Ocean Sea Freight Incoterms and Trade Terms

Question 1

Under FOB (Free on Board) Incoterms, when does risk transfer from seller to buyer?

Accepted Answer

When cargo is loaded on board the vessel at the port of origin

Answer

Under FOB, risk transfers from seller to buyer at the moment goods are loaded on board the named vessel at the port of shipment.

Question 2

Which Incoterm requires the seller to pay for freight and insurance to the destination port?

Accepted Answer

CIF (Cost, Insurance and Freight)

Answer

Under CIF, the seller must contract and pay for ocean freight and minimum cargo insurance (Institute Cargo Clauses C) to the named destination port, though risk transfers at loading.

Question 3

What does 'EXW (Ex Works)' mean for the buyer in ocean freight?

Accepted Answer

The buyer is responsible for all costs and risks from the seller's premises to final destination

Answer

Under EXW, the seller's only obligation is to make goods available at their premises — the buyer bears all costs and risks of loading, export customs, ocean freight, import duties, and final delivery.

Question 4

Under CFR (Cost and Freight), who is responsible for arranging cargo insurance?

Accepted Answer

The buyer

Answer

Under CFR, the seller pays for freight to the destination port but is not required to insure the cargo — the buyer bears the risk from loading and should arrange their own insurance.

Question 5

Which Incoterm is recommended for containerized ocean freight shipments according to the ICC?

Accepted Answer

FCA (Free Carrier)

Answer

The ICC recommends FCA for containerized shipments because risk typically transfers when the carrier takes custody at the container terminal, not when cargo is loaded on the vessel as under FOB.

Ocean Sea Freight Practice Test

Ocean Sea Freight Practice Test

Ocean Sea Freight Incoterms and Trade Terms