Trade terms

Clear terms. Controlled trade.

Understand delivery responsibilities, risk transfer and payment instruments in one place. Agree the applicable terms before material, documents or funds move.

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Delivery responsibilities

Incoterms® 2020

Eleven ICC rules allocate delivery obligations, costs and the point where transit risk passes. Choose the rule for the actual transport mode and name the place precisely.

Incoterms do not determine ownership, price or payment terms. Record those separately in the contract, together with assay, custody, licensing and release conditions.

Any mode of transport

For road, air, rail, sea or combined transport.

EXWEx WorksBuyer arranges and pays main carriage.

Seller responsibilities: Prepare and package the goods for collection at the named place.
Buyer responsibilities: Load, arrange carriage, and handle export, transit and import formalities.
Risk transfer: When goods are placed at the buyer’s disposal at the agreed place, before loading.
Insurance: Neither party is required by this rule to arrange insurance.

Check whether the buyer can lawfully complete export formalities; FCA may suit an export transaction better.

FCAFree CarrierBuyer arranges and pays main carriage.

Seller responsibilities: Clear for export and deliver to the buyer’s nominated carrier or person at the named place.
Buyer responsibilities: Arrange main carriage and complete transit and import formalities.
Risk transfer: At the agreed delivery point. At the seller’s premises, delivery includes loading; elsewhere, goods arrive ready for unloading.
Insurance: Neither party is required by this rule to arrange insurance.

Suitable for air, road, container and combined transport when the delivery point is precise.

CPTCarriage Paid ToSeller pays main carriage to the named destination.

Seller responsibilities: Clear for export, deliver to the carrier and pay carriage to the named destination.
Buyer responsibilities: Complete transit and import formalities and bear transport risk after delivery to the carrier.
Risk transfer: When goods are handed to the carrier at the agreed delivery point, usually the first carrier.
Insurance: The seller has no obligation under this rule to arrange insurance.

The destination paid for and the point where risk passes are different places.

CIPCarriage and Insurance Paid ToSeller pays main carriage to the named destination.

Seller responsibilities: Clear for export, deliver to the carrier, pay carriage and obtain the required cargo insurance.
Buyer responsibilities: Complete transit and import formalities; bear transport risk after delivery to the carrier, supported by the agreed cover.
Risk transfer: When goods are handed to the carrier at the agreed delivery point, usually the first carrier.
Insurance: Seller obtains Institute Cargo Clauses (A) or similar cover, unless the parties agree otherwise.

Confirm that the policy expressly covers precious metals, the route, custodians and agreed insured value.

DAPDelivered at PlaceSeller pays carriage to the named destination.

Seller responsibilities: Arrange carriage and bear risk to the named destination; handle export and transit formalities.
Buyer responsibilities: Handle import clearance, duties and taxes, and unload at destination.
Risk transfer: At the named destination, with goods on the arriving vehicle ready for unloading.
Insurance: Neither party is required by this rule to arrange insurance.

The buyer remains responsible for import formalities and destination unloading.

DPUDelivered at Place UnloadedSeller pays carriage and unloading at the named destination.

Seller responsibilities: Arrange carriage, handle export and transit formalities, and unload at the named destination.
Buyer responsibilities: Handle import clearance and pay import duties and taxes.
Risk transfer: After the goods have been unloaded and placed at the buyer’s disposal at destination.
Insurance: Neither party is required by this rule to arrange insurance.

Use only where the seller can organise safe unloading at the agreed place.

DDPDelivered Duty PaidSeller pays carriage to the named destination.

Seller responsibilities: Arrange carriage, clear for export, transit and import, and pay applicable import duties and taxes.
Buyer responsibilities: Receive the goods and unload at the named destination.
Risk transfer: At the named destination, import-cleared and on the arriving vehicle ready for unloading.
Insurance: Neither party is required by this rule to arrange insurance.

Confirm that the seller can legally act for import clearance and meet destination tax obligations.

Sea and inland waterway

For delivery alongside or on board a vessel. These four rules are not for air or road transport.

FASFree Alongside ShipBuyer pays loading and main carriage.

Seller responsibilities: Clear for export and place goods alongside the buyer’s nominated vessel at the named port of shipment.
Buyer responsibilities: Load aboard, arrange main carriage, and complete transit and import formalities.
Risk transfer: When goods are placed alongside the vessel at the named port of shipment.
Insurance: Neither party is required by this rule to arrange insurance.

Applies to delivery alongside a vessel; use an any-mode rule for an air or road shipment.

FOBFree On BoardBuyer pays main carriage from the port of shipment.

Seller responsibilities: Clear for export and load goods aboard the buyer’s nominated vessel at the named port of shipment.
Buyer responsibilities: Arrange main carriage and complete transit and import formalities.
Risk transfer: When goods are on board the vessel at the port of shipment.
Insurance: Neither party is required by this rule to arrange insurance.

