Ocean Sea Freight Incoterms and Trade Terms 2 — Questions and Answers
Question 1: What does 'DAP (Delivered at Place)' mean in ocean freight?
- The seller delivers goods ready for unloading at the named destination, with import duties the buyer's responsibility (Correct answer)
- The seller pays all costs including import duties to the final destination
- The buyer arranges all transport from the seller's country
- The goods are delivered to the carrier at the origin port
Correct answer: The seller delivers goods ready for unloading at the named destination, with import duties the buyer's responsibility
Under DAP, the seller delivers the goods ready for unloading at the agreed destination place, bearing all freight and risk — but import customs clearance and duties are the buyer's responsibility.
Question 2: What is the key difference between CPT and CIP Incoterms for ocean shipments?
- CIP requires the seller to provide all-risks (Institute Clause A) insurance; CPT does not require seller-paid insurance (Correct answer)
- CPT covers sea freight only; CIP covers multimodal transport
- CIP transfers risk at destination; CPT transfers risk at origin
- CPT includes import duties; CIP does not
Correct answer: CIP requires the seller to provide all-risks (Institute Clause A) insurance; CPT does not require seller-paid insurance
Both CPT and CIP require the seller to pay for carriage to the destination, but CIP additionally requires the seller to obtain comprehensive (Clause A) cargo insurance for the buyer.
Question 3: Under FCA Incoterms, where does risk transfer when used at a named port/terminal?
- When goods are delivered to the carrier at the named place and loaded onto the carrier's transport (Correct answer)
- When goods are loaded on board the ocean vessel
- When goods clear export customs
- When goods arrive at the destination port
Correct answer: When goods are delivered to the carrier at the named place and loaded onto the carrier's transport
Under FCA, risk transfers when the seller delivers goods to the named carrier or another nominated party at the agreed place — if at a container terminal, transfer occurs upon handover to the terminal.
Question 4: Which Incoterm requires the seller to deliver goods alongside the vessel at the named port of shipment?
- FAS (Free Alongside Ship) (Correct answer)
- FOB (Free on Board)
- FCA (Free Carrier)
- CFR (Cost and Freight)
Correct answer: FAS (Free Alongside Ship)
Under FAS, the seller fulfills their delivery obligation when goods are placed alongside the ship (on a quay or barge) at the named port, after which all costs and risks pass to the buyer.
Question 5: In a CIF transaction, what is the minimum insurance coverage the seller is required to provide?
- Institute Cargo Clauses (C) — covering only major perils (Correct answer)
- Institute Cargo Clauses (A) — all-risks coverage
- War and strikes clauses only
- Total loss coverage equal to 110% of invoice value
Correct answer: Institute Cargo Clauses (C) — covering only major perils
Under CIF, the seller is only required to obtain minimum coverage under Institute Cargo Clauses (C), which covers major perils — buyers needing broader coverage should negotiate Clause A or specify in the contract.
Question 6: What does 'Freight Collect' mean under ocean Incoterms such as CFR or CIF?
- It is a contradiction — CFR/CIF always require freight prepaid by the seller (Correct answer)
- The buyer pays freight at the destination port
- Freight is added to the commercial invoice for the buyer to pay
- The carrier collects freight from customs upon vessel arrival
Correct answer: It is a contradiction — CFR/CIF always require freight prepaid by the seller
CFR and CIF require the seller to contract and pay for main carriage freight — 'Freight Collect' on B/Ls is therefore incompatible with these Incoterms, as freight must be prepaid by the seller.
Ocean Sea Freight Incoterms and Trade Terms 2
What does 'DAP (Delivered at Place)' mean in ocean freight?