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Views: 288 Author: Site Editor Publish Time: 2022-04-06 Origin: Site
Key sea freight terms explained simply
Incoterms 2020 are globally recognized rules published by the ICC that define the responsibilities, risks, and costs between buyers and sellers in international trade. FAS, FOB, CFR, and CIF are the four most commonly used terms for sea and inland waterway transport, critical for avoiding disputes and ensuring smooth cross-border transactions.
Key Note: These terms apply only to sea/inland waterway transport – not air freight or fully containerized shipping (use FCA instead).
Under FAS, the seller fulfills their obligation when goods are placed alongside the buyer's nominated vessel at the named port of shipment (e.g., FAS Shanghai). Risk transfers to the buyer at the ship's side – not when loaded onto the vessel.
Deliver goods alongside the buyer's vessel
Handle export customs clearance & pay duties
Provide proof of delivery (e.g., delivery receipt)
Bear all risks/costs until goods reach ship's side
Arrange & pay for main sea freight
Arrange & pay for cargo insurance
Handle import customs clearance & pay duties
Bear all risks/costs from ship's side onwards
FOB is the most widely used sea freight Incoterm – the seller's obligation ends when goods are loaded onto the buyer's nominated vessel at the named port of shipment (e.g., FOB Shenzhen). Risk transfers at the point of loading, not before.
Load goods onto the buyer's vessel
Handle export customs clearance & pay duties
Provide clean bill of lading (B/L) as proof
Bear all risks/costs until loading is complete
Arrange & pay for main sea freight
Arrange & pay for cargo insurance
Handle import customs clearance & pay duties
Bear all risks/costs after loading
CFR requires the seller to pay for sea freight to the named port of destination (e.g., CFR Los Angeles), but risk still transfers when goods are loaded onto the vessel (same as FOB). The only difference from FOB is who pays the freight.
Load goods onto the vessel at shipment port
Arrange & pay for sea freight to destination
Handle export customs clearance & pay duties
Bear all risks/costs until loading is complete
Arrange & pay for cargo insurance (seller does not)
Handle import customs clearance & pay duties
Bear all risks/costs after loading
Pay unloading costs at destination port (unless agreed otherwise)
CIF is the most buyer-friendly term – the seller pays for freight AND minimum cargo insurance (110% of invoice value) to the destination port (e.g., CIF Hamburg). Risk still transfers at loading, same as FOB/CFR.
Load goods onto the vessel at shipment port
Arrange & pay for sea freight + minimum insurance
Handle export customs clearance & pay duties
Provide B/L and insurance certificate
Bear all risks/costs until loading is complete
Handle import customs clearance & pay duties
Bear all risks/costs after loading
Pay for additional insurance if needed
Pay unloading costs at destination port
| Incoterm | Full Name | Risk Transfer Point | Freight Paid By | Insurance Paid By | Best Use Case |
|---|---|---|---|---|---|
| FAS | Free Alongside Ship | At ship's side (port of shipment) | Buyer | Buyer | Bulk cargo (grain/minerals/oil), buyer-controlled shipping |
| FOB | Free On Board | Loaded onto vessel (port of shipment) | Buyer | Buyer | General cargo, balanced responsibilities (most popular) |
| CFR | Cost and Freight | Loaded onto vessel (port of shipment) | Seller | Buyer | Seller-managed freight, buyer handles insurance (better seller rates) |
| CIF | Cost, Insurance and Freight | Loaded onto vessel (port of shipment) | Seller | Seller (minimum coverage: 110% invoice value) | New importers, turnkey shipping (most buyer-friendly) |
Choose FOB/FAS to minimize risk after port delivery
Choose CFR/CIF if you have better freight/insurance rates
Always specify the exact port (e.g., "FOB Shanghai, China")
Choose CIF for hassle-free shipping (new to international trade)
Choose FOB if you have better freight rates with carriersVerify CIF
insurance coverage (minimum may be insufficient)
Confusing risk transfer (all 4 terms transfer risk at shipment port, not destination)
Using outdated Incoterms 2010 (always specify "Incoterms 2020")
Using sea terms for air freight/containerized shipping (use FCA instead)
Forgetting to clarify loading/unloading costs in contracts
Vague port specifications (e.g., "FOB China" instead of "FOB Shenzhen")
Our team of trade experts can help you select the right Incoterms, optimize logistics, and avoid costly mistakes in global transactions.
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