Incoterms: Rules for Sea and Inland Waterway Transport

Incoterms (International Commercial Terms) 2020 consists of 11 distinct rules, each represented by an abbreviation. These rules are divided into two main categories: those for any mode or modes of transport, and those specifically for sea and inland waterway transport.

This article will cover the terms for rules for sea and inland waterway transport including FAS (Free Alongside Ship), FOB (Free on Board), CFR (Cost and Freight), and CIF (Cost, Insurance, and Freight). 

 

FAS - Free Alongside Ship (named port of shipment)

Under FAS, the seller delivers the goods alongside the vessel at the named port of shipment. The risk passes to the buyer when the goods are placed alongside the ship, and the buyer bears all costs from that moment onwards. Used mostly for FCL / LCL container

 

FOB - Free on Board (named port of shipment)

With FOB, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The risk transfers to the buyer when the goods are on board the vessel. The buyer is responsible for main carriage costs and marine insurance.

 

CFR - Cost and Freight (named port of destination)

Under CFR, the seller delivers the goods on board the vessel and pays the costs and freight to bring the goods to the named port of destination. However, the risk transfers to the buyer when the goods are loaded on board at the port of shipment.

 

CIF - Cost, Insurance and Freight (named port of destination)

CIF is similar to CFR, but the seller also contracts for insurance coverage against the buyer's risk of loss or damage to the goods during carriage. The seller is only required to obtain minimum coverage, and the buyer may wish to arrange additional insurance.

 

Implications:

Each of these terms carries specific implications for both buyers and sellers. For instance, EXW places minimal responsibility on the seller, with the buyer bearing all costs and risks involved in taking the goods from the seller's premises to the desired destination. On the other hand, DDP represents the opposite extreme, placing maximum obligations on the seller, who is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to destination, duties, taxes, and customs formalities.

To learn more about Incoterms view our Incoterm Resource here!

Contributors: Brandon Munn

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