Q: What do the following price terms mean: FOB, CIF, CFR? What do the following payment terms mean: T/T, L/C?
Jan 24 2007
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Answered by: Philip Wilkinson Ask a question
FOB stands for Freight on Board. It indicates that the quoted price includes all costs up to and including loading the goods into the transport vessels at the specified place. The risk of loss or damage is transferred to the buyer when the goods pass the ship’s rail.
CIF means Cost, Insurance, Freight. It is a pricing term indicating that the cost of the goods, insurance and freight are included in the quoted price.
CFR stands for Cost and Freight. It indicates that the cost of the goods and freight charges are included in the quoted price. The buyer arranges and pays for insurance.
T/T stands for Telegraphic Transfer. It means that the payment is made from the buyers bank account to the seller’s bank account directly.
L/C is a Letter of Credit. It is a financial document issued by a bank at the request of the buyer, guaranteeing payment to the seller for cargo if certain terms and conditions are fulfilled. Normally a Letter of Credit contains a brief description of the goods, documents required, a shipping date, and an expiration date after which payment will no longer be made.
For more information on importing and exporting, visit the Business Link for London website, click here.
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