obligation when the goods have been made available, cleared for export, at the named point and place at the frontier, but before the customs border of the adjoining country.

 

The term “frontier” may be used for any frontier including that of the country of export. Therefore, it is very important that the frontier in question be precisely defined by always naming the point and place in the term.

 

  • Used primarily when goods are to be carried by rail or road, but may theoretically be use for any mode of transport

 

DAP:   Delivered at Place

 

Seller is responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving conveyance, at the named place. 

 

Risk transfers from seller to buyer when the goods are available for unloading; so unloading is at the buyer’s risk. The buyer is responsible for import clearance and any applicable local taxes or import duties.

 

This rule can often be used to replace the Incoterms 2000 rules:

 

  • Delivered At Frontier (DAF)
  • Delivered Ex Ship (DES)
  • Delivered Duty Unpaid (DDU)

 

DAP can be differentiated from Delivered At Terminal (DAT), whereby the seller is responsible for unloading.

 

DDP:  Delivered Duty Paid

 

Means that the seller fulfills his obligation to deliver when the goods have been made available at the named place, in the country of importation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods thereto, cleared for importation.

 

  • Whereas EXW term represents the minimum obligation for the seller, DDP represents the maximum
  • Cab be used for any mode of transport

 

DDU:   Delivered Duty Unpaid

 

Means that the seller fulfills his obligation to deliver when he has made the goods available at the named place in the country of importation.

 

The seller bears the risks and costs involved in bringing the goods thereto (excluding duties, taxes, and other official charges payable upon importation), as well as the costs and risks of carrying out customs formalities. The buyer has to pay any additional costs and to bear any risks caused by his failure to clear the goods for import in time.

 

  • Can be used for any mode of transport

 

DES:   Delivered Ex Ship

 

Means that the seller fulfills his obligation to deliver when the goods have been made available to the buyer on board the ships uncleared for import at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination.

 

  • Can only be used for sea or inland waterway transport.
  • Requires the seller to clear the goods for export.

 

DEQ:   Delivered Ex Quay (Duty Paid)

 

Means that the seller fulfills his obligation to deliver when he has made the goods available to the buyer on the Quay (i.e. wharf) or at the named port of destination, cleared for importation.

 

  • Seller bears all risks and costs including duties, taxes and other charges of delivering the goods
  • Can only be used for sea or inland waterway transport

 

EXW:   Ex works

 

Means that the seller fulfills his obligations to deliver when he had made the goods available at the premises (i.e. factory, warehouse, etc.) to the buyer. In particular, he is not responsible for loading the goods onto the vehicle provided by the buyer or for clearing the goods for export, unless otherwise agreed.

 

The buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination.

 

  • Represents the minimum obligations for the seller
  • Can be used for any mode of transport, including multimodal transport

 

FAS:   Free Alongside Ship

 

Means that the seller fulfills his obligation to deliver when the goods have been placed alongside the vessel on the wharf or in lighters at the named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that moment.

 

  • Requires the buyer to clear the goods for export
  • Can only be used for sea and inland waterway transport

 

FCA:   Free Carrier

 

Means that the seller fulfills his obligation to deliver when he has handed the goods, cleared by export, into the charge of the carrier named by the buyer at a named place or point. If no precise point is indicated by the buyer, the seller may choose within the place or range stipulated where the carriers shall take the goods into his charge.

 

  • Can be used for any mode of transport, including multimodal transport

 

FOB:   Free on Board

 

Means that the seller fulfills his obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point onwards.

 

  • Requires the seller to clear the goods for export
  • Can only be used for sea and inland waterway transport

 

Confusingly, a FOB transaction can mean pretty much anything. Depending on which version of Incoterms referenced, pre-2010 and post-2010 FOB definitions can signify different location of risk and payment transfers.

 

Illustrated below is a comparison of North American FOB usage vs Incoterms.

 

 

 

Now that we have armed you with some useful knowledge, you can be less stupefied the next time a trader blurts out a string of Incoterms.

 


Note - All definitions above are based according to Incoterms® 2010, the 8th version published by the International Chamber of Commerce (ICC).

