Trade terms and abbreviations; meaning of trade terms – FOB, FOR, CWO, EXSHIP, COD, CIF, FAS. - SS3 Commerce Lesson Note

Trade terms, also known as Incoterms (International Commercial Terms), are standardized terms used in international trade to define the responsibilities and obligations of buyers and sellers regarding the delivery of goods. 

• FOB (Free on Board): FOB means that the seller is responsible for delivering the goods to a designated location, typically a port or a vessel, and bears the costs and risks until the goods are loaded onto the transport. Once the goods are on board, the buyer assumes responsibility and the costs and risks associated with further transportation.
• FOR (Free on Rail): FOR is similar to FOB but is specifically used for goods transported by rail. It means that the seller is responsible for delivering the goods to a designated railway station, and the buyer assumes responsibility and costs from that point onward.
• CWO (Cash with Order): CWO is a trade term that requires the buyer to make full payment at the time of placing the order. The seller does not ship the goods until the payment is received. It is commonly used in situations where there is a need for immediate payment or when dealing with new or less established customers.
• EXSHIP (Ex-Ship): EXSHIP means that the seller is responsible for delivering the goods to the buyer at the named port of destination. The seller bears the costs and risks of delivering the goods to the port, but once the goods are unloaded, the buyer assumes responsibility for further transportation and any associated costs and risks.
• COD (Cash on Delivery): COD is a trade term where the buyer makes payment at the time of delivery. The seller ships the goods, and the buyer pays for them upon receipt. This term is often used for small-scale local transactions or when there is a need for immediate payment upon delivery.
• CIF (Cost, Insurance, and Freight): CIF is a trade term where the seller is responsible for delivering the goods to the named port of destination, including the costs of transportation and insurance. The seller also arranges and pays for marine insurance to cover the goods during transit. Once the goods are on board, the buyer assumes responsibility for any further costs and risks.
• FAS (Free Alongside Ship): FAS means that the seller is responsible for delivering the goods alongside a vessel at the named port of shipment. The seller bears the costs and risks until the goods are placed alongside the vessel. The buyer then assumes responsibility and the costs and risks associated with loading the goods onto the vessel and subsequent transportation.