First, the basic concept
TRADE TERMS, also known as terms of trade, price terms (PRICE TERMS), is a short concept (SHORTHEXPRESSION) that determines the costs, risks, and responsibilities of buyers and sellers, as well as buyers and sellers in delivery and acceptance. The obligation that should be fulfilled in the process of goods is an important part of the price in trade.
II. Main International Practices Concerning Trade Terms
There are three main practices
A. Warsaw Rules of Warsaw 1932 (WARSAW-OXFORD RULES 1932, referred to as WORULES 1932)
B. 1941 Revised American Foreign Trade Definition (REVISED AMERICAN FOREIGN TRADE DEFINITIONS 1941)
C. The 2000 General Rules formulated by the International Chamber of Commerce is INCOTERMS 2000, (ICC PUBLICATION NO.560)
The ICC abbreviation for ICC is the first capital of the three words of INTERNATIONAL CHAMBER OF COMMERCE.
INCOTERMS comes from the merger of the three words of INTERNATIONAL COMMERICAL TERMS.
Third, the current trade terms widely used in international trade practices
1 is INCOTERMS 1990 or INCOTERMS 2000 developed by the International Chamber of Commerce.
2 The International Chamber of Commerce was established in 1919. Its members are distributed in more than 140 countries and regions. It is a worldwide non-governmental commercial organization with significant influence. It is a high-level advisory body of the United Nations. The purpose of the establishment is in the economic and legal fields. Take effective actions to promote the development of international trade and investment.
3 China gained membership of the International Chamber of Commerce in November 1994.
4 INCOTERMS 1990/2000 has been widely recognized in the world and is widely used in international trade contracts and L/C.
IV. FOB Trade Terms
1. Definition: FOB is the capitalization of the first letter of the three words FREE ON BOARD. Chinese means the shipment on the port of shipment and the specific port of shipment.
2. Applicable modes of transportation: maritime transport and inland water transport.
3. Key points: The risk division points, delivery points, and cost division points are all on the ship's side designated by the buyer of the port of shipment (in actual operation, they are loaded into the cabin).
4. The main obligations of the seller
A. Responsible for delivering the goods in accordance with the contract at the designated port of shipment to the vessel designated by the buyer in the customary manner of the port at the designated port of shipment or within the time limit, and give the buyer sufficient notice of shipment.
B. Responsible for obtaining export licenses or other approved certificates (certificate of inspection, certificates of origin, etc.) for export procedures (customs declarations, export orders, etc.).
C. To bear all costs and risks of the goods passing the ship's rail at the port of shipment (actually up to the cabin).
D. Responsible for providing commercial invoices and certifying that the goods have been delivered to the usual documents on board (shipped ocean bills of lading).
5, the buyer's main obligations
A. Responsible for paying the price of the goods according to the contract.
B. Responsible for booking or chartering, payment of freight (shipping costs), and giving the seller sufficient notice of the name of the vessel, the place of loading and the required delivery time (in practice, the buyer informs the seller of the freight forwarder at the port of shipment, And ask the seller to order his ship, ocean freight to pay, the buyer pays, usually the sea freight paid by the buyer is 10-20% cheaper than the seller's own booking.
C. Obtain an import license for risk and expenses at their own risk (the quota is also applied by the buyer to the domestic administrative agency in the importing country) or other approved certificates, and handle all customs formalities for the import of the goods and, if necessary, transit through another country.
D. to bear all costs and risks of the goods after crossing the ship's rail at the port of shipment (actually after loading in the harbor)
E. Collect the goods delivered by the seller according to the contract, and accept the documents matching the contract.
6. Points to note in the actual business
A. In the trading contract, the port of departure must be specified: the port of departure should be a seaport or river port (inland ports such as Nantong and Chongqing Port).
B. Trades require the seller to provide clean on-board bills of lading, and the point of transfer of risks and expenses is the designated cabin of the port of shipment.
C. The connection between cargo and cargo should be clearly defined in the trade contract, and the additional expenses such as voidage, demurrage, and warehousing insurance shall be paid.
D. Who will bear the loading fee for the port of shipment, ie who will pay for the THC fee, and who will pay the THC fee for the principle of international trade.
E. When negotiating trade contracts with U.S. customers and other customers in the Americas, customers should pay attention to the customary use of the “United States Foreign Trade Definition Revision 1941†trade practice or INCOTERMS 1990/2000 practice in the international market. Because the interpretation of the two conventions of the same FOB term is different, there is a big difference between the two sides in terms of risks, costs, responsibilities and obligations.
F. Negotiating with the customer to obtain only the designated shipping company or shipping agency. The freight forwarding agent will be ordered by us. The freight forwarding agency at the port of destination should also be designated by our freight forwarder, which can greatly reduce the trade risk.
V. CIF Trade Terms
1. Definition: CIF is COST, INSURANCE, AND FREIGHT (.....NAMED PROT OF DESTINATION). The first letter of the three words is composed of capital letters. Chinese means cost plus insurance plus freight. (designated port of destination) means that when the goods pass the ship's rail at the port of shipment (actually in the ship's cabin), the seller completes the delivery. Freight insurance premiums for goods from the port of shipment to the port of destination are paid by the seller, but the risk of damage and loss after shipment of the goods is borne by the buyer.
