Incoterms and Trade Terms Flashcards
6 cards from real Ocean Sea Freight practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Incoterms and Trade Terms flashcards as text
What is the '110% rule' commonly applied to cargo insurance under Incoterms?
Answer: Insurance coverage is typically arranged for 110% of the commercial invoice value to cover freight and additional costs
Standard trade practice under CIP and CIF calls for insuring cargo for 110% of the commercial invoice value — the extra 10% covers expected profit and incidental costs.
What does 'Named Port of Destination' specify in ocean freight Incoterms?
Answer: The specific port where the seller's obligations or cost transfer to the buyer ends
Under Incoterms like CFR, CIF, and DAP, the named destination port determines where the seller's cost obligations (and risk, in some terms) end — being specific avoids disputes about port charges.
Which party typically arranges the export customs declaration under FOB Incoterms?
Answer: The seller
Under FOB, the seller is responsible for export customs clearance and associated costs before loading the goods onto the vessel.
Why might a US importer prefer DDP over DAP when sourcing from overseas?
Answer: DDP includes import duties and customs clearance, reducing the importer's burden at destination
Under DDP, the seller handles import customs and pays all duties, giving the US importer a simple 'landed cost' with no surprise charges — ideal for buyers who lack customs expertise.
What Incoterm is most commonly used when a US exporter wants to sell goods loaded on board a vessel at their US port?
Answer: FOB (Free on Board)
US exporters commonly use FOB named US port, as it passes risk and further costs to the foreign buyer once goods are loaded on the vessel, which is a familiar and widely accepted arrangement.
Under which Incoterm does the seller bear the maximum obligation and cost burden?
Answer: DDP (Delivered Duty Paid)
DDP places the maximum obligation on the seller — they must deliver goods cleared through import customs with all taxes and duties paid at the named destination.