Key takeaways
- Incoterms are a contract clause defining who pays, who insures, and where risk transfers — four terms (FOB, CFR, CIF, DAP) cover roughly 95% of polymer trade.
- FOB: risk and cost transfer on loading at the origin port; the buyer arranges freight, insurance and import — the default when the buyer controls routing.
- CFR adds seller-paid ocean freight but insurance is still the buyer's; CIF bundles only minimum-cover (Institute Cargo Clauses C) insurance, usually too little for containers.
- DAP keeps cost and risk with the seller to the destination (the buyer still clears import) — the single price-to-warehouse for buyers with no freight desk. Always name the exact port or place.
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.
Frequently asked
Questions on the desk
Which Incoterms are used in polymer trade?
About 95% of polymer contracts use four of the eleven Incoterms 2020 terms: FOB (Free On Board), CFR (Cost and Freight), CIF (Cost, Insurance and Freight) and DAP (Delivered At Place).
Does CFR include insurance?
No — and this is the common trap. CFR means the seller pays the ocean freight to the destination port, but marine insurance remains the buyer's responsibility. 'Cost and Freight' does not include cover.
What is the difference between CIF and CFR?
CIF is CFR plus minimum-cover marine insurance (Institute Cargo Clauses C, the lowest tier). For containerised cargo that cover is rarely enough, so most buyers upgrade to Clauses A or buy CFR and insure separately on a broader open cover.
When should I use DAP?
Use DAP when the buyer is small, has no freight desk, and wants a single delivered-to-warehouse price. Risk and cost stay with the seller to the named place; the buyer still handles import clearance and duties.
General market commentary from the OmniaStrata desk, provided for information only. It is not legal, financial, tax, or trading advice, and it is not an offer or a commitment to any terms. Figures such as price ranges, spreads, financing costs, and credit periods are illustrative market context, not OmniaStrata's rates or terms. Actual contract terms — including price, payment instrument, credit, insurance, and Incoterms — are agreed in writing on a per-transaction basis and at OmniaStrata's discretion. Market conditions change; figures reflect the publication date.