13 Important Commercial Terms in the Apparel Industry

The commercial term is an abbreviation of International Commercial terms, which were first published in 1936 by the International Chamber of Commerce (ICC); since then, there have been six different revisions and updates to the commercial terms. The income terms provide a standard set of rules for the most often used international trade term. This article presents 13 Important Commercial Terms in the Apparel Industry.

The goal of the income terms is to alleviate or reduce confusion over the interpretation of shipping terms by exactly who is obligated to take control of insuring goods at a particular point in the shipping process. Furthermore, the terms outline the obligation for the clearance of the goods for export or import and requirements on packing items. These terms are also used as price fixation terms in the apparel industry.

13 Important Commercial Terms in the Apparel Industry

There are some terms used commercially in the apparel industry, such as:

1. EXW-Ex Works

The seller fulfills his obligation to deliver when he has made the goods available to the buyer at his premises. the critical points worth noting are:

Carriage to be arranged by the buyer.
Risk transfer from the seller to the buyer when the goods are at the buyer’s disposal.
Cost transfer from the seller to the buyer when the goods are at the buyer’s disposal.

2. FCA- Free Carrier

The seller satisfies his obligation to deliver when he has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the designated place or point. If the buyer instructs the seller to deliver the cargo to a person, e.g., a freight forwarder who is not a ‘’carrier,’’ the seller is deemed to have completed his obligation to deliver the goods when they are in that person’s custody. the critical points worth noting are-

Carriage is to be arranged by the buyer or by the seller on the buyer’s behalf.
Risk transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place.
Cost transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place.

3. FAS- Free Alongside Ship:

The seller satisfies his obligation to deliver the goods placed alongside the vessel on the quay or lighters at the shipment name. The critical points worth noting are:

Carriage to be arranged by the buyers
Risk transfer from the seller to the buyer when the goods have been placed alongside the ship.
Cost transfer from the seller to the buyer when the goods have been placed alongside the ship

4. FOB- Freight on Board:

This means the seller completes his obligation to deliver when the goods pass over the ship’s rail at the named port of shipment. the critical points worth noting are-

Carriage to be arranged by the buyers
Risk transfer from the seller to the buyer when the goods pass the ship rails
Cost transfer from the seller to the seller to the buyer when the goods pass the ship’s rail

5. CIF- Cost, Insurance and Freight:

The seller has the same obligations as under CFR but must also procure marine insurance against the buyer’s risk of loss of or damage to the goods during carriage. The critical points worth noting are-

Carriage and Insurance are to be arranged by the dealer.
Risk transfer from the seller to the buyer when the goods pass the ship’s rail.
Cost transfer at the port of destination: The buyer paying such costs is not for the seller’s account under the contract of carriage.

6. CNF-Cost and Freight:

The seller must pay the cost of freight necessary to bring the goods to the named post of destination. the critical points worth noting are-

Carriage to be arranged by the seller.
Risk transfer from the seller to the buyer when the goods pass the ship’s rail
Cost transfer at the port of destination: The buyer paying such costs is not for the seller’s account under the contract of carriage

7. CPT- Carriage Paid To

The seller paid the freight for the carriage of the goods to the named destination port. The risk of loss of, or damage to, the goods, as well as any additional costs due to the events occurring after the time the goods have been delivered into the custody of the carrier. In this context ’’carrier” means any person who, in a contract of carriages, undertakes to perform or to procure the performance of carriage by rail, roads, sea, or air by such combination of moods. The terms applied to any mode of transport. The critical points noting are:

Carriage to be arranged by the seller
Risk transfer from the seller to the buyer when the goods have been delivered to the carrier.
Cost transfer at the port of destination: The buyer paying such costs is not for the seller’s account under the contract of carriage

8. Carriage and Insurance Paid To:

The seller has the same obligation as under CRT but must also procure cargo insurance against the buyer’s risk of loss of or damage to the goods during the carriage. The seller must clear the export of the goods. The critical points worth noting are:

Carriage and Insurance are to be arranged by the seller.
Risk transfer from the seller to the buyer when the goods have been delivered to the carrier
Cost transfer at the port of destination: buyers paying such costs are not for the seller’s account under the contract of carriage.

9. DAF- Delivered at Frontier:

The seller fulfills his obligation to deliver when the goods are available, cleared for export, at the named point, and placed at the frontier but before the customs border of the adjoining country. Title, risk, and responsibility for import clearance pass to buyer when delivered to named border point by the seller. the term ‘’frontier’’ covers any frontier, including that country of export. Therefore, the frontier in question must be defined precisely by naming the point and place in the term. The term applies primarily to the goods carried by rail or road but may be used for any mode of transport. The critical points worth noting are-

Carriage and Insurance are to be arranged by the seller.
Risk transfer from the seller to the buyer when the goods have been delivered at the frontier
Cost transfer from the seller to the buyer when the goods have been delivered at the frontier.

10. DES-Delivered EX Ship:

The seller satisfies his obligation to deliver when the goods are available to the buyer on board the ship unclear for import at the named port of destination. Title, risk, and responsibility for vessel discharge and import clearance pass to buyer when the seller delivers goods on board the ship at the destination port. the critical points worth noting are-

Carriage and Insurance are to be arranged by the seller.
Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship at the port of destination
Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship at the port of destination

11. DEQ- delivered EX Quay:

The seller fulfills his obligation to deliver when the goods are available to the buyer on the quay at the named port of destination cleared for importation. the critical points worth noting are-

Carriage and Insurance are to be arranged by the seller
Risk transfer from the seller to the buyer when the goods are placed at the disposal of the quay
Cost transfer from the seller to the buyer when the goods are placed at the buyer’s disposal on the quay.

12. DDU- Delivered Duty Unpaid:

The seller fulfills his obligation to deliver when the goods are available at the named place in the country of importation. Title, risk, and responsibility of import clearance pass to the buyer when the seller delivers goods to named destination point in the country of importation. Buyer is obligated for import clearance.

Carriage and Insurance are to be arranged by the seller
Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyers
Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer.

13. DDP- Delivered Duty paid:

The seller fulfills his obligation to deliver when the goods are available at the named place in the country of importation. Title and risk pass to the buyer when the seller delivers goods to named destination points cleared for import.

Carriage and Insurance are to be arranged by the seller
Risk transfer from the seller to the buyer when the goods are placed at the buyers’ disposal.
Cost transfer from the seller to the buyer when the goods are placed at the buyer’s disposal.

Conclusion

Commercial terms are fundamental to carrying out business smoothly in the apparel industry. Here, we shared 13 Important Commercial Terms in the Apparel Industry. To be an expert in Textile Merchandising or commercial activities, you must have to know these terms.

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13 Important Commercial Terms in the Apparel Industry

13 Important Commercial Terms in the Apparel Industry