国贸期中作业

My understanding of trade terms

1. Introduction

With the development of the international trade, we inevitably use some trade terms. In present international custom, the main purpose of trade terms is to determine at what points the seller has fulfilled his obligations so that the goods in legal sense could be said to have been delivered to the buyer.

Now with my limited cognition, first I?ll introduce the six main trade terms, which are called FOB, CIF, CFR, FCA, CPT and CIP, then analysis them.

Definition

FOB, FREE ON BOARD (… named of shipment).FOB means that the seller has fulfilled his obligation to deliver when the goods have physically passed over the ships rail at the named port of shipment..

CFR, COST AND FREIGHT (…named port of destination). CIF means that the seller must pay the costs and freight necessary to transport the goods to the named destination port.

CIF, COST, INSURANCE AND FREIGHT (… named of destination). CFR means that the seller has the same obligations as under the CFR term but with the additional responsibility that he must procure marine insurance against the buyers risk of loss of or damage the goods during the period of carriage.

FCA, FREE CARRIER (… named place of delivery). FCA means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller?s premises or another named place.

CPT, CARRIAGE PAID TO (… named place of destination). CPT means that the seller delivers the goods to the carrier nominated by the seller at an agreed place and the seller must contract for pay the cost of carriage necessary to bring the goods to the named destination.

CIP, CARRIAGE AND INSURANCE PAID TO (…named place of destination). CIP means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination.

2. The Analysis of the trade terms

Similar and the difference between FOB,CIF and CFR The similar between FOB, CIF and CFR are by the following:

1. These terms can be used only for the sea and inland waterway transport.

2. The place of delivery are the same as transport port.

3. The risks transfer to the buyer when the goods pass the ship?s rail.

4. The buyer undertakes the risk when the goods are delivery to the buyer.

5. The seller needs to hand in the bill of lading to the buyer.

6.The seller should send out the notice to the buyer when the of shipment toward the buyer in time.

The difference between FOB, CIF and CFR are by the following:

1. Under FOB, the seller need not to pay the freight and insurance.

2. Under CFR, the seller should take responsibility for the freight payment, but not including the insurance.

3. Under CIF, the seller should take responsibility not only for the freight but also the insurance, and the buyer undertake the risk.

2.2 Similar and the difference between FCA,CIP and CPT The similar between FCA, CIP and CPT are by the following:

1. These terms can use for any kind of multimodal transport.

2. The place of delivery can be the inland of the country or the port.

3. The risks transfer to the buyer after delivery the goods.

4. The buyer undertakes the risk when the goods are delivered.

The difference between FCA, CIP and CPT are by the following:

1. Under FCA, the selle r doesn?t need to pay the cost of the freight and insurance.

2. Under CPT, the seller should take responsibility for the freight payment but no duty to the insurance.

3. Under CIP, the seller should take responsibility not only for the freight payment but also the insurance, but the buyer should undertake the risks.

The table of The difference between FCA, CPT, CIP

2.3The difference between FOB, CFR, CIF and FCA, CPT CIP 1. Different transportation. The trade terms FOB, CFR and CIF can be used only for the sea and inland waterway transport, and the carrier is the shipping company. However, FCA, CPT and CIP can be used for any kind of transport, including the sea ,inland waterway, highway, railway and multimodal transport. The carrier is the shipping company and also the highway, railway departments and the person of multimodal transport.

2. Different Cargo transportation interval.The Cargo transportation interval of FOB,CFR and CIF is from the port of shipment to the port of destination. It belongs to the port to port. However, The Cargo transportation interval of FCA, CPT and CIP is from any inland place in seller?s country to buyer?s any inland place. It realizes the way to deliver the goods “door to door”.

3. Different Delivery place and risk transfer site. The delivery place and the risk transfer site of FOB, CFR, CIF is the shipment port and the risks transfer to the buyer when the goods pass the ship?s rail. However, the delivery place of the FCA, CPT and CIP is determined by the different transportations and different arrangement. The risk transfers to the buyer when the seller gives the goods to the carrier and another person.

4. D ifferent transport document. With the conditions of the trade terms FOB,CFR and CIF, in generally, the seller should give the clean on board ocean bill of lading to the buyer, which is the document of title and it can be used to Pledge and endorsement assignment. However, the delivery transport documents are determined by the different transport ways. Any other transport way…s documents can not be used as the document of title except the sea transport.

5. Different handling expense. In trade terms FOB, CFR, CIF, the seller should undertake all expenses before the goods have physically passed over the

ships rail at the named port of shipment. Because the cargo shipment need continuous operation, each port …s way is not the same, when we use the terms FOB, which party pays the cost of the shipment should be pointed out. However, Affording the shipping costs in the contract of FCA and the handling costs problem in the contract of CIP, CPT is not exist.

Comparison Table

3. Findings

All in all, in today’s international trade, how to good at using the trade term and make profits for both parties is very important.

1.In import trade, China always use the terms of FOB or FCA. In export trade, we should

strive for using the terms CIF or CIP.

2.FOB, CFR,CIF is only for inland waterway transport and sea transport. In air transport and

railway transport , we should use the terms FCA , CIP , CPT. However , the transport way is sea transport but use container to transport goods ,after having given the goods to the carrier, the exporter does not have rights to manage the goods, he would better choose the terms FCA , CIP , CPT..

3.When we import goods that are bulk cargoes of large quantities, in principle, we use the

terms FOB.