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SHIPPING TERMS
Customs & Excise Commonly used Incoterms:
Ad Valorem costs or charges are applied based
on the value of goods during movement or Free on Board
customs clearing, i.e., 10% of the invoice value. FOB means that risk and responsibility pass from
Customs & excise rates are generally ad valorem, the seller to the buyer when the goods cross the
but freight rates are generally calculated in a ship’s rail at the port of loading, cleared for export
different manner, i.e., per weight. by the seller.
Shipper Cost Insurance Freight
He books transport services with a transport Risk passes from the seller to the buyer when
owner (such as a ship owner) on behalf of buyers the goods cross the ships rail at the seaport of
and sellers of goods. loading; however, the seller is responsible for
the payment of freight and procurement of
Carrier insurance to the destination seaport.
A transporter of goods, such as a ship owner or
land transporter. Cost and Freight
C&F / C+F / CFR is when the seller meets his
Bill of Exchange obligation under the sales contract i.e., Risk
This is defined as instructions from one party to a passes from seller to buyer when the goods cross
second party to pay a third. the ship’s rail at the seaport of loading. The seller
is however responsible for the payment of freight
Bill of Lading to the destination seaport.
B/L is a receipt issued by a shipping line for
cargo, which is a document of title to the cargo, Ex Works
and which details the terms of the contract of EXW is when risk and responsibility pass from
carriage. the seller to the buyer when the goods are made
available on the ground at the “works” i.e., where
Commercial Invoice the goods are produced, such as at the factory,
An invoice issued by a seller to a buyer used at or on the agreed future date or future time,
extensively for the purposes of Customs & Excise uncleared through customs and Excise.
procedures and is typically one of the documents
required to accompany an LC.
Incoterms PLEASE NOTE
To improve consistency and remove uncertainty The above definitions are for basic information
in international trade, the International purposes only, and do not constitute technical or
Chamber of Commerce (ICC) in Paris developed legal definitions, as such may differ from country
INCOTERMS (International Commercial TERMS), to country, and depend upon the context in
a set of uniform rules for the interpretation of which the terms are being used.
international commercial terms defining the
costs, risks, and obligations of buyers and sellers
in international transactions.
First published in 1936, these rules have been
periodically revised to account for changing
modes of transport and document delivery.
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