Key takeaways
- If the buyer has its own freight contract, FOB. Otherwise CFR or DAP.
- Always specify the named port or place. "FOB Jubail" is clear; "FOB Saudi Arabia" is ambiguous.
- If the contract says CIF, the buyer should still buy supplementary insurance on top — do not rely on the producer’s minimum cover.
Incoterms are not shipping rules. They are a contract clause that says, in three letters, who pays for what, who insures what, and where risk transfers between seller and buyer. The 2020 revision is the current standard. Polymer trade uses four of the eleven terms in roughly 95% of contracts.
Risk and cost transfer when the goods are loaded onto the vessel at the named port of origin. The seller clears export. The buyer arranges and pays for the ocean freight, marine insurance, destination handling, and import clearance.
FOB is the default when the buyer has its own freight contracts or wants to control routing. It is also the most common term for container trade between buyers with established freight desks and producers in major export ports (Jubail, Yanbu, Houston, Rotterdam, Singapore).
Same risk transfer point as FOB — onto the vessel at origin — but the seller pays the ocean freight to the named destination port. Insurance is still the buyer’s responsibility. This is the trap. New buyers see CFR and assume "cost and freight, including insurance." It is not.
Same as CFR but with minimum-cover marine insurance bundled in. The insurance is the lowest available tier (Institute Cargo Clauses C). For containerised cargo this is rarely enough — most buyers either upgrade to Clauses A or buy CFR and insure separately on a more comprehensive open cover.
Risk and cost stay with the seller all the way to the named destination, ready for unloading. Import clearance and import duties remain the buyer’s job. DAP is what to ask for when the buyer is small, has no freight desk, and wants a single price-to-warehouse.
- If the buyer has its own freight contract, FOB. Otherwise CFR or DAP.
- Always specify the named port or place. "FOB Jubail" is clear; "FOB Saudi Arabia" is ambiguous.
- If the contract says CIF, the buyer should still buy supplementary insurance on top — do not rely on the producer’s minimum cover.
Pair the Incoterm with the right payment instrument. Together they define the risk profile of the transaction more than any other two clauses in the contract.