2. Applicable modes of transportation: maritime transport, inland water transport, and trading country (the port or river port to which the goods are finally delivered).
3. Key points: The risk point and delivery point are on the vessel at the port of departure. The cost is divided to the port of destination port.
4. The main obligations of the seller
A. Within the time limit stipulated in the contract, the goods in accordance with the contract shall be delivered to the ship destined for the designated port of destination at the port of shipment and the buyer shall be given a notice of shipment.
B. Responsible for handling export procedures, obtaining export licenses or other approved certificates (origin, inspection certificate, etc.)
C. Responsible for chartering or booking and paying the sea freight to the port of destination.
D. Responsible for cargo insurance and payment of insurance premiums.
E. Responsible for all costs and risks of cargo crossing the ship's rail at the port of shipment.
F. Responsible for providing commercial invoices, insurance policies, and on-board bills of lading for goods.
5, the buyer's main obligations
A. Pay the price according to the contract.
B. Responsible for import procedures to obtain import licenses or other approvals.
C. To bear all costs and risks of the goods passing through the ship's rail at the port of shipment.
D. Collect the goods delivered by the seller according to the contract, and accept the documents matching the contract.
6. Points to note in the actual business
A. Conceptual misunderstandings: CIF and FOB, the terms delivery point and risk point are on the ship in the port of loading, the seller will complete the seller’s obligation to ship the cargo safely to the vessel at the port of loading, and the cargo may pose risks after shipment. The seller no longer takes responsibility. The seller passes the insurance policy, bill of lading, etc. to the buyer, and the risk claim is handled by the buyer.
B. Booking stowage: Under the CIF condition, the seller sets orders independently, selects the shipping company’s freight forwarding, self-paid freight, terminal fee, etc. It generally does not accept the buyer’s designated freight forwarder/shipping company, etc. The actual business customers will choose foreign service Maersk, APL and other well-known shipping companies generally confirm good freight rates with the buyer and they can accept after the shipping period, but generally cannot be shipped by the buyer's designated freight forwarder.
C. When the seller applies for insurance at the port of shipment, he usually specifies the amount of insurance, the insurance coverage and the applicable insurance clauses, and the period of commencement of the insurance liability when the contract is concluded. Select the association or Chinese insurance policy. The insurance bill must be transferred when the bank submits the invoice. To the buyer.
D. Discharging costs: terminal operating expenses, etc. In CIF, PORT TO PORT is usually the port-to-port clause. The cost of port of departure is borne by the seller, and the port of destination is borne by the buyer.
E. Notice of shipment, transit and arrival date of goods, etc.
1. After loading the goods at the port of shipment, the seller obtains the ocean bills of lading and delivers the main shipping documents to the bank or to the buyer himself. Underwriting the insurance, obtaining the insurance policy, paying the sea freight, and loading the port incident, the buyer completes all the delivery obligations.
2. The seller shall give the buyer sufficient shipping notice after loading.
3. The seller has no guarantee of the inevitable arrival of the goods and the responsibility for ensuring when they reach the port of destination.
4. The seller bears no liability for damage, moisture, loss, etc. after the shipment of the goods.
5. If the goods are damaged or lost when the seller submits the documents, the buyer must still pay the documents by vouchers. The buyer can use the bills of lading to the shipping company/ship, with an insurance policy, and request the insurance company for damages instead of making a claim to the seller.
6. In the actual business, the buyer is using the goods in the transit port, not transiting or falling out of the box on time. The delay in the arrival of the goods on the way to the port twice or the delay in the arrival of the goods affects the garments/finished goods delivery loss, air freight, etc. are unreasonable. How to avoid the need to specify when the trade contract was signed that the seller had not loaded the ship and ensured that the goods arrived at the port of destination and that they could not guarantee the transit date.
6. CFR/CNF Trade Terms
1.Definition: CFR/CNF is a combination of one of the three words COST AND FREIGHT. Chinese means cost and freight. The specified port of destination means that the seller completes the delivery when the goods pass the ship's rail at the designated port of shipment. The seller pays for the sea freight necessary to transport the goods to the destination port, and the risk of loss and damage after delivery has been transferred to the buyer from delivery.
2. Applicable modes of transport: maritime transport and inland water transport (to the port of destination of the trading country, seaport, river port).
3. Key points: Delivery point and risk point are on the port of shipment. The cost is divided and the sea freight is paid to the port of destination. Insurance is processed and paid by the buyer.
4, the difference between the CFR/CNF and CIF buyer and seller obligations
In the CFR/CNF contract, the seller is not responsible for handling insurance, does not pay insurance premiums, does not provide insurance documents, and the marine cargo transportation insurance is handled by the buyer himself.
Other obligations are the same as CIF.
5. Points to note in practical obligations
A. Transfer of risk point: The risk point is that the seller will load the cargo into the hold at the port of shipment. The risk point will be transferred to the buyer. The buyer must have completed the insurance to the insurance company before this time. Therefore, the seller should be shipped in the actual business. Before and after the buyer on the ship issued a notification of how to issue a shipment and when to send a shipment notice, an agreed method should be specified in the trade contract, the content, manner, and time of delivery of the shipping notice.
