Import Export Contract Terms


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Sales Contract/Purchase Contract

A contract is an agreement that creates an obligation,that is a binding,legally enforceable agreement between two or more competent parties.


A contract can be worked out either by the seller or the buyer, and it is called a sales contract or a purchase contract respectively. The formal contract consists of the following main terms:


Import Export Contract Terms on
Price Methods

  • FOB - Free on Board
    Free on Board means that the seller fulfills his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. The buyer has to bear all costs and risks of loss of or damage to the goods from that point. FOB terms requires the seller to clear the goods for export. This term can only be used for sea or inland waterway transport.

  • CFR or C&F - Cost and Freight

    Cost and Freight means that the seller must pay the cost and freight necessary to bring the goods to the named port of destination but the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. The CFR term requires the seller to clear the goods for export. Import Export Contract Terms


  • CIF - Cost, Insurance, and Freight
    CIF means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer's risk of loss of or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium.

  • DAF - Delivered at Frontier (...named place)
    DAF means that the seller fulfills his obligation to deliver when the goods have been made available, cleared for export, at the named point and place at the frontier, but before the customs border of the adjoining country. The term is primarily intended to be used when goods are to be carried by rail or road, but it may be used for any other mode of transport.



Import Export Contract Terms on
Payment Methods

  • Irrevocable L/C(Letter of Credit)


    A letter of credit eliminates financial risks for you, the manufacturer, and the distributor. When your distributor confirms the order, a letter of credit is drawn from that company's bank to a branch in the United States or to your bank.


    This letter of credit confirms that funds are available from the distributor to cover the same costs you quoted. An irrevocable letter of credit assures you the order will not be cancelled at any time. When that letter of credit is likewise confirmed by your bank to deliver the goods, the distributor is assured of delivery. Once the letter of credit is confirmed by the bank, the currency exchange is also confirmed, so you don't have to worry about the fluctuation in currency. Import Export Contract Terms
    Basically, the bank holds the money until all shipping documents are presented. The letter of credit states the terms and conditions to make it legal and negotiable into money, usually holding for proof of shipment of the goods. Your freight forwarder helps you attain all those documents. When you hand them to the banker, the letter of credit is turned into liquid assets for you to then pay the manufacturer and all other invoices from the transaction.

    Never work on promises. Not only do you take a gigantic risk, but you create bad risks for everyone you are involved with. A letter of credit is the only sure way to transfer these payments.


    Irrevocable L/C is the one that can not be withdrawn or amended by the opening bank without the agreement of the beneficiary. This kind of L/C is more secure and hence is most often used. It claims our attention that, according to Uniform Customs and Practice of Commercial Documentary Credits 500, if a L/C is not marked as being irrevocable or not, it should be taken as irrevocable.


  • Remittance - Import Export Contract Terms
    Remittance is of three types: Mail Transfer (M/T), Telegraphic Transfer (T/T), and Demand Draft (D/D).

    • By Mail Transfer, the buyer will hand over the payment of the goods to the remitting bank that will authorize its branch bank or correspondent bank in the country of the beneficiary by mail to make the payment to him.
    • By

    • Telegraphic Transfer, the buyer will hand over the payment of the goods to the remitting bank which will authorize its branch bank or correspondent bank in the country of the beneficiary by telegraphic means to make the payment to him. Mail transfer is less expensive, but it costs more time, while telegraphic transfer is more expensive but it is much sooner.
    • ByDemand Draft, the buyer will come to the local bank to buy a banker's bill and then deliver it to the seller or beneficiary by mail. When the seller or beneficiary has received it, he will come to the bank designated by the banker's bill for cash. Apart from banker's bill, promissory notes or checks can also be used in this way.


  • Documentary Collection

    • D/P at sight
      Under D/P at sight, the seller might either draw or not draw a draft on the buyer. He hand over the shipping documents together with (or without) the draft, and the shipping documents and the draft (or wihtout draft)will be transferred to the collecting bank which will present them to the buyer and ask him to make the payment at sight. The buyer, upon sight, should then make the payment and get the shipping documents. When the collecting has thus finished the collection, it should immediately notify the remitting bank which will then make the payment to the seller. Import Export Contract Terms
    • D/P at _ days after sight (date)
      The buyer shall duly accept the documentary draft drawn by the seller at _ days's sight upon first presentation and make payment on its maturity. The shipping documents are to be delivered against payment only.


  • Documents Against Acceptance (D/A)

    Under D/A, the buyer can get the shipping documents from the collecting bank after he has duly accepted the draft. This is only applicable to time draft. This will greatly convenience the buyer, but it means much more risk for the seller, for once he has delivered the shipping documents, he will have lost his title over the goods. Import Export Contract Terms

  • D/A means more risks for the seller, for the buyer might refuse to pay after he has accepted the draft and taken the delivery of the goods. Certainly the seller might sue him, but as is often the case, the buyer claims bankruptcy and then the seller can do nothing to remedy the situation. Import Export Contract Terms


Import Export Contract Terms on Documentation and More Others




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