About International Procurement: Freight Prepaid and related incoterms - Schain24.Com

About International Procurement: Freight Prepaid and related incoterms

Procurement: Freight Prepaid and related incoterms
Transportation is one of the Drivers of Supply Chain.
The term Freight denotes transportation charges. The
International Commercial terms or INCOTERMS refers to whether the
shipper/consignee responsible to pay the freight or transportation charges.
Freight Collect” & “Freight Prepaid” are two
shipping terms, which indicate whether consignee has the primary liability to
the carrier for the shipping charges in a procurement process.
If it is a “Freight Prepaid” shipment, then the
carrier is supposed to invoice to shipper for the transportation charges.
Conversely, if it is a “Freight Collect” shipment, the carrier is supposed to
invoice the consignee.
The Incoterms CFR, CIF, CPT, CIP, DAT, DAP, DDP
require repayment of cost of the main carriage or shipping cost by
EXW, FCA, FOB, FAS etc Incoterms are used for
“Freight Collect” shipment.
Now, we would like to discuss about incoterms which
can be used for different types of “Freight Prepaid” shipments based on
Incoterms 2010 published by ICC:
Carriage paid by Supplier” group of incoterms:
CFR: Cost and Freight (Named Port of destination)
Sellers arrange transport and pay all the freight charges,
so that the goods may be brought to a named destination port. Point of delivery
of goods and transfer of risk is when the respective goods pass ship’s rail at
the destination port. Previously, it was called CNF or C&F. This incoterm
is used for sea bound shipments.

CIF: Cost, Insurance and Freight (Named Port of
This incoterm is exactly same as CFR, except seller
need to pay insurance also. It’s only applicable for Maritime and inland waterway
CPT: Carriage Paid to (Name place of destination)
All kind of shipments
(general/multimodal/containerization) are included for CPT. Not only sea shipments.
Point of transfer of risk happens upon delivery of goods at the country of export.
An Incoterm

CIP: Carriage and Insurance paid to (Named place of
This incoterm is exactly same as CPT, except seller
need to pay insurance also.
group of incoterms:
DAT: Delivered at Terminal (Named terminal at Port
or Place of Destination)
Delivery takes place once the goods unloaded at the
terminal .Except import clearance cost carriage to terminal cost and all risk
is to be paid by seller .Previously DEQ was used for similar purpose.
DAP: Delivered at Place (Named Place of Destination)
Delivery takes place once the seller sends the cargo
to the Named Place and pays freight for it. Seller assumes risks until buyer is
ready to unload it at the terminal DAP should be used in place of previous incoterms
DDP: Delivery duty paid (Named place of destination)
It is seller’s duty to deliver the goods to the
named place in buyer’s country. Including duty and taxes all cost need to bear
by the seller. So, the term is giving maximum responsibility to seller and minimum
responsibility to buyer. The goods are delivered at the named place, which may
be buyer’s premises, but not unloaded.   
Above mentioned incoterms are applied for different
type of transportations. CFR and CIF are used for Maritime and inland waterway. CPT,
CIP, DAT, DAP, DDP are used for air freight, road freight, Railway freight,
Maritime and Inland waterway freight.
A Usage of Incoterms by Banks in Bangladesh:
Bangladesh Bank (Central Bank of Bangladesh) has
given a rule binding to its entire Banks that the EXP Form shall be negotiated
/ accepted only when these are drawn on CFR/CIF/CPT/CIP basis and not on
At conclusion stage, we can say one thing is that
suppliers and buyers can also invent or modify incoterms for their particular situation.
But ICC incoterms are widely used by world business community for its
familiarity and wide acceptance.
Bengali Version:
If required, please see the Bengali Version of  the article in the below mentioned link :

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