Shipment contract

Definition and principle

A shipment contract (or sale at departure) is an international sales contract in which the seller fulfils their delivery obligation at the point of departure (factory, port of shipment, handover to carrier). Transport risks are transferred to the buyer upon delivery at the point of departure, even if the seller may organise and pay for transport (C terms).

Corresponding Incoterms

Shipment contracts correspond to E, F, and C group Incoterms:

Group E:

• EXW: the seller makes goods available at their premises. Minimum seller obligation

Group F (main carriage not paid by seller):

• FCA: the seller delivers to the carrier at the named place
• FAS: the seller delivers alongside the ship at the port of shipment
• FOB: the seller delivers on board the ship at the port of shipment

Group C (main carriage paid by seller, but risk transferred at departure):

• CFR/CIF: the seller pays freight (and insurance for CIF) to the port of destination, but risk transfers when placed on board
• CPT/CIP: multimodal version of CFR/CIF

Key characteristic

• The main characteristic of a shipment contract is the possible disconnect between the point of risk transfer (at departure) and the point to which the seller pays costs (at destination, for C terms)
• This disconnect is frequently misunderstood and a source of disputes

Strategic choice

• Shipment contracts are generally favoured when the buyer has strong logistics expertise or wishes to control transport
• The seller limits their risks but loses control of the logistics chain after the delivery point
• Cargo insurance must be taken out by the buyer (except CIF/CIP) to cover main carriage