FOB, CFR and CIF reflect differences in cost and risk for oil and gas cargo shipment

• For shipping related to oil and gas the commonly used terms are FOB, CFR and CIF – the last two terms replaces previously used DES term

  • FOB – Free On Board (2000 and 2010)

    • Buyer bear all costs (including freight) & risks (once the goods enter the ship).
    • This term means that the seller delivers when the goods pass the ship’s rail at the named port of shipment.
    • The seller must clear the goods for export. This term can only be used for ocean transport. If the parties do not intend to deliver the goods across the ship’s rail, the FCA term should be used.

  • CFR – Cost and Freight (2000 and 2010)

    • Seller bear all cost (including freight). Buyer bear the risk
    • This term means the seller delivers when the goods pass the ship’s rail in the port of shipment.
    • Seller must pay the costs & freight necessary to bring the goods to the named port of destination, BUT the risk of loss or damage, as well as any additional costs due to events occurring after the time of delivery, are transferred from seller to buyer.
    • The seller must clear goods for export. This term can only be used for ocean transport.

  • CIF – Cost, Insurance, Freight (2000 and 2010)

    • Seller bear all costs (including freight) and risk
    • The seller delivers when the goods pass the ship’s rail in the port of shipment. Seller must pay the cost & freight necessary to bring goods to the named port of destination.
    • The risk of loss & damage is the same as CFR. Seller also has to procure marine insurance against the buyer’s risk of loss/damage during the carriage. The seller must clear the goods for export. This term can only be used for ocean transport.

• DES (destination, ex-ship) is the old term that is similar to CIF. It was replaced in favour for more targeted terminology reflecting many unique arrangement on costs and risk

References

• Incoterms 2022: EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU (iaspaper.net)
  • Read more https://www.iaspaper.net/incoterms-ddp-upsc-economics/

• [Incoterms® in 2022 Guide

  IncoDocs](https://incodocs.com/blog/incoterms-guide-2022/)

  • [Incoterms® 2020 Explained - The Complete Guide

    IncoDocs](https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide/)

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• topic:: 00 Engineering Economics00 Engineering Economics
  #MOC / for economics notes with focus on petroleum fiscal and engineering
  
• updated:: 2022-12-05 Private or Broken Links
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