FOB, CFR, CIF and DAP are Incoterms rules, published by the International Chamber of Commerce. They say where the seller's costs end and where risk passes to you. FOB ends when goods are on board at the Indian port, CFR adds sea freight to your port, CIF adds insurance as well, and DAP delivers to a named place in your country, ready for unloading.
Each rule only works if the named place is written after it, for example FOB Mundra or DAP Hamburg warehouse. Incoterms do not cover payment, ownership or quality. Your contract does.
The four rules side by side
- FOB (Free On Board), named Indian port. The seller clears the goods for export and loads them on the vessel you or your forwarder booked. Risk passes once goods are on board. You pay sea freight, insurance and everything after.
- CFR (Cost and Freight), named destination port. The seller books and pays sea freight. Risk still passes on board in India. You arrange insurance if you want it.
- CIF (Cost, Insurance and Freight), named destination port. As CFR, plus the seller buys cargo insurance for you. Under Incoterms 2020 the minimum cover is limited, so check the policy.
- DAP (Delivered At Place), named place. The seller arranges carriage to that place and carries the risk until goods arrive there, ready for unloading. You handle import clearance and duties.
The point most buyers miss
Under CFR and CIF, the seller pays freight to your port, but risk passes to you in India. If the container is damaged at sea, you claim on the insurance, not against the seller. Many first-time buyers assume CIF means the seller carries the voyage risk. It does not.
FOB, CFR and CIF are rules for sea and inland waterway transport. For containers, the ICC suggests FCA and CIP instead, because the seller hands the container over at a terminal before it is loaded. In the Indian agri trade, FOB and CIF are still widely used for containers. Ask your forwarder whether that matters for your insurance.
Which costs sit where
- Export customs clearance: seller, under all four rules.
- Origin terminal handling: usually seller under FOB, but check how the line charges it.
- Sea freight: buyer under FOB, seller under CFR, CIF and DAP.
- Cargo insurance: buyer under FOB and CFR, seller under CIF, seller's own risk under DAP.
- Destination port and terminal charges: often buyer, but under DAP depends on the contract and freight terms.
- Import duties and import clearance: buyer under all four.
Choosing between them
FOB gives you control of the line, the forwarder and the insurance. CIF and CFR are simpler when you have no forwarder. DAP is simplest, but you pay for the seller's margin on freight and lose visibility. Our guides to FOB Mundra and CIF Rotterdam and which Incoterm suits a first order go further.
How we help
We put the Incoterm and the named place into the specification and proforma, and compare supplier quotes on the same basis. We then check that the bill of lading and invoice match the agreed term. Ask for a free sourcing review.