Delivery terms: FOB, CIF and CFR
The Incoterms 2020 rule chosen for a cargo allocates the cost of carriage, the point at which risk transfers and the responsibility for insurance. In bulk oil trading the most common terms are FOB, CFR and CIF.
- FOB (Free On Board) — the buyer nominates and pays for the vessel; risk passes to the buyer once the cargo is on board at the load port.
- CFR (Cost and Freight) — the seller arranges and pays for carriage to the discharge port; risk still passes at the load port.
- CIF (Cost, Insurance and Freight) — as CFR, with the seller also arranging marine insurance to the discharge port.
A fuller comparison is set out in FOB versus CIF in oil trading.
Vessel nomination and laycan
The party responsible for carriage nominates a vessel that meets the load and discharge port restrictions and the cargo requirements. Nomination is made against the laycan — the laydays/cancelling window, the agreed range of dates within which the vessel must arrive and tender readiness to load. If the vessel arrives after the cancelling date, the counterparty may have the right to reject it.
3FB coordinates the match between the vessel programme, the loading window and the contractual delivery dates. The concept is explained further in what a laycan is.
Loading window and Notice of Readiness
On arrival the vessel tenders a Notice of Readiness (NOR) once it is physically and documentarily ready to load or discharge. Laytime — the time allowed for cargo operations — begins to count in accordance with the charter party terms. Time used beyond the allowed laytime gives rise to demurrage, while time saved may earn despatch. Coordinating the loading window with the vessel’s arrival reduces the risk of waiting time and schedule conflicts.
Port logistics
Port operations cover berth availability, tug and pilotage arrangements, hose connection and cargo transfer, and compliance with terminal and local authority requirements. 3FB coordinates with terminals, agents and the appointed inspector so that berthing, loading and documentation proceed in sequence. Operational constraints such as draft, vessel size limits and terminal scheduling are factored into the vessel nomination.
Marine documentation
Cargo operations generate the marine document set that supports payment and title transfer. This typically includes the Bill of Lading, the mate’s receipt, ullage and quantity reports, and the time sheet or statement of facts recording the sequence of events in port.
- Bill of Lading (B/L) — evidence of shipment, cargo description and, where negotiable, title — see the Bill of Lading explained.
- Mate’s receipt — acknowledgement by the vessel that the cargo has been received on board.
- Ullage and quantity reports — measured volumes recorded at load and discharge.
- Statement of facts / time sheet — the record used to calculate laytime, demurrage or despatch.