FREE ON BOARD
• Cost of freight & insurance to a certain
point in the transportation link (usually
within the exporting country) is included in
the seller’s price.
• Buyer must pay for freight beyond that
• Specification of fob location is critical.
– Ex-factory, Ex-city, Ex-port.
COST, INSURANCE, &
• Cost of freight and insurance to a port in
the importing country is included in the
• Buyer must pay for freight beyond the
• Specification of CIF location is useful.
COST & FREIGHT
• Cost of freight to a port in the importing
country is included in the seller’s price.
• Buyer must pay for insurance from the
originating point and freight beyond the
• Specification of C&F location is useful.
• Usually refers to the ultimate cost of the
product to the buyer at his/her place of
business after paying for cost, freight,
insurance, and customs fees and duties.
• Useful benchmark for comparing quotes
from different suppliers.
• THE U.S. HAS TWO TYPES OF
– VALIDATED LICENSE
– GENERAL LICENSE
THE IMPORTER MAY NEED TO OBTAIN
AN IMPORT LICENSE.
MAKE SURE YOUR BUYER HAS ONE IF
• Shipper’s export declaration with Export
• Commercial (and Consular) Invoice
• Bill of lading (airway bill)
• Packing list
• Insurance certificate
• Special purpose certificates
– Ex: Country of origin, Quality, Standards, etc.
• Import license (if required)
• Import declaration form (Summary Form)
• Customs bond
• Special tariff considerations
• Open Account
• Documents against acceptance D/A
• Documents against payment D/P
• Letter of Credit
• Cash in advance
LETTER OF CREDIT
• A letter issued by a bank to guarantee
payment to the seller on proof of shipment
• Irrevocable: A L/C that is irrevocable.
• Confirmed: A L/C that is endorsed by a
second bank, that takes up the responsibility
to pay the seller.
D/A AND D/P
• D/P: Documentary upon Payment
– Documents are released to buyer upon
• D/A: Documentary upon Acceptance
– Documents are released to buyer upon his
D/A is like open account.