FCA

(Free Carrier)

CPT
(Carriage Paid To)

The buyer bears all costs and risks involved in taking the
goods from the seller's premises to the desired
destination. The seller's obligation is to make the goods
available at his premises (works, factory, and
warehouse). This term represents minimum obligation
for the seller. This term can be used across all modes of
transport.
The seller's obligation is to hand over the goods, cleared
for export, into the charge of the carrier named by the
buyer at the named place or point. If no precise point is
indicated by the buyer, the seller may choose within the
place or range stipulated where the carrier shall take the
goods into his charge. When the seller's assistance is
required in making the contract with the carrier the
seller may act at the buyers risk and expense. This term
can be used across all modes of transport.
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EXW
(Ex Works)

The seller pays the freight for the carriage of goods to

the named destination. The risk of loss or damage to the
goods occurring after the delivery has been made to the
carrier is transferred from the seller to the buyer. This
term requires the seller to clear the goods for export and
can be used across all modes of transport.

CIP
The seller has the same obligations as under CPT but
(Carriage & insurance P has the responsibility of obtaining insurance against the
aid to)
buyer's risk of loss or damage of goods during the
carriage. The seller is required to clear the goods for
export however is only required to obtain insurance on
minimum coverage. This term requires the seller to clear
the goods for export and can be used across all modes
of
transport.
DAT
New Term - May be used for all transport modes
(Delivered At Terminal) Seller delivers when the goods, once unloaded from the
arriving means of transport, are placed at the disposal of
the buyer at a named terminal at the named port or
place of destination. "Terminal" includes quay,
warehouse, container yard or road, rail or air terminal.
Both parties should agree the terminal and if possible a
point within the terminal at which point the risks will
transfer from the seller to the buyer of the goods. If it is
intended that the seller is to bear all the costs and
responsibilities from the terminal to another point, DAP
or
DDP
may
apply.
Responsibilities

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Seller is responsible for the costs and risks to bring

the goods to the point specified in the contract
Seller should ensure that their forwarding contract
mirrors the contract of sale
Seller is responsible for the export clearance
procedures
Importer is responsible to clear the goods for
import, arrange import customs formalities, and
pay import duty
If the parties intend the seller to bear the risks and
costs of taking the goods from the terminal to
another place then the DAP term may apply
DAP
(Delivered At Place)

New Term - May be used for all transport modes

Seller delivers the goods when they are placed at the
disposal of the buyer on the arriving means of transport
ready for unloading at the named place of destination.
Parties are advised to specify as clearly as possible the
point within the agreed place of destination, because
risks transfer at this point from seller to buyer. If the
seller is responsible for clearing the goods, paying duties
etc., consideration should be given to using the DDP
term.
Responsibilities
Seller bears the responsibility and risks to deliver
the goods to the named place
Seller is advised to obtain contracts of carriage
that match the contract of sale
Seller is required to clear the goods for export
If the seller incurs unloading costs at place of
destination, unless previously agreed they are not
entitled to recover any such costs
Importer is responsible for effecting customs
clearance, and paying any customs duties

The seller is responsible for delivering the goods to the

named place in the country of importation, including all
costs and risks in bringing the goods to import
destination. This includes duties, taxes and customs
formalities. This term may be used irrespective of the
mode
of
transport.
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DDP
(Delivered Duty Paid)

FAS
The seller must place the goods alongside the ship at
(Free Alongside Ship -the named port. The seller must clear the goods for
named
port
ofexport. Suitable only for maritime transport but NOT for
shipment)
multimodal sea transport in containers (see Incoterms
2010, ICC publication 715). This term is typically used
for
heavy-lift
or
bulk
cargo.
FOB
The seller must load themselves the goods on board the
(Free On Board - namedvessel nominated by the buyer. Cost and risk are divided
port of shipment)
when the goods are actually on board of the vessel (this
rule is new!). The seller must clear the goods for export.
The term is applicable for maritime and inland waterway
transport only but NOT for multimodal sea transport in
containers (see Incoterms 2010, ICC publication 715).
The buyer must instruct the seller the details of the
vessel and the port where the goods are to be loaded,
and there is no reference to, or provision for, the use of
a carrier or forwarder. This term has been greatly
misused over the last three decades ever since
Incoterms 1980 explained that FCA should be used for
container
shipments.
CFR
(Cost and FReight)

The seller must pay the costs and freight required in

bringing the goods to the named port of destination. The
risk of loss or damage is transferred from seller to buyer
when the goods pass over the ship's rail in the port of
shipment. The seller is required to clear the goods for
export. This term should only be used for sea or inland
waterway
transport.

