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Commercial terms
Incoterms 2020, explained
Incoterms decide two things: who pays for which leg and where risk transfers from seller to buyer. Those are different points — a seller can pay the freight while the buyer already carries the risk. That single misunderstanding causes most Incoterm disputes.
| Term | Risk transfers at | Main freight paid by | Mode |
|---|---|---|---|
| EXWEx WorksBuyer does everything, including export clearance. Heaviest burden on the buyer. | Seller's premises | Buyer | Any |
| FCAFree CarrierThe workhorse for containerised trade. Seller clears export. | Handover to buyer's carrier | Buyer | Any |
| CPTCarriage Paid ToSeller pays freight, but risk passes early — insure accordingly. | Handover to first carrier | Seller | Any |
| CIPCarriage & Insurance PaidLike CPT plus seller buys all-risk insurance (ICC A) since 2020. | Handover to first carrier | Seller | Any |
| DAPDelivered At PlaceBuyer handles import clearance and duties. | Named destination, on truck | Seller | Any |
| DPUDelivered at Place UnloadedOnly term where the seller unloads. New name in 2020 (was DAT). | Named destination, unloaded | Seller | Any |
| DDPDelivered Duty PaidSeller even pays import duty & VAT. Heaviest burden on the seller. | Named destination | Seller | Any |
| FASFree Alongside ShipMostly bulk & break-bulk cargo. | Alongside vessel at load port | Buyer | Sea only |
| FOBFree On BoardEast Africa's favourite. Not meant for containers (use FCA) but widely used anyway. | On board vessel at load port | Buyer | Sea only |
| CFRCost & FreightSeller pays ocean freight; risk still passes at loading. | On board vessel at load port | Seller | Sea only |
| CIFCost, Insurance & FreightCFR plus minimum-cover insurance (ICC C). Common for LC payments. | On board vessel at load port | Seller | Sea only |
Rules of thumb from the desk
Importing into East Africa? FOB keeps you in control of ocean freight and avoids inflated CIF markups. Shipping containers, not bulk? The ICC says use FCA instead of FOB — risk shouldn't wait until the container is lifted on board when you handed it over at the terminal days earlier. And under CPT/CFR, remember the seller paying freight does not mean the seller carries the risk in transit — buy insurance.
Ready to put a term on a real shipment? Post an RFQ and let forwarders quote against it.