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◇Learn the definition and classification of price terms．
◇Learn in detail the 6 popular price terms．
◇Get to know the other price terms．
◇Learn the factors in choosing proper price term for a transaction．
In international trade， price for each transaction should be quoted in price terms． A price term is a three－English－letter initials stipulating the obligations of the seller and those of the buyer． Generally speaking， price terms set out the obligations of the seller． Hence， by a process of elimination， the buyers'responsibilities are implied because any obligation which does not appear in a particular price term may become the responsibility of the buyer．
The International Chamber of Commerce （ICC） has， over time， developed a set of rules： International Rules for the Interpretation of the Trade Terms （ INCOTERMS）， which are also referred to as price terms， trade terms or delivery terms．From the first publication in 1936， ICC has successively updated Incoterms several times． The most recent version is INCOTERMS 2000， effective on Jan． 1，2000.
For reasons such as business habits and individual preferences， Incoterms 2000 will not be completely replaced by Incoterms 2010 in a short time． They will coexist for some years with the latter gradually gaining dominance． In practice， it is recommended that the traders shall specify that the price quoted in a sales contract is subject to Incoterms 2000 or Incoterms 2010．
Price terms quite simply define the geographic point in the transit of goods where the risks and costs （obligations） of the exporter and importer begin and end．When drawing up the contract， both buyer／ importer and seller／ exporter specially refer to INCOTERMS to clearly define their respective obligations right at the beginning of the transaction in order to eliminate any possibility of misunderstanding and subsequent disputes in the operation．
Obligations for the goods to be transported from the seller's premises to the buyer's premises mainly include the costs of production and packing， the inland transportation within the exporting and importing country， the expenses for clearing the export and import customs， the loading and unloading charges and the main carriage from the port／ place of shipment to the port／ place of the destination and the insurance for the goods． These obligations are illustrated in Figure 2.1．
Figure 2.1 Major Obligations in the Transit of Goods in International Trade
There are 13 different price terms in INCOTERMS 2000， organized into four groups： E， F， C and D groups as shown in Table 2.1．
Table 2.1 Incoterms 2000
Table2.1（continue）
E group is for“Ex works” whereby the seller only makes the goods available to the buyer at the seller's own premises． From that point on all other costs are the buyer's responsibility； F group is for FCA， FAS and FOB． Under these terms， the seller is required to deliver the goods to a carrier appointed by the buyer； CFR，CIF， CPT and CIP are in C group whereby the seller has to contract for carriage to deliver the goods at the port／ place of destination， but without assuming the risk of loss or damage to the goods； Finally， D group for terms in which the seller has to bear all costs and risks to bring goods to the place of destination （DAF， DES，DEQ， DDU and DDP）． When price term moves from EXW to DDP， the responsibilities of the seller run from the minimum to the maximum and the opposite holds true for the buyer．
Figure 2.2 is a simple way to understand this classification from the dividing points where the obligations of carriage of the exporter and importer begin and end．It is also important to note that the port／ place of shipment in a price term is not always the exporter's premises where goods are produced and similarly， the port／place of destination in a price term does not always refer to the final destination of the transaction， the importer's premises．
Figure 2.2 Carriage Dividing Points
In Incoterms 2010， the number of trade terms has been reduced from 13 to 11.The change is mainly in D terms． Except DDP remains unchanged， Incoterms 2010 has added DAP and DAT to integrate and replace DAF， DES， DEQ and DDU in Incoterms 2000．
According to Incoterms 2010，7 price terms， namely EXW， FCA， CPT，CIP， DAP， DAT， DDP， are applicable to any mode of transportation， while the other 4 price terms， namely FAS， FOB， CFR， CIF， are applicable only to sea and inland waterway transportation， as is shown in Table 2.2．
Table 2.2 Incoterms 2010
Among all the 11 price terms，six terms are most commonly used — FOB，CFR and CIF for the sea transportation， and FCA， CPT and CIP for the land transportation and multi－modes transportation where there is a combination of at least two modes of transportation by land， sea， air， rail， road or inland waterway．
According to INCOTERMS 2010， FOB means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment．The risk of loss of goods of or damage to the goods passes when the goods are on board the vessel， and the buyer bears all costs and risks of loss of or damage to the goods from that point onward．
（1）The seller's main obligations under FOB：
①Deliver the goods on board the ship nominated by the buyer at the named port of shipment on the agreed dated or within the agreed period．
②Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
③Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
④Give the buyer sufficient notice about the delivery of the goods．
⑤Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under FOB：
①Contract the carriage at its own expense for the carriage from the port of shipment and pay the freight．
②Give the seller sufficient notice of the vessel， name， loading point and the selected delivery time within the agreed period．
③Take delivery of the goods when they are shipped on board the vessel at the port of shipment．
④Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
