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EX-WORKS (.... NAMED PLACE) 
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"Ex-Works" is the term of sale most suited to the seller. Under the ex-works the seller only has to make the goods ready for pick-up at his warehouse. The seller is not responsible for loading of the goods on to the container or truck provided by the buyer or clearing the goods for export unless agreed otherwise. The buyer has to arrange for transportation from the seller's warehouse or works at his own risk and co-ordinate all further export arrangements.

If the trading company wants to protect its source of supply, it is advisable to structure the contract on the ex-works basis. This way the trading company will be responsible for the booking of the container or chartering of the vessel and would make sure that the export documentation is filled out properly, i.e. showing the trading company's name as shipper on the Bills of Lading, Certificate of Origin and other export documents.

If the seller or supplier is responsible for the preparation of export documentation, often the suppliers' name, sometimes with full corporate address, telephone and fax number, will be mentioned somewhere in the document. Since trading companies are in the middle of, what can be described as a bridge between the manufacturer in one country and an ultimate buyer (user of goods) in another country, such information as the manufacturer's direct contact information may prove costly for the trading company's future sales, as the same buyer, may attempt to by-pass (go behind the trading company's back) directly to the manufacturer. If there is no exclusive right agreement between the manufacturer and the trading company, the trading company is always at risk that after the initial sale to a foreign buyer, the foreign buyer may approach the manufacturer directly and the trading company which has developed the new export business in the first place will only get a 'thank-you' as remuneration. Read the section on EXCLUSIVE AGREEMENTS to learn how to protect your interests in international trade transactions.

F.O.B FREE ON BOARD (.... NAMED PORT OF SHIPMENT) 
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FOB means that the seller of the goods must load the goods onto the container, deliver the container to the port and load it on a vessel. In case of break bulk cargo it has to be loaded on board the vessel. The buyer on the other hand takes possession of the goods when they pass over the ship's, rail at the named port of shipment. The buyer is therefore responsible for all costs and risk of loss of or damage to the cargo from that point. Under the FOB terms, the seller must clear the goods for export. Despite the fact that FOB term should only be used for sea or inland waterway transport, it is used for all kinds of transport in the everyday conversations among traders.

Under the FOB contract, the seller has no obligation for the freight cost or insurance cost, this is the responsibility of the buyer. When shipping commodities, the FOB term can be profitable for the buyer if the buyer is chartering a vessel. Usually a good freight rate can be negotiated providing the buyer is a frequent customer in the freight market. In shipping commodities, a saving of $1 to $3 per metric ton by the chartered party (a company chartering the vessel) can result in substantial additional revenue. On a 20,000 MT shipment this difference translates into $20,000-$60,000 profit. There are potential risks associated with chartering a vessel, such a demurrage. Nevertheless, there are ways to limit those risks to a minimum and still bear the advantages.

FOB Stowed or FOB ST. (Short for Stowed) term may often be seen in a commodity contract. Stowed or ST. means that the seller is responsible for stowing the goods loaded on board the vessel inside a vessels hall. Furthermore in addition to FOB Stowed the contract may mention FOB ST L/S/D. The term L/S/D stands for Lashing/Securing/Dunneging. In this case the Seller is also responsible and has to pay for L/S/D.

C.I.F. COST INSURANCE AND FREIGHT (.... NAMED PORT OF DESTINATION)
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Unlike the CFR term which was re-named from CNF, the CIF Incoterm did not change from the first publication of Incoterm in 1936. Together with the FOB term CIF is probably the most frequently used term in the international trade business. The only difference between CIF and CFR is insurance that the seller is responsible to obtain at this own expense for the contractual amount. The insurance usually covers the full value of the goods plus 10%. The insurance covers all risks including war risk from the seller's warehouse to the port of discharge only.

The CIF term requires that the seller clear the goods for export. The buyer should be careful with CIF terms if he is acting as a trading house in the middle of the end buyer and supplier where a letter of credit is involved. For the same reasons as with CFR where the buyer controls the insurance of the goods, CIF value on the 2nd L/C will be different from the 1st L/C unless the trading house or 1st beneficiary under the L/C is not making any money on the transaction and transfers the L/C at the same face value. Since this is not the case in most transactions trading houses must be aware of this problem.

A solution can be found by asking the 2nd beneficiary (supplier) to contract the insurance for more than 10% over the invoice value to match the amount on the 1st L/C. Doing this may alert the suppler to the amount of profit, the trading house, is making on the transaction. Nevertheless, if such a situation occurs and you are stuck with a transferable L/C this may be only way out. There is however another more expensive solution, which is getting another spare insurance policy and substituting it to the bank during the document negotiation stage. Most banks will allow for such substitution of documents since you (the 1st beneficiary) are responsible for presentation of all documents required by the L/C. To avoid such problems from the start, it is best to ask for a CFR letter of credit and negotiate out the cost of insurance from the purchase contract.