Article
Every export quotation names an Incoterm. It decides who arranges and pays for transport, insurance, export and import clearance, and exactly when the risk of loss passes from seller to buyer. Choosing the right term avoids surprises in cost and responsibility.
The terms buyers meet most
| Term | Seller delivers | Risk passes | Main freight paid by |
|---|---|---|---|
| EXW – Ex Works | Goods ready at seller's premises | At seller's premises | Buyer |
| FCA – Free Carrier | Goods handed to buyer's carrier, export cleared | On handover to carrier | Buyer |
| FOB – Free On Board | Goods loaded on vessel at port of shipment | When on board | Buyer |
| CFR – Cost and Freight | Goods on board, freight paid to destination port | When on board at origin | Seller |
| CIF – Cost, Insurance and Freight | As CFR plus minimum insurance | When on board at origin | Seller |
| DAP – Delivered at Place | Goods at named destination, not unloaded | At destination | Seller |
| DDP – Delivered Duty Paid | As DAP plus import duties and clearance | At destination | Seller |
Sea-only terms
FOB, CFR and CIF are intended for sea and inland waterway transport. For containerised cargo handed over at an inland depot, FCA, CPT or CIP are often more accurate, because the seller loses control of the goods before they are loaded on the ship.
Key point about CFR and CIF
Under CFR and CIF, the seller pays freight to the destination port, but the risk passes at the port of loading. If cargo is damaged at sea, the buyer claims on insurance. CIF requires only minimum cover (Institute Cargo Clauses C), so many buyers ask for higher cover or arrange their own.
Which term should you choose?
- FOB / FCA – if you have a good freight forwarder and want control over shipping.
- CFR / CIF – if you prefer the supplier to book freight and give a landed price to your port.
- DAP / DDP – if you want delivery to your site, though fewer suppliers offer DDP because of import duty and tax handling.
Always name the place
An Incoterm without a place is incomplete. Write it as FOB Nhava Sheva, Incoterms 2020 or CIF Jebel Ali, Incoterms 2020.
Frequently asked questions
What is the difference between FOB and CIF?
Under FOB the buyer pays sea freight and insurance; under CIF the seller pays freight and minimum insurance to the destination port. In both, risk passes when goods are on board at the port of loading.
Which Incoterm is best for containers?
FCA, CPT or CIP often fit containerised cargo better than FOB, CFR or CIF.
Do Incoterms cover payment terms?
No. Incoterms cover delivery, costs and risk, not payment or ownership transfer.
Key takeaways
- The Incoterm decides costs, responsibilities and risk transfer.
- Under CFR and CIF, risk passes at the loading port.
- Always state the term, the named place and "Incoterms 2020".
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