CIF
The seller has the same obligations as under CFR
(Cost, Insurance & Freig however he is also required to provide insurance against
ht)
the buyer's risk of loss or damage to the goods during
transit. The seller is required to clear the goods for
export. This term should only be used for sea or inland
waterway transport.
Documents used in International Trade

1.
2.
3.
4.
5.

Commercial documents
Official documents
Insurance documents
Transport documents
Financial and financing documents

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International Trade documents may be classified as under:

1. Commercial documents:
i) Invoice
a) Proforma Invoice
b) Commercial Invoice
c) Certified Invoice
ii) Certificate of origin
iii) Weight notes or certificates
iv) Packing list
v) Quality or Inspection certificate
2. Official documents:
i) Consular Invoice
ii) Legalized Invoice
iii) Black-listed Certificate
iv) Health, Veterinary and Sanitary Certificate, Certificate of Analysis
3. Insurance documents:
i) Marine Cargo Insurance
ii) Marine Hull Insurance
iii) Freight
Main types of Marine Insurance Policies are:
i) Floating policy
ii) Time policy
iii) Voyage policy
iv) Mixed policy
v) Open cover or Blank policy
vi) Specific policy
vii) Valued policy
vii) Unvalued policy
4. Transport documents:
i) Airway Bill/ Air consignment Note
ii) Mate's Receipt
iii) Bill of Lading
iv) Railway consignment Note/Railway Receipt
v) Roadway Bill

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vi) Post Parcel Documents

5. Financial and financing documents:

i) Bill of exchange
ii) Promissory Note
iii) Trust Receipt
Other Documents:
There are some important documents related with International Trade
i) Dock, Wharfinger's Receipt
ii) Dock Warrants, Warehouse Warrants
iii) Delivery Orders
iv) Shipping bill
v) Bill of entry/Import manifest
vi) Custom Duties
vii) Warehousing
Documents used in international trade:
1. Indent
Indent is an order placed by the importers to the exports. It contains the essential
information regarding the goods to be imported i.e. quality, quantity, packing,
packaging, mode of payment, insurance, price of good, etc.
When the price at which the goods are to be purchased by the importer is clearly
stated in an order (Indent), with no options to the exporter, then it called "Closed
Indent".
If the prices are not mentioned by the importer and it is left to the discretion of
the exporter, then it is known as "Open Indent".
Indent can be sent by the importer directly to the exporter or it may be sent
through the indent agencies.
2. Mate's Receipt
Mate's Receipt is a receipt issued by Captain / Master / Mate of the ship.The Mate
of the ship after receiving the goods on the board and after inspection of the
goods issues this receipt.
The loading of the goods on the ship is possible only after presentation of
'shipping order'. Mate's receipt contains details regarding name of ship, date on
which the goods are loaded, description of goods, numbers and marks on the
packages, conditions of cargo, etc. This receipt is issued to the exporter who has

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to present the mate's receipt in the office of shipping company by which he will
get bill of lading. Mate Receipt may be clean or qualified. It is qualified if there is
some defect in the cargo loaded on the ship, in such case the captain makes
adverse remark on the receipt. In case of clean receipt, the cargo in good
condition and the adverse remark is not mentioned. The bill of lading is always
prepared on the basis of mate's receipt. In short mate's receipt is an
acknowledgement of the receipt of goods on board of the ship.
3. Bill of Lading
Bill of lading is one important shipping document necessary and useful in exportimport trade transactions. It is a document issued by the shipping company after
the shipment of goods. In simple, Bill of lading is a contract between the exporter
or the shipper and the shipping company for the carriage of goods from the port
of loading to the port of destination.
Bill of lading is a document to title of goods and is transferable by endorsement
and delivery. Hence, it is a semi-negotiable instrument. The bill of lading is
prepared on the basis of mate's receipt. The importer has to produce this receipt
for securing the deliver of goods.
The bill of lading contains following information:1. Name and address of the exporter and the shipper.
2. Name and address of shipping company.
3. Name and address of importer or agent.
4. Quantity, weight and value of goods sent.
5. Place of loading and port of destination.
6. Date of loading of goods on the ship.
7. Mark description and number of packages.
8. Port at which the goods are to be discharged.
9. Freight paid or to be paid.
10.