⑤Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
The buyer， at the same time， may choose to arrange the marine cargo insurance and pay for the insurance premium from the port of shipment． Figure 2.3 illustrates the obligations divisions under FOB between the seller and the buyer．
Figure 2.3 FOB
In order to further specify the responsibility of loading charges and to avoid any dispute in this regard， FOB takes the following varied terms：
（1） FOB liner terms． It means that loading and unloading expenses are included in the freight paid by the buyer to the liner company and that the seller does not have to pay for the loading．
（2）FOB under tackle． This term requires the seller to place the goods on the wharf within the reach of the ship's tackle． Loading expenses incurred thereafter will be borne by the buyer．
（3）FOB stowed． This term requires the seller to load the goods into the ship's hold and pays the loading charges including stowing expenses． Stowing refers to make proper placement and arrangement of the cargo in the hold． In practice， this term is expressed as FOBS．
（4）FOB trimmed． The seller pays all the loading expenses including the trimming expenses． Trimming means to place the bulk cargo neatly in a ship's hold and it actually involves stowing． In practice， this term is expressed as FOBT．
FOB varied terms were made before the introduction of Incoterms 2010.Although they are not established in Incoterms 2010， Incoterms 2010 do not object their application if they are chosen and specified by the contracting parties in a sales contract．
According to INCOTERMS 2010， CFR means that the seller delivers the goods on board the vessel． The risk of loss of or damage to the goods passes when the goods are on board the vessel． The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination．
（1）The seller's main obligations under CFR：
①Contract for the carriage of the goods and pay the freight．
②Deliver the goods on board the ship at the named port of shipment on the agreed dated or within the agreed period．
③Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
④Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
⑤Give the buyer sufficient notice about the delivery of the goods．
⑥Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under CFR：
①Take delivery of the goods when they are shipped on board the vessel at the port of shipment．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
③Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
The buyer， at the same time， may choose to arrange the marine cargo insurance and pay for the insurance premium from the port of shipment． It should be noted that the seller must send shipping advice sufficient both in detail and in time to enable the buyer to insure the goods on time． Otherwise， the seller is to held responsible for any losses thus incurred． Figure 2.4 illustrates the obligations divisions under CFR between the seller and the buyer．
Figure 2.4 CFR
In order to further specify the responsibility of unloading charges and to avoid any disputes in this regard， CFR takes the following varied terms：
（1）CFR liner terms． The ship is responsible for the discharge of goods． The unloading charges are included in the freight that is paid by the seller．
（2）CFR landed． The goods must be unloaded onto the dock． The seller is responsible for the discharge of the goods and pays the costs， including the lighterage and wharfage charges．
（3）CFR ex tackle． This term requires the seller to lift the goods from the ship's hold onto the wharf or lighter within the reach of tackle． The buyer must pay for the lighterage when the ship is not able to reach the shore．
（4）CFR ex－ship's hold． The seller fulfills his obligations when he has made the goods available to the buyer for unloading． The buyer pays the cost for discharging the goods from the ship's hold．
CFR varied terms were made before the introduction of Incoterms 2010.Although they are not established in Incoterms 2010， Incoterms 2010 do not object their application if they are chosen and specified by the contracting parties in a sales contract．
According to INCOTERMS 2010， CIF means that the seller delivers the goods on board the vessel． The risk of loss of or damage to the goods passes when the goods are on board the vessel． The seller must contract for and pay for the costs and freight necessary to bring the goods to the named port of destination． The seller also contracts for insurance cover against the buyer's risk of loss of or damage to the goods during the carriage．
（1）The seller's main obligations under CIF：
①Contract for the carriage of the goods and pay the freight．
②Contract for the insurance of the goods and pay the premium．
③Deliver the goods on board the ship at the named port of shipment on the agreed dated or within the agreed period．
④Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
⑤Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
⑥Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under CIF：
①Take delivery of the goods when they are shipped on board the vessel at the port of shipment．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
③Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
The buyer should note that under CIF term， the seller is required to obtain insurance only on minimum cover． Should the buyer wish to have the protection of greater cover， he would either need to agree as such expressly with the seller or to make his own extra insurance arrangements． Figure 2.5 illustrates the obligations divisions under CIF between the seller and the buyer．
Figure 2.5 CIF
In order to further specify the responsibility of unloading charges and to avoid any disputes in this regard， CIF takes the following varied terms：
（1）CIF liner terms． The ship is responsible for the discharge of goods． The unloading charges are included in the freight that is paid by the seller．
