United Exports

FOB, CIF & Other Export Terms

Trade terms — commonly called Incoterms rules — define the exact point where your cost and risk end and the buyer's begin, which is why a price is meaningless without one.

At a glance

A quote should always read as a price plus a term plus a named place, for example “$12,400 FOB Savannah”.
Cost transfer and risk transfer happen at the same named point under most terms — but the term you choose moves that point.
EXW places the most burden on the buyer; DDP places the most on the seller.
FOB, CFR and CIF are for sea and inland waterway transport. For containers and air, FCA, CPT and CIP are the appropriate equivalents.

The terms you will encounter most

EXW — Ex Works: Buyer collects from your premises and handles everything after that. Minimum obligation for the seller.
FCA — Free Carrier: You deliver goods, cleared for export, to a carrier the buyer nominates at a named place. The modern default for containerized and air freight.
FOB — Free On Board: You deliver on board the vessel at the named port of shipment. Sea and inland waterway only.
CFR — Cost and Freight: You pay freight to the named destination port, but risk transfers when goods are on board at origin.
CIF — Cost, Insurance and Freight: As CFR, plus you buy cargo insurance for the buyer's benefit. Risk still transfers at origin.
CPT / CIP: The multimodal equivalents of CFR and CIF, usable for any transport mode including containers and air. CIP requires broader insurance cover than CIF.
DAP — Delivered At Place: You deliver to the named destination, ready for unloading. Buyer handles import clearance and duties.
DPU — Delivered at Place Unloaded: As DAP, but you also unload at destination.
DDP — Delivered Duty Paid: You deliver to the buyer's door with import duties and clearance handled. Maximum obligation for the seller.

How to choose a term

1
Start with what you can actually control
Only take on obligations you can execute reliably. Promising DDP into a country where you have no clearance capability is how margins disappear.
2
Match the term to the transport mode
Use FCA, CPT or CIP for containerized and air shipments. Reserve FOB, CFR and CIF for bulk and break-bulk cargo actually loaded on a vessel.
3
Decide who is better placed to buy freight
A buyer with strong carrier rates may prefer FCA or FOB. A buyer who wants a simple landed price may prefer CIF, CIP or DAP.
4
Name the place precisely
“FCA Chicago” is ambiguous; “FCA 123 Industrial Drive, Chicago, IL” is not. Ambiguity in the named place is where disputes start.
5
Reflect the term everywhere
The same term and named place should appear on the quotation, the order confirmation, the commercial invoice and any letter of credit.

Points that regularly cause disputes

Assuming insurance is included. Only CIF and CIP oblige the seller to insure, and CIF's minimum cover is often narrower than buyers expect.
Using FOB for a container that is handed over at an inland terminal, leaving a gap in who bears risk during the leg to the port.
Forgetting that CFR and CIF split cost and risk: you pay freight to destination but risk passed at origin.
Agreeing to DDP without confirming that you can legally act as importer of record in the destination country.
Leaving unloading responsibility unstated on delivered terms.

Educational guidance, not an official determination

Incoterms rules are published by the International Chamber of Commerce, and the summaries here are educational paraphrases rather than the official text. Reference the current published rules in your contracts and confirm wording with your counsel or customs broker.

Continue learning

Exporting Made SimpleTrade terms in the context of pricing and quoting your first export.Export Documents ExplainedWhere the agreed term appears in your document set.What Does a Freight Forwarder Do?Who arranges each leg of the move once the term is set.