 


 

To see more from the Trade, Shipping and Finance Wizard visit: 

http://jacquessimon506.wordpress.com/

 
Enjoy this content? Join our Free Newsletter    
  • Jacob Amanda :   I am bold enough among many others to state that there is now a potent cure to this sickness but many are unaware of it. I discovered that I was infected with the virus 3 months ago, after a medical check-up. My doctor told me and I was shocked, confused and felt like my world has crumbled. I was dying slowly due to the announcement of my medical practitioner but he assured me that I could leave a normal life if I took my medications (as there was no medically known cure to Herpes). I went from churches to churches but soon found that my case needed urgent attention as I was growing lean due to fear of dying anytime soon. In a bid to look for a lasting solution to my predicament, I sought for solutions from the herbal world. I went online and searched for every powerful trado-medical practitioner that I could severe, cos I heard that the African Herbs had a cure to the Herpes syndrome. It was after a little time searching the web that I came across one Dr.Afrid (A powerful African Herbal Doctor), who offered to help me at a monetary fee. I had to comply as this was my final bus-stop to receiving a perfect healing. My last resolve was to take my life by myself, should this plan fail. At last it worked out well. He gave me some steps to follow and I meticulously carried out all his instructions. Last month, to be precise, I went back to the hospital to conduct another test and to my amazement, the results showed that negative,Dr.Afrid Can As Well Cure The Following Desease…Cancer,Hiv,Herpes, Hepatitis B,Liver Inflammatory,Diabetis,Fribroid, Dercum,fibromyalgia,Get Your Ex Back,Als,SYPHILLIS,Genetic disease, Parkinson's disease.Fibrodysplasia Ossificans Progressiva.You can free yourself of this Herpes virus by consulting this great African Herbal Doctor via this e-mail: drafridherbalhome@gmail.com or call and whatsapp him on +2349057260738 He will help you and his herb medication is sure. he has the cure on all disease ..

    May 10, 2020

  • Mare :   HOW I GOT CURED FROM HIV BY DR PADMAN. Greetings to everyone,i want to use this medium to thank the great spell caster called Dr Padman who helped to restored my relationship back to me,it happened that my ex lover decided to break up with me without any reason,saying that he don't love me anymore,this started to happen when my ex lover started keeping late night,and coming home late,i pleaded to him for several months but he refused to listen to my apology,so one faithful day i was browsing through the internet and i suddenly came across several testimonies of how Dr Padman helped so many people in bringing back their ex lover,so without wasting much time i contacted his https://padmanspell.com he told me that i shouldn't worry anymore that he must return back to me after he has cast a love spell for me that he will surely run back to me,i didn't doubt his words i obeyed his instruction and indeed after 24 hours my ex lover rush back to me and everything went back as it was in the beginning contact him today on his padmanlovespell@yahoo.com , https://twitter.com/padman_dr. https://padmanspell.com WhatsApp +19492293867

    May 17, 2020

  • Lynne Wilson :   Irrespective of receiving daily oral or future injectable depot therapies, these require health care visits for medication and monitoring of safety and response. If patients are treated early enough, before a lot of immune system damage has occurred, life expectancy is close to normal, as long as they remain on successful treatment. However, when patients stop therapy, virus rebounds to high levels in most patients, sometimes associated with severe illness because i have gone through this and even an increased risk of death. The aim of “cure”is ongoing but i still do believe my government made millions of ARV drugs instead of finding a cure. for ongoing therapy and monitoring. ARV alone cannot cure HIV as among the cells that are infected are very long-living CD4 memory cells and possibly other cells that act as long-term reservoirs. HIV can hide in these cells without being detected by the body’s immune system. Therefore even when ART completely blocks subsequent rounds of infection of cells, reservoirs that have been infected before therapy initiation persist and from these reservoirs HIV rebounds if therapy is stopped. “Cure” could either mean an eradication cure, which means to completely rid the body of reservoir virus or a functional HIV cure, where HIV may remain in reservoir cells but rebound to high levels is prevented after therapy interruption.Dr Afrid Herbal Medicine makes me believes there is a hope for people suffering from,Parkinson's disease,Schizophrenia,Cancer,Scoliosis,Fibromyalgia,Fluoroquinolone Toxicity Syndrome Fibrodysplasia Ossificans Progressiva.Fatal Familial Insomnia Factor V Leiden Mutation ,Epilepsy Dupuytren's disease,Desmoplastic small-round-cell tumor Diabetes ,Coeliac disease,Creutzfeldt–Jakob disease,Cerebral Amyloid Angiopathy, Ataxia,Arthritis,Amyotrophic Lateral Sclerosis,Alzheimer's disease,Adrenocortical carcinoma.Asthma,Allergic diseases. Hiv_ Aids,Herpes,Inflammatory bowel disease ,Copd,Diabetes,Hepatitis,I read about him online how he cure Tasha and Tara so i contacted him on drafridherbalhome@gmail.com even talked on whatsapps +2349057260738 believe me it was easy i drank his herbal medicine for two weeks and i was cured just like that isn't Dr Afrid a wonder man? Yes he is! I thank him so much so i will advise if you are suffering from one of those diseases please do contact him he's a nice man.

    May 30, 2020

Do NOT follow this link or you will be banned from the site!