What is the difference between EXW, FOB, CFR, CIF and other trading methods?

Common trade terms are EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU, DDP.

From left to right in these 13 trade terms, the seller’s obligations are getting bigger and bigger, and the buyer’s on the contrary. In other words, among the above-mentioned trade terms, the seller bears the least responsibility under the EXW term, and the seller bears the most responsibility under the DDP term.

EXW – EX work

It means that when the seller delivers the goods to the buyer at its location or other designated locations (such as a workshop, factory or warehouse), the delivery is completed. The seller does not go through the export customs clearance procedures or load the goods on any means of transportation.

This term is with the least liability of the seller.

FCA – Cargo Delivery Carrier

It means that the seller only needs to deliver the goods to the carrier designated by the buyer at the designated place and complete the export customs clearance procedures to finish the delivery.

It should be noted that the choice of delivery location will have an impact on the obligations of loading and unloading at that location. The term can be used for various modes of transportation.

FAS – Free Alongside Ship

It means that the seller delivers the goods to the ship at the designated port of shipment, that is completed delivery. The buyer must bear all risks of loss or damage to the goods since then.

FOB（Free on Board – named port of shipment）

This term requires the seller to deliver the goods to the ship designated by the buyer at the designated port of shipment within the shipping period specified in the contract, and to bear all costs and risks of loss or damage to the goods until the goods cross the ship’s rail.

Simply put, the customer has designated a freight forwarder, and only the shipper needs to arrange the trailer and customs declaration at the port of departure. There are also EXW delivery directly at the factory or at the place designated by the customer. The trailer declaration is arranged by the customer. The customer picks up the goods by himself and delivers the goods at the factory.

CFR – Cost and Freight

It means that the seller completes the delivery when the goods pass the ship’s rail at the port of shipment, and the seller must pay the freight and expenses required to transport the goods to the designated port of destination. However, the risk of loss or damage to the goods after delivery, as well as any additional costs caused by various events, is transferred from the seller to the buyer.

This term only applies to sea or inland water transportation. If the parties do not intend to deliver the goods across the ship’s rail, then should be used CPT term.

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

It’s means that the seller must deliver the goods to the ship at the designated port of destination at the port of shipment within the time specified in the contract, bear all costs and risks of loss or damage to the goods before the goods cross the ship’s rail, and apply for freight insurance, pay insurance premiums, and be responsible Charter a ship and book a space, and pay the normal freight from the port of shipment to the port of destination.

CPT – freight paid to (specified destination)

It means that the seller delivers the goods to the designated carrier, but the seller must also pay the freight to transport the goods to the destination. That is the buyer bears all risks and other expenses after delivery.

CIP – freight and insurance

It means that the seller delivers the goods to the designated international forwarder, but the seller must also pay the freight to transport the goods to the destination, that is the buyer bears all risks and additional costs after the seller has delivered the goods.

The term can be applied to various modes of transportation.

DAF – Delivered At Frontier

It means that when the seller is at the designated location and specific delivery point at the border, before the border of the country’s customs border, the goods that are still on the delivery vehicle and have not been unloaded are handed over to the buyer for disposal, and the export customs clearance procedures have been completed but the goods have not been cleared yet. The delivery will be completed when the import customs clearance procedures are handled.

DES – Delivered Ex Ship

It means that at the designated port of destination, the goods are handed over to the buyer for disposal on the ship, but the seller will complete the delivery without going through the customs clearance procedures for the import of the goods.

This term can only be used when the goods are transported by sea or inland waterway or multimodal transport on board the ship at the port of destination.

DEQ – Delivered EX Quay

It means that the seller only needs to deliver the goods to the carrier designated by the buyer at the designated place and complete the export customs clearance procedures to finish the delivery.

It should be noted that the choice of delivery location will have an impact on the obligations of loading and unloading at that location. This term can be used for various modes of transportation.

DDU (Delivered duty unpaid – named place of destination)

It means that the seller transports the goods to the destination designated by the importing country and delivers them to the buyer without going through the import procedures or unloading the goods from the delivery means of transport, that is completed delivery. The seller shall bear all the costs and risks of the goods shipped to the designated destination, excluding any “taxes” that should be paid at the destination when customs formalities are required (including the responsibilities and risks of customs formalities, and the payment of handling fees , Duties, taxes and other fees). The buyer must bear this “tax fee” and the costs and risks caused by its failure to complete the import customs clearance procedures in a timely manner.

DDP ( Delivered duty paid – named place of destination)

It’s means that the seller transports the goods to the designated place in the importing country, and delivers the goods that have not been unloaded on the delivery means of transport to the buyer. The seller is responsible for handling import customs formalities and delivering any imports taxes that should be paid at the destination when customs formalities are required. The seller shall bear all costs and risks before the goods are delivered to the buyer. This term should not be used when the seller cannot obtain the import license directly or indirectly. DDP is the trade term with the greatest responsibility of the seller.

Simply put is door-to-door. The often-speaking double clearance custom includes trailer at the port of departure + customs declaration + shipping + customs clearance at the destination port. If whether need for door-to-door delivery mainly depends on the needs of customers. It should be noted that DDP must provide the value of the goods because the tax is based on the value of the goods.

Therefore, when you have to check shipping cost with freight forwarder, it is best to first specify trade terms in FOB/CIF/DDU or DDP, etc. If in FOB, you need to provide cargo name/container size/quantity/weight/loading address/shipping port/bill or document. Of course, it may also be bulk cargo, instead of providing the size of the container, only the quantity and volume of the cargo are required.