Commodities

Shipping terms

Updated on: Apr 02, 2014

Trading in commodities has various terms, particularly if a produce has to be exported or imported. Transportation is part and parcel of any trade. Therefore, let us look at various freight terms in commodities trading, particularly related to shipping.

In shipping, the most common form of trading quotes are f.o.b, c&f, c.i.f, etc. These are terms spelt in trading for various conditions to deliver a commodity.

F.O.B is free-on-board. A commodity sold on F.O.B basis will mean that the seller’s responsibility ends with delivering the commodity at the port of its loading on a vessel or aircraft. Once the commodity is delivered at the point of loading, the risk of loss or damage to the goods gets transferred to the buyer. A F.O.B quote normally states the port where the commodity will be loaded.

F.O.R is free-on-rails wherein a commodity is loaded on to a rail or truck to the port of loading. The charge for transporting the commodity in this arrangement is borne by the seller.

C&F is cost and freight that a buyer will have to pay a seller for a produce as well as for transporting it to the port of landing. This includes all transportation costs, including shipping, till it reaches the buyer’s port. However, this does not include insurance charges that can cover any damage or loss to the produce.

C.I.F or cost, insurance and freight, on the other hand, ensures that payment is made for the commodity, its transportation while insuring against loss or damage until it reaches the port of landing.

There are two other terms too in commodities trading, viz CPT and CIP.

CPT or carriage paid to will ensure that the seller is paid for the commodity and its transportation to the buyer’s gate or warehouse.

CIP or carriage and insurance paid is a term for charging a buyer for a produce and transporting it, besides insuring against loss or damage till it reaches the buyer’s warehouse.

Published on April 02, 2014

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