Review INCOTERMS 2020 | Export Import Sales Contract |FOB – CIF-CFR

Review INCOTERMS 2020 Export Import Sales Contract FOB - CIF-CFR

Chetan Kumar Verma
international Biz Consultant

Hi, my name is Chetan Kumar Verma from The Biz Solution India Exporter Team, India. I work as a CEO of Kliicksetup Business Solution OPC Pvt Ltd – Notes Book Publication LLP – The Biz Solution – India Exporter and many more. With this blog I’d like to share all about International Trade,Mandatory Export Import Registration , Top Buyer Countries for Indian Products Export , Starter Support for Export Import Business. 

I do hope this little information could give you a little bigger benefit for learning things about international trade, as a handbook for you. All I want from you after reading my posts is share your thoughts by leaving comments below each post.

Review INCOTERMS 2020 | Export Import Sales Contract |FOB – CIF-CFR

For all Export Import Startup Needs to understand about Incoterms and today we will review INCOTERMS 2020 | Export Import Sales Contract |FOB – CIF-CFR

International trade transactions are dynamic. A sale and purchase activity that crosses the country’s territorial boundaries which are basically owned by two parties, namely the seller (exporter) and buyer (importer). However, in practice, it also involves other parties. Who are they? Banks, shipping companies, customs, surveyors, to government departments.

In addition to the parties involved, international trade also has a dynamic circle at a more fundamental level, namely the form and method of buying and selling itself. There are several options that can be taken by the seller and buyer, starting from the type of unsecured transaction from the bank (non-L / C) such as open account, advance payment, consignment, and documentary collection; to transactions involving banks as guarantors, such as letters of credit (L / C).

Now we try to flashback. Before the seller and buyer involve themselves in the international trade process by involving other parties, as well as being involved in a complicated trading process – whatever method they choose – they first cling to the agreement they first made as their underlying, namely the Sales Contract.

Yes, the sales contract is the beginning of the buying and selling process in the realm of international trade. The sales contract contains an agreement or agreement between the seller and the buyer in the form of a document that in principle states their rights and obligations.

In practice, there are various kinds of sales contracts. Starting from the contract which is notarial, under the hand, until only a mere fax order. Or even telephone conversations can be considered as a sales contract. But for good, and to avoid disputes in the future, you should make a sales contract in writing.

Regarding content, in general, sales contracts contain relatively similar agreement clauses. That is regardless of the buying and selling method they choose, whether L / C or non L / C. And the clauses listed generally include the following:

1. Terms of goods

a. Details of goods, including:

– Types of goods
– Types of goods
– Specifications of goods (specifications of goods)
– Authenticity of goods (originality of goods)
– Origin of goods (origin of goods)

b. Quantity and quality of goods (quantity and quality of goods)
c. Price of goods

2. Terms of delivery of goods


Port of loading and port of loading and port of destination
Partial shipment is permitted or not
– Transshipment
is permitted or not

3. Terms of delivery

The clauses in the sales contract regarding these conditions generally refer to the International Commercial Terms (INCOTERMS) 2020 to uniform the interpretation of the implementation of the terms of delivery of goods, risk transfer and costs from the seller to the buyer based on the type of transportation used.

The types of terms of delivery according to INCOTERMS 2020 include:
1. Ex Works (EXW)
2. Free Carrier At (FCA)
3. Free Alongside Ship (FAS)
4. Free on Board (FOB)
5. Cost and Freight (CFR)
6. Cost Insurance and Freight (CIF)

7. Carrier Paid To (CPT)
8. Carrier and Insurance paid (CIP)
9. Delivered at Frontier (DAF)
10. Delivered Ex Ship (DES)
11. Delivered At Quay (DEQ)
12. Delivered Duty Unpaid (DDU)
13. Delivered Duty paid (DDP)

Because the explanation of each type of terms above delivery requires detailed details, I will peel it in another article. But in practice, not all types of terms above are used in international trade transactions. The most commonly used are FOB, CFR, and CIF.

4. Terms of payment

a. Payment without L / C (non L / C), including:

Open account
– Advance payment
– Consignment (consignment)

– Collection

b. Payment by L / C, consisting of:
– Sight L / C
– Usance L / C
– Red clause L / C

5. Terms of documents (documentations)

This clause contains an agreement on what documents are needed in the context of the realization of the sales contract, consisting of:

a. Financial documents, in the form of a draft / draft of unconditional orders to pay a sum of money

b. Commercial documents, including:

– Invoices / invoices, as proof of sale of goods
– Transportation documents, as proof of delivery of goods
– Insurance documents, as proof of risk / insurance coverage
– Other documents, such as Certificate of Origin, Certificate of Analysis, Certificate of Inspection, Packing List, etc.

Thus my description of the sales contract, the beginning of an international trade transaction.

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