Incoterms and Trade Terms Flashcards

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

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

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

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

Answer: CIF (Cost, Insurance and Freight)

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.

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

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

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.

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

Answer: The buyer

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.

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

Answer: FCA (Free Carrier)

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.

Under DDP (Delivered Duty Paid), who is responsible for import customs clearance and duties?

Answer: The seller

DDP places maximum obligation on the seller, who must deliver goods cleared through import customs with all duties and taxes paid at the named destination.