（2）CIF landed． The goods must be unloaded onto the dock． The seller is responsible for the discharge of the goods and pays the costs， including the lighterage and wharfage charges．
（3） CIF ex tackle． This term requires the seller to lift the goods from the ship's hold onto the wharf or lighter within the reach of tackle． The buyer must pay for the lighterage when the ship is not able to reach the shore．
（4）CIF ex－ship's hold． The seller fulfills his obligations when he has made the goods available to the buyer for unloading． The buyer pays the cost for discharging the goods from the ship's hold．
FOB， CFR and CIF differ in price structure where FOB represents the basic costs in an export business， CFR the cost plus freight and CIF the cost plus freight plus insurance． However， these three terms share the same risk dividing line and the risk of loss of or damage to the goods is transferred from the seller to the buyer when goods are shipped on board the vessel at the port of shipment． Under these terms， the seller makes delivery when he makes shipment at the port of shipment and surrenders the title documents stipulated in the contract to the buyer and he is not responsible for the physical goods to reach the buyer． This kind of delivery is called the constructive delivery where delivery is made against title documents rather than the physical goods．
These three terms are applicable to any mode of transport and multi －modal transport where the transportation of goods involves at least two modes of transportation by rail， road， air， sea and inland waterway．
According to INCOTERMS 2010， FCA means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller's premises or another named place． The parties are well advised to specify as clearly as possible the point within the named place of delivery， as the risk passes to the buyer at that point．
（1）The seller's main obligations under FCA：
①Deliver the goods to the carrier or another person nominated by the buyer at the agreed time and place．
②Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
③Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
④Give the buyer sufficient notice about the delivery of the goods and the conditions of the carrying carrier．
⑤Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under FCA：
①Contract at its own expense for the carriage of the goods and pay the carriage．
②Notify the seller within sufficient time the name of the carrier， the mode of transport and the point of taking delivery within the named place to enable the seller to deliver the goods．
③Take delivery of the goods when they are delivered to the carrier．
④Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
⑤Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
The buyer， at the same time， may choose to arrange the cargo insurance and pay for the insurance premium from the place of delivery．
According to INCOTERMS 2010， CPT means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination．
（1）The seller's main obligations under CPT：
①Contract for the carriage of the goods and pay the carriage．
②Deliver the goods to the carrier or another person nominated by the seller at the agreed time and place．
③Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
④Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
⑤Give the buyer sufficient notice to enable the buyer to take the goods．
⑥Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under CPT：
①Take delivery of the goods when they are delivered to the carrier or another person nominated by the seller at the agreed time and place．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
③Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
The buyer， at the same time， may choose to arrange the cargo insurance and pay for the insurance premium from the place of delivery．
According to INCOTERMS 2010， CIP means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place． The seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination． The seller must contract for insurance cover against the buyer's risk of loss of or damage to the goods during the carriage．
（1）The seller's main obligations under CIP：
①Contract for the carriage of the goods and pay the carriage．
②Contract for the insurance of the goods and pay the premium．
③Deliver the goods to the carrier or another person nominated by the seller at an agreed time and place．
④Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
⑤Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
⑥Give the buyer sufficient notice to enable the buyer to take delivery．
⑦Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under CIP：
①Take delivery of the goods when they are delivered to the carrier or another person nominated by the seller at an agreed time and place．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
③Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
The buyer should note that under CIP term， the seller is required to obtain insurance only on minimum cover． Should the buyer wish to have the protection of greater cover， he would either need to agree as such expressly with the seller or to make his own extra insurance arrangements．
As FOB， CFR and CIF are applicable only for the transport by sea and inland waterway， FCA， CPT and CIP are introduced as the counterparts to be used for goods to be transported by air， road， rail as well as multi－modal transport where the transportation of goods involves at least two modes of transportation． The introduction of FCA， CPT and CIP are made to meet the demands arising from the rapid development of modern logistics characterized by container transport and multi－modal transport．
The obligations of the seller and the buyer under FCA， CPT and CIP correspond to those under FOB， CFR and CIF． Under FCA， CPT and CIP， the risk of loss of or damage to the goods is transferred from the seller to the buyer at the time the nominated carrier accepts them at the named place． The buyer must bear all the cost and risk of the goods from the time they have been delivered to the carrier to the final destination． Their obligations concerning cost， carriage and insurance can be made clear in comparison with FOB， CFR and CIF in Figure 2.6．
