Under EXW, FCA and FOB, you as buyer arrange and pay the main sea freight. Under CFR, CIF, CPT, CIP, DAP, DPU and DDP, the seller arranges and pays it. That is the cost split. Risk is a separate question, and under several rules the seller pays freight while you carry the risk.
The Incoterms rules come from the International Chamber of Commerce. The current edition is Incoterms 2020. Always name the edition and the place in your contract.
Buyer arranges main freight
- EXW (Ex Works). You collect from the factory and handle everything, including export clearance in India. Rarely practical for overseas buyers, because Indian export formalities need an Indian party.
- FCA (Free Carrier). The seller clears for export and hands the goods to your carrier at a named place, such as the factory or a container terminal. You pay freight from there.
- FOB (Free On Board). The seller clears for export and loads on the vessel at the named Indian port. You pay ocean freight and everything after.
Seller arranges main freight
- CFR and CPT. The seller pays freight to your port or named place. Risk passes to you in India, on board or at handover to the first carrier.
- CIF and CIP. As CFR and CPT, plus the seller buys insurance for you. CIP requires wider cover than CIF under Incoterms 2020.
- DAP (Delivered At Place). The seller pays carriage and carries risk to your named place, ready for unloading. You unload and clear import.
- DPU (Delivered at Place Unloaded). As DAP, but the seller also unloads. Less common for agri containers.
- DDP (Delivered Duty Paid). The seller also clears import and pays duties in your country. Rare from Indian agri processors, and it needs a party able to act as importer in your country.
Charges that fall between the cracks
Terminal handling at origin and destination, documentation fees, seal fees and local surcharges are not always clear from the Incoterm alone. Shipping lines and forwarders bill them in different ways. On FOB, check that origin charges stay with the seller. On CFR or CIF, expect destination charges to land with you, even though the seller paid the freight.
Demurrage and detention at destination are usually yours once the container arrives. Free days depend on the line and the booking, so ask before shipping.
This is general guidance, not legal advice. For the rules side by side see the difference between FOB, CFR, CIF and DAP, and for a worked comparison see FOB, CIF or DAP.
Put it in writing
- The Incoterm, the edition and the exact named place.
- Which origin charges the seller pays, listed by name.
- Who books the vessel, and the latest date to do so.
- Who arranges insurance, the cover and the insured value.
- Who pays if a booking is rolled or the container misses the vessel.
How we help
We list the cost split in the purchase specification, so each supplier quotes the same charges, and we check the invoice and bill of lading against it before you pay. Ask for a free sourcing review.