B. Port miscellaneous fees, port miscellaneous charges at the port of shipment, THC expenses shall be borne by the seller, port miscellaneous expenses at the port of destination, and delivery costs shall be borne by the buyer.
C. Other points of attention are the same as those of CIF.
VII Common Ground of FOB/CIF/CFR
1. All three price terms are applicable to maritime transport and inland water transport (such as China's Yangtze River, river transportation in the United States and the Great Lakes region). Its carriers are generally limited to shipping companies.
2. The terms of delivery for the three price terms are the port of shipment of the port of shipment (actually within the ship's cabin). Risk points are transferred from the seller to the buyer when the shipment passes across the ship's rail (actually in the hold).
3. Expenses: The seller bears all costs of the goods passing through the ship's rail at the port of shipment.
4. Bill of lading: The seller must submit to the buyer a clean bill of lading on board.
5. Shipment Notice: The seller shall promptly issue a shipping notice to the buyer before and after the shipment.
6. Risk point: The risk of the seller after loading the goods at the port of shipment is transferred to the buyer.
7. The import clearance of the port of destination, the cost, etc. shall be handled by the buyer; the loading, land transport, export declaration, and the processing of permits shall be handled by the seller.
8. The seller has the obligation to arrange booking and ship allocation at the port of shipment.
VIII. Different points of FOB and CIF price terms
1. The price term is not the same as the post port. After the FOB, the port refers to the seaport or river port of the country where the seller is located. The post-CIF port refers to the port or river port of the buyer’s country. After the CIF price terms, the port’s country of origin should be specified. Don’t like Victoria Harbour, in Hong Kong, in the United Kingdom, in Brazil, and to distinguish between countries.
2, the cost composition is not the same, the quote is not the same. FOB price is to consider all the costs and profits of the goods from the purchase of raw materials, production until export customs clearance goods to the buyers designated cabin, and CIF is based on the FOB price plus Shanghai freight and insurance.
3, THC terminal operating fee payment targets are different. According to the principle of who pays for the sea freight THC fee, the THC fee in the FOB price clause shall be borne by the buyer. The THC shall be borne by the seller in the CIF. The current domestic THC standard is 370 yuan for 20' cabinets, and 40' for large cabinets is 560 yuan. THC fees should clearly indicate who should pay in the trade contract.
4. Insurance payment and handling are different: FOB and CNF insurance are handled by the buyer. The seller should notify the buyer before shipment. CIF insurance is handled by the seller and pays insurance premiums. The seller will apply for insurance according to the terms of the contract and insurance and will pay the insurance policy. To the buyer.
5. The price terms and international conventions are different. FOB prices are common practice in the U.S. practice and the International Chamber of Commerce in 1990 and 2000. Most of the CIF are the ICC's 1990/2000 practice. They must be noted when signing a trade contract or when the customer issues a letter of credit. the difference.
6. Air Freight: The FOB Seller will only bear the air freight for all charges prior to the aircraft's flight, and the destination port of air will be borne by the Buyer.
In addition to the FOB air freight, the CIF seller shall also bear the air freight and insurance against the air cargo as required by the buyer.
After the air cargo is delivered from the port of shipment, the ownership of the goods is transferred to the buyer.
7. Ship charter is different: FOB price is arranged by the buyer's designated shipping company/shipping company or even freight forwarding company. The buyer can timely charter the booking, which will affect the seller's timely delivery and bank presentation.
The CIF price is left to the seller to choose the shipping company or freight forwarding company.
8. The shipping notice informs the buyer that the time is different: the FOB price and CNF inform the buyer prior to shipment that the loading content and loading details are sufficient for the buyer to have sufficient time to apply for marine insurance of the goods and the CIF is insured by the seller after loading. Within days to inform the buyer of the shipping notice.
9. Post-shipment tracking service is different: Because FOB price terms are customer-specified ship/forwarders, the two-way trips are generally handled by the buyer, while the CIF price terms are used to provide better services to the seller. The ship agent will inform the buyer of the information on the transfer, the proxy information of the destination port, and when it will arrive in Hong Kong. (In the CIF price, however, the seller does not have this obligation, and in practice, the buyer will have this requirement)
10. Different Force Majeure Risks: Different Claims Are Difficult
In the actual export business, if the goods have been loaded on the ship, they are subjected to force majeure natural disasters or accidents during the port of shipment or transportation, and the documents submitted by the seller are inconsistent with the L/C provision. The risk borne by CNF and CIF is different.
In CIF terminology, the seller applies for insurance, and is insured at the port of departure. If the customer refuses to pay the bill, the seller can make a claim against the one-way local insurance company.
In the case of FOB and CNF, the buyer is insured. The insurance policy is in the hands of the buyer, and the insurance company is mostly abroad. The seller is difficult to claim from the insurance company. In particular, FOB terminology, the seller is looking for the shipping company to specify the booking of the charter company. It is even more difficult for the agent to obtain timely and accurate evidence.
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