Figure 2.6 Comparison between FOB，CFR， CIF and FCA， CPT， CIP
Other price terms here refer to EXW， FAS， DAT， DAP and DDP stipulated in INCOTERMS 2010.In practice， these five price terms are less popular than FOB， CFR， CIF， FCA， CPT and CIP．
According to INCOTERMS 2010， EXW means that the seller delivers when it places the goods at the disposal of the buyer at the seller's premises or another named place （i．e． works， factory， warehouse， etc．）． The seller does not need to load the goods on any collecting vehicle， nor does it need to clear the goods for export， where such clearance is applicable．
（1）The seller's main obligations under EXW：
①Deliver the goods by placing them at the disposal of the buyer at the named place of delivery， not loaded on any collecting vehicle．
②Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
③Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under EXW：
①Take delivery of the goods at an agreed time and place．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
③Pay for any export and import license or other official authorization and carry out applicable customs formalities for the export and import of the goods．
EXW represents the minimum obligations for the seller but the maximum obligations for the buyer． It is advised that the buyer does not use EXW if they cannot directly or indirectly obtain export clearance．
According to INCOTERMS 2010， FAS means that the seller delivers when the goods are placed alongside the vessel （e．g．， on a quay or a barge） nominated by the buyer at the named port of shipment． The risk of loss of or damage to the goods passes when the goods are alongside the ship， and the buyer bears all the costs from that moment onwards．
（1）The seller's main obligations under FAS：
①Deliver the goods at an agreed time by placing them alongside the ship nominated by the buyer at the loading point．
②Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
③Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
④ Give the buyer sufficient notice about the delivery of goods and the condition of the carrying vessel．
⑤Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under FAS：
①Contract for the carriage of the goods and pay the freight．
②Give the seller sufficient notice of the name of the vessel， loading point and the selected delivery time within the agreed period．
③Take delivery of the goods when they are placed alongside the ship nominated by the buyer at the loading point．
④Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
⑤Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
FAS is applicable only for the transport by sea and inland waterway． The buyer， at the same time， may choose to arrange the marine cargo insurance and pay for the insurance premium from the port of shipment．
According to INCOTERMS 2010， DAT means that the seller delivers 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 determination．“ Terminal ” includes any place， whether covered or not， such as quay，warehouse， container yard or road， rail or air cargo terminal． The seller bears all the risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination．
（1）The seller's main obligations under DAT：
①Contract at its own expense for the carriage of the goods to the named place at the named port or place of destination．
②Unload the goods from the arriving means of transport and deliver them by placing them at the disposal of the buyer at the named terminal at the named port or place of destination at the agreed time．
③Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
④Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
⑤Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under DAT：
①Take delivery of the goods when they are delivered and receive them from the carrier at the named terminal at the named port or place of destination．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
③Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
According to INCOTERMS 2010， DAP means that the seller delivers the goods when they are placed at the disposal of the buyer on the arrival means of transport ready for unloading at the named place of destination． The seller bears all the risks involved in bringing the goods to the named place of destination．
（1）The seller's main obligations under DAP：
①Contract at its own expense for the carriage of the goods to the named terminal at the named port or place of destination．
②Deliver the goods by placing them at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination at the agreed time．
③Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
④Pay for any export license or other official authorization and carry out applicable customs formalities for the export of the goods．
⑤Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under DAP：
①Take delivery of the goods when they are delivered and receive them from the carrier at the named place of destination．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
③Pay for any import license or other official authorization and carry out applicable customs formalities for the import of the goods．
DAP is very similar to DAT except that the place of delivery under DAT is a transport terminal in the country of destination， while under DAP， it is the final destination， either at the buyer's premises or a place nearby． DAP is often used for transactions when the importing and the exporting countries are in the same economic zone where there is no need to clear the goods as there are no customs houses between the two countries． For these transactions， the buyers would prefer to have the goods delivered at their own premises．