Signature of the issuing authority with date.

11.

Any other relevant details.

Important functions of bill of lading are as follows :-

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1. It is useful to the importer for obtaining delivery of goods from the shipping
company and port authorities.
2. It is a document of title to goods. A possessor of the bill of lading is entitled
to take the delivery of goods.
3. It is a semi negotiable document and it is transferable by endorsement and
delivery.
4. It is a legal document including the contract for carrying goods.
5. It is a proof of the fact that the goods are handed over to the shipping
company for transportation to the port of destination.
4. Letter of Credit
Letter of Credit is an important document in international trade. It is for safety
and security of the exporter as regards payment for the goods to be exported.
Letter of Credit can be defined as "an undertaking by importer's bank stating that
payment will be made to the exporter if the required documents are presented to
the bank".
Before executing an export order, the exporter of goods desires to have adequate
proof regarding the credit worthiness of the importer. It is issued by the bank (in
the importer's country) in favour of the foreign supplier, it contains a guarantee
or an undertaking by one bank that the bill of exchange drawn on the importer
will be honoured on presentation to the extent of the amount specified in the
letter. Letter of Credit may also be issued on the strength of the business of the
importer with the bank.
The Letter of Credit also contains certain conditions such as date of bill, date for
shipment, shipment by approved vessels with approved flags packing, etc.
The advantages of the letter of credit to the exporters are many such as :1. Exporter gets safety and security of payment for the goods exported.
2. The exporter gets discounting facility from the bank.
3. It enables the exporter to take more initiative in promoting exports and
earns foreign exchange for his country.
5. Certificate of Origin
Certificate of Origin is an important shipping document sent by the exporter
alongwith the other document to the importer. This document is showing or

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giving the information of the fact that the goods which are exported are
manufactured in a particular country i.e. the document certifies that certain
goods are manufactured within a specific country only. It is a proof about the
origin of goods exported. This certificate is generally issued by the "Chamber of
Commerce" or "Export Promotion Council" or "Trade Association" or "Such Other
recognised body" on behalf of Government. It is issued to the exporter. It is very
useful document to save custom/import duties. As a general rule the rate of
import duty is not same for imports from all countries. The goods imported from
some other countries are subject to less import duty. Thus, to get the benefit of
saving import duty the importer can use the Certificate of Origin, because the
government of importing country grants concession in import duty to the
importer on the basis of certificate of origin.
6. Consular Invoice
Consular Invoice is an important document used in foreign trade. It is issued by
the Trade consulate of the importing country stationed in the exporters country.
Consular is a government officer having office in other countries. This document
is also obtained by the exporter and is sent to the importer along with other
shipping documents. This invoice is also useful for importer at the time of
payment of importy duty. For obtaining document from the consular the exporter
has to pay the prescribed fees. This document contains information about goods
and the value of goods.
Sometimes, the custom authorities desire to open the packages and scrutinize
the goods for the purpose of calculating custom duty. Due to which there is delay
in clearing the goods from dock or port. To avoid this, one copy is sent to the
custom authorities of the importing country, second copy is retained by the
consulate office for reference and the third copy is given to the exporter which is
forwarded by exporter to the importer with other documents.
7. Bill of Entry
Bill of entry is a document required in case of import of goods. It is like shipping
bill in case of exports. A Bill of Entry is the document testifying the fact that
goods of the stated value and description in specified quantity are entering into
the country from abroad. The customs office supplies this form which is prepared
in triplicate. Three different colours are used to prepare bill of entry. One copy is
retained by custom department, other is retained by port trust and the third is
kept by the importer.
The bill of entry is divided into three classes :1. Entry for duty free goods.

