Your eyes and hands in India · Est. 2019 · Replies within one working day

FOB, CIF or DAP: which term suits a first order from India

The Incoterm decides who pays for what and where the risk changes hands. For a first order the right choice depends on how much you want to manage yourself.

· 5 min read · Creston & Co

Incoterms are the three-letter codes on a quote that decide who arranges and pays for each leg of the journey, and at what point the goods become your risk. Three of them cover almost every order from India.

FOB: you take over at the Indian port

The seller delivers the goods on board the ship at the Indian port, cleared for export. From there, the sea freight, insurance, import clearance and delivery are yours to arrange and pay. FOB suits buyers who already have a freight forwarder and negotiated rates, and who want to control the shipping line and the schedule.

CIF: one price to your port

The seller arranges and pays the sea freight and a basic insurance policy to your port. You handle import clearance and onward delivery. CIF is simpler to compare between suppliers, but check the insurance level and remember that risk still passes to you when the goods are loaded in India, not when they arrive.

DAP: delivered to your door, you clear customs

The seller delivers to a named place in your country; you pay import duty and clear customs. DAP is the easiest to budget, since the quote is close to a landed cost, and the best way to compare suppliers in different countries.

For a first order

If you have a forwarder you trust, buy FOB and keep control. If you do not, buy CIF or DAP for the first order, learn the route and the costs, and move to FOB once the volumes justify it. Whatever you choose, write the term, the port and the Incoterms year into the contract.

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