International Rules for the Interpretation of Trade Terms (INCOTERMS 2020)
We usually use the below trade terms in international business
FCA
FCA (Free Carrier) means that the seller delivers the goods to the carrier or another person nominated by the buyer at the named place. The parties must specify as clearly as possible the point in the named place of delivery. The risk passes to the buyer at that point.
The FCA rule now contains an additional element relating to bills of lading. Under this option, the buyer and seller agree that the buyer’s carrier will issue an on-board bill of lading to the seller after loading, which the seller will then tender to the buyer (likely through the banking chain). A problem with the old FCA rule was that it ended before the loading of the goods, which prevented the seller from obtaining an on-board bill of lading. However, bills of lading are generally required by banks under letters of credit and therefore the FCA rule was revised to take account of this market reality.
CFR
CFR (Cost and Freight) means that the seller delivers when the goods pass the ship’s rail in the port of shipment. Seller pays the cost & freight necessary to bring the goods to the named port of destination. Also, seller must clear the goods for export. But, the buyer has to bear the risk of loss or damage, as well as any additional costs due to events occurring after the time of delivery. This term can only be used for ocean transport.
CIF
CIF (Cost, Insurance and Freight) means that the seller delivers when the goods pass the ship's rail in the port of shipment. Seller pays the cost & freight necessary to bring the goods to the named port of destination. Seller must clear the goods for export. Risk of loss & damage same as CFR.
The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The seller is obliged to obtain the minimum marine insurance protection. If the buyer wants to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
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