3. Entry for goods to be re-exported.

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2. Entry of goods which are meant for consumption at home.

In India, all these entries are on the same form.

The contents of Bill of Entry are :1. Name and address of importer.
2. Import License number of importer.
3. Name and address of exporter.
4. Name of port where goods are to be cleared.
5. Value of goods.
6. Description of goods.
7. Rate and amount of import duty payable.
8. Other relevant details.
8. Dock's Receipt
Dock authorities issue dock's receipt once the goods are stored in the sheds at
the docks. The Clearing and Forwarding agent clears the documents from the
customs authorities. Then he approaches the Port Trust authorities and obtains
the Carting Order. The Carting Order is the permission to cart the goods inside
the docks. The goods are then brought inside the docks. The goods may be
loaded immediately on the ship. Many-a-times immediate loading on ship is not
possible. The goods are then stored in sheds at the port or docks. The dock
authorities then issues the dock receipt as an acknowledgement for goods
received in sheds.
9. Commercial Invoice
Commercial invoice is a basic export document. It contains all the information,
which is required for preparation of all other documents. It is the exporter's bill
for goods which the importer has to pay.
Commercial invoice contains the following information :1. Name and address of exporter and importer.
2. Description of goods (weight, quality, quantity, rate, etc.)

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3. Value of goods after discount, if any.

5. Terms and Conditions of sale

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4. Net amount payable by the importer.

Other details of shipment to be included are :1. Name of ship on which goods are loaded.
2. Letter of Credit Number.
3. License number of exporter.
4. Bill of lading number.
5. Packaging Specifications.
6. Shipping terms and Conditions, etc.
What is the definition of master air waybill and house air waybill in
international trade?
Master air waybill is a transport document which is issued by the air cargo carrier
or its agent. House air waybill is a transport document which is issued by a
freight forwarder.
Delivery order:
Delivery order is the order given by carrier to the party to take delivery of goods.
Once cargo arrived at port of destination, the goods are moved to customs
bonded area where in customs clearance procedures are carried out. If the cargo
is Less Container Load (LCL), it is stored in the container freight station
warehouse. The import cargo will be under the custody of CFS authorities who
acts as custodian of cargo. Custodian of cargo can be a private party, semigovernment, or fully owned by government authorities. However, custodian of
cargo in a bonded area can release the goods to the party only with the
permission of Customs authorities and the carrier of cargo. The carrier of cargo
means, the shipping, freight forwarding or transport company who carries goods
to the port of final destination. Once after arrival of cargo at final customs port of
destination, the said carrier of goods issues delivery order to consignee (or his
order) after collecting necessary charges if any. The importer or his customs
broker completes import customs formalities by filing necessary documents and
inspection of cargo procedures completes if applicable. Once after completion of
import customs formalities, the importer or his authorized agent approaches

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11

custodian of cargo along with the delivery order issued by carrier of goods to
release the cargo. The custodian of cargo verifies the proof of completion of
import customs clearance procedures and delivery order, release the cargo to
importer. Along with delivery order, carrier need to collect original bill of lading
issued by his counterpart at port of loading pertaining to the said shipment
unless otherwise the said document surrendered or released as Sea Way Bill.
Surrender of bill of Lading;
If a shipment is not under the terms Documents against Payments or under
Letter of credit, most of shippers do not send original bill of lading to buyer but
surrender original bill of lading after releasing with carrier. Surrendering
procedures of bill of lading simplifies the mechanism of transportation
procedures. Once after completion of export customs formalities, the shipper
hands over cargo to carrier to move final destination. After receiving cargo by
carrier, bill of lading is released after collecting necessary charges if any from
shipper. If the shipper wants to surrender original bill of lading, he can submit all
originals with a request letter to the carrier of goods with necessary OBL
surrender charges if any. Once after receiving original Bills of lading which carries
normally three originals but in some cases five, the carrier arranges to send a
message to his counterpart at destination port stating that OBL surrendered at
origin port and the consignee may not be insisted to produce original bill of
lading at the time of delivery of cargo. So the carrier at load port advises his
office at destination port to release goods to consignee without original bill of
lading. A copy of such message is sent to the shipper also as a proof of
surrendering OBL.