For container handover before vessel loading, consider FCA rather than FOB.

CFRCost and FreightSeller pays freight to the named destination port.

Seller responsibilities: Clear for export, deliver on board and pay freight to the named port of destination.
Buyer responsibilities: Bear risk after loading at origin, and complete transit and import formalities.
Risk transfer: When goods are on board at the port of shipment, although the seller pays onward freight.
Insurance: The seller has no obligation under this rule to arrange insurance.

Agree destination handling and unloading costs against the actual carriage contract.

CIFCost, Insurance and FreightSeller pays freight to the named destination port.

Seller responsibilities: Clear for export, deliver on board, pay freight and obtain the required marine cargo insurance.
Buyer responsibilities: Bear risk after loading at origin, and complete transit and import formalities.
Risk transfer: When goods are on board at the port of shipment, although the seller pays freight and insurance.
Insurance: Seller obtains Institute Cargo Clauses (C) or similar minimum cover, unless broader cover is agreed.

Minimum cover may be unsuitable for precious metals. Agree suitable cover and exclusions explicitly.

Rule definitions: International Chamber of Commerce — Incoterms® 2020. These summaries support comparison; the complete ICC rules and the agreed contract govern their use.

Settlement and security

Payment instruments

Match the payment method and any supporting security to the counterparty, documents, route and agreed release condition. Acceptance is confirmed for each engagement.

T/T · documented banking channel

Bank transfer

A payment instruction moves funds through the banks agreed in the contract. Timing, currency, charges and the release condition must be specified.

Before proceeding

Verify beneficiary details independently. Release material only after the receiving bank confirms the required cleared funds; a message or payment screenshot is insufficient.

Typical sequence

Agree payment terms; verify bank instructions; transfer; confirm receipt; authorise release.

LC · payment against complying documents

Documentary letter of credit

An issuing bank undertakes to honour a presentation that meets the credit’s terms. A second bank may add confirmation where agreed.

Before proceeding

Agree document requirements and deadlines with the banks before shipment. Banks examine documents; the credit does not establish the physical quality of the goods.

Typical sequence

Agree credit terms; issue and authenticate; ship; present documents; bank examination; honour if compliant.

SBLC · contingent payment protection

Standby letter of credit

A standby supports an agreed obligation and can be drawn when the conditions stated in it are met, commonly following non-payment or another default.

Before proceeding

Authenticate through the banks and review expiry, claim documents, applicable rules and issuer risk. A standby is not ordinary settlement or automatically available cash.

Typical sequence

Define the secured obligation; agree wording; issue and authenticate; perform; claim only if the stated conditions arise.

D/P · D/A

Documentary collection

Banks transmit documents for release against payment (D/P) or acceptance of a future payment obligation (D/A), following the collection instructions.

Before proceeding

Banks facilitate collection without guaranteeing payment. Confirm whether the transport documents actually control delivery; this is especially important for air shipments.

Typical sequence

Ship; submit documents; banks present; buyer pays or accepts; documents released under instructions.

Full or partial prepayment

Advance payment

The buyer pays an agreed amount before shipment or another contractual milestone. The contract defines the remaining balance and performance conditions.

Before proceeding

The buyer takes performance risk. Agree the evidence of performance, refund terms and any independently authenticated protection before payment.

Typical sequence

Agree milestones; verify beneficiary; pay agreed advance; confirm receipt; perform and reconcile the balance.

Payment or performance security

Bank guarantee

A bank’s undertaking supports a specified payment, performance or advance-payment obligation according to the guarantee’s wording.

Before proceeding

Review the issuer, governing rules, demand conditions, amount and expiry. A guarantee supports the obligation; it does not replace the agreed settlement method.

Typical sequence

Define obligation; agree wording; issue and authenticate; monitor expiry; discharge or present a complying demand.

Payment after delivery

Open account

Goods are supplied before payment falls due on the date agreed in the contract. This requires an assessed credit relationship and explicit approval.

Before proceeding

The seller bears non-payment risk. Confirm credit limits, due dates, monitoring and any agreed insurance or security before release.

Typical sequence

Approve credit terms; deliver and document; invoice; monitor due date; receive and reconcile funds.

Reference: International Trade Administration — Trade Finance Guide. Bank messaging formats, including legacy MT103 references and ISO 20022 messages, are not substitutes for confirmation of credited funds.

Before commitment

Agree one complete set of terms.

Specify the Incoterm, named place and edition; material and assay basis; price, fees and currency; payment method; custody and insurance; documents; and the authorised release condition.

Educational guidance only. The signed contract and authenticated bank terms control the engagement. Listing an instrument does not confirm acceptance, financing or issuance by AL-AREEN.

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