Shipping Terms
Carriage, insurance and freight (now known in the US as "cost, insurance and freight") (CIF):
A trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination,
and provide the buyer with the documents necessary to obtain the goods from the carrier.
Insurance and freight are all paid by the exporter to the specified location. For example, at CIF Los
Angeles, the exporter pays the ocean shipping/air freight costs to Los Angeles including the insurance
of cargo. This also states that responsibility of the shipper ends at the Los Angeles port.
Free On Board or Freight On Board (FOB)
A trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The
seller fulfils its obligations to deliver when the goods have passed over the ship's rail.
When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a
named place for transfer to a carrier.
The exporter delivers the goods at the specified location (and on board the vessel). Costs paid by the
exporter include load, lash, secure and stow the cargo, including securing cargo not to move in the
ships hold, protecting the cargo from contact with the double bottom to prevent slipping, and
protection against damage from condensation. For example, "FOB JNPT" means that the exporter
delivers the goods to the Jawahar lal Nehru Port, India, and pays for the cargo to be loaded and
secured on the ship. This term also declares that where the responsibility of shipper ends and that of
buyer starts. The exporter is bound to deliver the goods at his cost and expense. In this case, the
freight and other expenses for outbound traffic are borne by the importer.
Common price term used in international trade meaning seller's responsible for the cost of goods is to
the point of loading it to the vessel deck or aircraft loading deck. The risk of loss of or damage to the
goods is transferred from the seller to the buyer when the goods have been so delivered. FOB
normally comes with port of loading either airport or sea port.
Cost and Freight or Carriage and freight or Cost Net Freight (C&F/CFR/CNF)
To a named overseas port of import. Under this term, the seller quotes a price for the goods that
includes the cost of transportation to the named point of debarkation. The cost of insurance is left to
the buyer's account. (Typically used for ocean shipments only. CPT, or carriage paid to, is a term
used for shipment by modes other than water.) Also, a method of import valuation that includes
insurance and freight charges with the merchandise values.
Insurance is payable by the importer, and the exporter pays all expenses incurred in transporting the
cargo from its place of origin to the port/airport and ocean freight/air freight to the port/airport of
destination. For example, C&F Los Angeles (the exporter pays the ocean shipping/air freight costs to
Los Angeles). most of the governments ask their exporters to trade on these terms to promote their
exports worldwide such as India and China. Many of the shipping carriers (such as UPS, DHL,
FedEx) offer guarantees on their delivery times. These are known as GSR guarantees or "guaranteed
service refunds"; if the parcels are not delivered on time, the customer is entitled to a refund.
Cash Against Documents (CAD)
A payment arrangement in which an exporter instructs a bank to hand over shipping and title
documents (see document of title) to the importer when the importer fully pays the accompanying bill
of exchange or draft. Also called documents against payment.
This means the receiver of the documents has to pay in cash, before he/she receives the shipping of
the imported documents. A third party (a bank for example) keeps the documents until they receive
the payment from the buyer.
Free Alongside Ship (FAS)
Under FAS, the seller quotes a price for the goods that includes charges for delivery of the goods
alongside a vessel at the port of departure. The seller handles the cost of unloading and wharfage;
loading, ocean transportation, and insurance are left to the buyer. FAS is also a method of export and
import valuation.
Free Carrier (FCA)
This term replaces the former "FOB named inland port" to designate the seller's responsibility for the
cost of loading goods at the named shipping point. It may be used for multimodal transport, container
stations, and any mode of transport, including air.
Consignment
Delivery of merchandise from an exporter (the consignor) to an agent (the consignee) under
agreement that the agent sell the merchandise for the account of the exporter. The consignor retains
title to the goods until sold. The consignee sells the goods for commission and remits the net
proceeds to the consignor.
An arrangement whereby goods are left in the possession of another party to sell. Typically, the
consignor receives a percentage of the sale (sometimes a very large percentage). Consignment deals
are made on a variety of products - from artwork, to clothing, to books. In recent years, consignment
shops have become rather trendy, especially those offering specialty products, infant wear and highend fashion items.