According to INCOTERMS 2010， DDP means that the seller delivers the goods when they are placed at the disposal of the buyer， cleared for import on the arriving means of transport ready for unloading at the named place of destination．The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import， to pay any duty for both export and import and to carry out all customs formalities．
（1）The seller's main obligations under DDP：
①Contract at its own expense for the carriage of the goods to the named place at the named port or place of destination．
②Pay for any export and import license or other official authorization and carry out applicable customs formalities for the export and import of the goods．
③Deliver the goods by placing them at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination at the agreed time．
④Bear the risks of loss of or damage to the goods as well as all costs to the goods before the delivery．
⑤Provide the buyer at the seller's expense with usual proof of delivery．
（2）The buyer's main obligations under DDP：
①Take delivery of the goods when they are delivered and receive them from the carrier at the named place of destination．
②Bear all the risks of loss or damage to the goods as well as costs relating to the goods after delivery．
DDP represents the maximum obligations for the seller but minimum obligations for the buyer． It is advised that the seller does not use DDP if they cannot directly or indirectly obtain import clearance．
Of the price terms illustrated above， it can be concluded that when price term moves from EXW to DDP， the responsibilities of the seller run from the minimum to the maximum and the opposite holds true for the buyer． Hence， we should also note the following points．
INCOTERMS indicate the conditions under which prices are made． These conditions represent the traders.obligations． As a result， three items will make a complete and correct quotation in international trade： Unit price with its currency ＋INCOTERMS ＋ port／ place of loading ／ unloading． For example：
Unit price in international trade quotation“USD 100 ／ bag FOB Shanghai or USD 120 ／ bag CIF Shanghai”． In the first quotation， Shanghai is the port of shipment， while in the second one， Shanghai becomes the port of destination because it is used in different price terms．
In addition to this， sometimes a special term“commission” will be used together with a price term． Commission is a sum of money paid to the middleman for every sale that he or she makes． When commission is indicated in a price term， the middleman is to collect it from the buyer． For example，“CFR New York C3 USD 10.00 ／ CTN” means that the commission to the middleman is 3％ which is to be paid by the buyer． The commission to the middleman may not be indicated in a price term． In this case， the commission， if any， is to be paid by the seller．
When obligations under a certain price term fall heavily on the part of the exporter， he quotes higher． On the contrary， when the buyer assumes more responsibilities， the quoted price of the exporter will be lowered．
Figure 2.7 shows that for one sales contract， the quoted unit price may vary according to different price terms：
Figure 2.7 Price Terms and Quoted Price
（The figures here are just a theoretical illustration with no practical references）
When dealing with price terms， it should always be understood that INCOTERMS are a description of obligations from the seller's point of view rather than from that of the buyer． Therefore， when insurance is not shown， the price term only states that it is not the seller's responsibility and the insurance can be taken up by the buyer．
For example， goods can be protected under insurance coverage in FOB as much as under CIF． In a word， goods can be covered by insurance under any price term and the only difference lies in the fact that which trader is to contract with the insurance company and pays for the insurance premium．
When a sales contract is made under the price term of FOB， FAS， FCA，CFR， CIF， CPT or CIP， it is called the shipment contract where constructive delivery is carried out． In constructive delivery， delivery is deemed to be made when the seller makes shipment to the named place ／ port of shipment and surrenders to the buyer commercial documents， including title documents， specified in the contract， but without being responsible for the goods to reach the place of destination．The buyer should make payment to the exporter against the title documents． Under shipment contract， the risk of the loss and damage to the goods is transferred to the buyer when the goods are placed on board or alongside the ship at the port of shipment or when they have been delivered to the carrier at the place of shipment．
When a sales contract is made under the price term of EXW， it is also called the shipment contract but actual delivery is carried out． In actual delivery， delivery is deemed to be made when the physical goods are delivered to the buyer at the seller's premises． The risk of the loss or damage to the goods is transferred to the buyer when the goods are at his disposal at the seller's premises．
When a sales contract is made under the price term from DAT， DAP or DDP，it is called the arrival contract where actual delivery is carried out． Delivery is deemed to be made when the physical goods are delivered to the buyer at the terminal or the named place at the place of the destination． The risk of the loss or damage to the goods is transferred to the buyer when the goods are at his disposal at the terminal or named place at the place of the destination．
As the price term determines the nature of the sales contract and the terms and conditions concerning the delivery of goods， the proper choice of price term is important to reflect the performance capacity of the traders and to enhance the economic effectiveness of the transaction． The following factors should always be taken into consideration：
