The Treasurer’s Guide to Trade Finance

A Reference Guide to Trade Finance Techniques

Term Seller Buyer

FOB
(Free on Board)

Used only for
goods shipped
by water
(including inland
waterways).

Required to deliver the goods onto a ship at a

port located in the seller’s own country.

Responsible for delivery and for loading the

goods onto the named ship.

Usually responsible for arranging export

clearance.

Responsible for all further

transportation costs to the

final destination, for all other

documentation and for

insuring the goods in transit.

Group C – Main Carriage Paid

Under these terms, the seller arranges shipment of the goods to the buyer. The seller is responsible
for the main costs of shipment.

Term Seller Buyer

CFR
(Cost and
Freight)

Used only for
goods shipped
by water
(including inland
waterways).

Required to deliver the goods to a named port

located in the buyer’s own country.

Responsible for ensuring the delivery of the

goods to the destination port. This includes

arranging export clearance and any other

export requirements.

Not obligated to arrange any transit insurance

for the goods, although many exporters

choose to arrange their own insurance.

Assumes any risk of loss

once the goods have been

loaded on board the ship at

the port of origin, so should

arrange transit insurance

for the goods.

Takes control of the goods

at the destination port and

is responsible for managing

the import process.

CIF
(Cost, Insurance
and Freight)

Used only for
goods shipped
by water
(including inland
waterways).

Required to deliver the goods to a named port

located in the buyer’s own country.

Responsible for ensuring delivery of the goods

to the destination port. This includes arranging

export clearance and any other export

requirements.

In contrast to CFR, the seller assumes the risk

of loss or damage to the goods until they are

unloaded at the port of destination, and should

arrange any transit insurance for the goods.

Does not assume any risk

of loss until such time as

the goods are unloaded

at the destination port,

but many importers

nevertheless choose to

arrange their own insurance

of the goods whilst in

transit.

Takes control of the goods

at the destination port and

is responsible for managing

the import process.

CPT
(Carriage
Paid To)

Used for
all forms of
transport.

Required to deliver the goods to a named port

located in the buyer’s own country.

Pays for delivery of the goods to the

destination port. This includes arranging export

clearance and any other export requirements.

Not responsible for any loss or damage in

transit, so is not required to arrange any

transit insurance for the goods, although

many exporters choose to arrange their own

insurance.

Responsibility for the goods ends once the

goods have been accepted for carriage by the

shipping company.

Assumes any risk of loss,

once the goods have been

loaded on board the ship

at the port of origin (or

otherwise been accepted

for carriage), so should

arrange transit insurance

for the goods (although this

is not required).

Takes control of the goods

at the destination port and

is responsible for managing

the import process.