（1）Mode of transport． As FOB， FAS， CFR and CIF are only applicable for sea and inland waterway transport， if the goods are to be transported by air， road，rail or multi －modal transport， the contacting parties should choose a price term from EXW， FCA， CPT， CIP， DAT， DAP and DDP．
（2 ） Compliance ability． INCOTERMS 2000 classify price terms into four groups of E， F， C and D， among which the buyer assumes maximum obligations under E group while the seller assumes maximum obligations under D group． For this reason， it is recommended that the buyer does not choose EXW and the seller does not choose price term from D group， especially when either the seller or the buyer cannot directly or indirectly obtain from the country of its trading partner the import／ export license or other official authorization and carry out applicable customs formalities for the import／ export of the goods．
The traders share obligations under price terms from F group and C group．Therefore， if they can obtain favorable freight charges and insurance premium， it is recommended that they choose FOB， FCA， FAS as the buyer and CFR， CIF， CPT or CIP as the seller．
（3） Freight change． When the freight charges are expected to change in the upward trend， it is recommended to choose FOB， FCA， FAS as the seller and CFR， CIF， CPT or CIP as the buyer． On the other hand， When the freight charges are shifting in the downward trend， it is recommended to choose just the opposite．If the future trend for the freight change is hard to predict， it is better for the seller to choose price terms from the F group and the buyer to choose from the C group．
（4） Payment method． Of the three popular payment methods， e． g．，remittance， collection and letter of credit， when the payment method chosen is collection or letter of credit， the seller is recommended to choose a price term from F group and C group where the sales contract is the shipment contract with constructive delivery． In this way， the seller or the seller's bank can control the title to the goods through title documents． Title to the goods will be released only after the importer makes payment， either to the exporter itself or to the bank．
Generally speaking， there is no need for such consideration when the payment method chosen is remittance．
1.The seller is not to bear the costs of export clearance under____．
A． FCA
B． FAS
C． FOB
D． EXW
2.Construct delivery is made when the seller____．
A． does not make delivery of the goods
B． makes delivery of both the goods and documents
C． makes delivery of the goods against documents
D． makes delivery of the goods
3.FCA differs from FOB in that____．
A． FCA applies to all modes of transport while FOB applies to ocean and inland waterway transport only．
B． The place of delivery under FOB is on board the vessel at the port of shipment while under FCA the place of delivery can be any point within the export country．
C． FCA is more flexible than FOB．
D． FCA means more obligations to the seller．
4.A shipping advice should contain the following details EXCEPT____．
A． the name of the vessel
B． description of goods
C． B ／ L number
D． date of arrival
5.That____is／ are correct about the price term variations．
A． the variations do not change the costs division of the original price term
B． the variations do not change the place of delivery of the original price term
C． the variations do not change the risk dividing line of the original price term
D． the variations do not change the payment method of the original price term
1.According to INCORERMS 2000， contracts made under C group belong to shipment contracts．
2.DDP is the only trade term that requires the buyer to clear the goods for both export and import．
3.Under CIP term， if the types of insurance coverage are not specified in the sales contract， the seller is required to obtain insurance only on minimum cover．
4.To further specify the responsibility of unloading charges and to avoid any disputes in this regard， FOB takes varied terms．
5.Under CIF， if the goods are lost during transit， the buyer can refuse to make payment on receiving documents， even the documents submitted by the seller are completely correct and in full set．
1.Company XYZ， Chengdu has entered into a contract with Company HD，Thailand to export 100 sets of sterilized cupboards under CFR． The time of shipment is agreed to be made before 15， April． Company XYZ， Chengdu has placed the goods on board the ship on 8， April but failed to immediately send to the buyer the shipping advice， being the weekends that followed right after the shipment date． For this reason， Company HD， Thailand did not contract in time for the insurance of the goods． Unfortunately， the goods were destroyed due to a fire on the night of 8， April． Questions：
（1）Who should bear the loss？
（2）Why or why not？
2.A Chinese company， Company A， Chengdu exported 20 M／ T of herbs and spices to Company B in Singapore under USD 2 500 ／ M／ T FOB Shanghai，container transport with the shipment to be made in October． Company A， Chengdu received the shipping advice from Company B on 16， Oct． In order to make shipment on time， Company A， Chengdu sent the goods on 17 Oct and the goods were stored in the dock warehouse． Unfortunately， the warehouse was on fire the very night and the goods were completely burnt and lost． Company A， Chengdu had to bear all the risks and losses to the goods． Questions：
（1）Would Company A， Chengdu suffer such a loss if the chosen price term was FCA？
（2）Why or why not？
Refer to Figure 2.8 below and consider the following questions：
Figure 2.8 Major Obligations in the Transit of Goods in International Trade
1.How many parties will be involved so that the goods can be successfully transported from the exporting country to the importing country？
2.What do we learn about the importance of “ team work” in trade transactions？
3.What inspiration can be drawn as to a better understanding of the Belt and Road Initiative？