Every export quotation includes a short code such as FOB, CIF or EXW followed by a place name. These are Incoterms, the international rules published by the International Chamber of Commerce that define who pays for transport, insurance and customs, and the exact point where risk passes from seller to buyer. The current version is Incoterms 2020. Misunderstanding them is one of the most common causes of unexpected costs on import orders. This guide explains the terms metal buyers meet most often.
What Incoterms do and do not cover
Incoterms define the delivery obligations of seller and buyer: who arranges and pays for carriage, who handles export and import clearance, who insures the goods, and when risk transfers. They do not set the price, the payment method, or when ownership of the goods passes. Those are agreed separately in the sales contract.
The 2020 rules contain 11 terms. Seven can be used for any mode of transport, and four are designed for sea and inland waterway transport. Always state the Incoterm, the named place and the version, for example “FOB Nhava Sheva, Incoterms 2020”.
The terms metal buyers use most
EXW: Ex Works
The seller makes the goods available at its premises. The buyer arranges and pays for everything else: loading, export clearance, freight, insurance and import. Risk passes when the goods are made available. EXW gives the buyer most control but also most work, and export clearance from another country can be difficult for an overseas buyer to arrange.
FCA: Free Carrier
The seller clears the goods for export and hands them to the buyer’s nominated carrier at a named place, such as the seller’s premises or a container freight station. FCA is often more practical than EXW and suits containerised shipments.
FOB: Free On Board
The seller clears the goods for export and loads them on board the vessel nominated by the buyer at the named port of shipment. Risk passes once the goods are on board. The buyer pays sea freight, insurance and all costs from that point. FOB is very common for bulk and break-bulk metal shipments.
CFR: Cost and Freight
The seller pays freight to the named destination port, but risk still passes when the goods are loaded on board at the origin port. The buyer should arrange its own cargo insurance.
CIF: Cost, Insurance and Freight
As CFR, but the seller also buys cargo insurance for the buyer’s benefit. Under Incoterms 2020, the minimum required cover for CIF is relatively basic, so buyers who want wider protection should ask for it specifically. Again, risk passes at loading in the origin port, even though the seller pays freight to destination.
DAP: Delivered at Place
The seller delivers the goods, ready for unloading, at a named destination such as the buyer’s warehouse. The buyer handles import clearance and duties. Risk passes at the named place.
DDP: Delivered Duty Paid
The seller delivers to the named place and also clears the goods for import and pays duties and taxes. DDP places maximum obligation on the seller and is less common for international metal shipments because import rules and taxes vary by country.
How to choose
- If you have a trusted freight forwarder with good rates, FOB or FCA gives you control over freight and insurance.
- If you want a simple landed-port price, CFR or CIF lets the seller arrange the main freight.
- If you want delivery to your door, consider DAP and handle import clearance yourself.
- Match the Incoterm to your payment method. Letters of credit, for example, rely on shipping documents that fit the chosen term.
Common mistakes
- Assuming CIF means the seller carries the risk until arrival. It does not.
- Using FOB or CIF for containers handed over at an inland depot, where FCA or CIP fits better.
- Leaving out the named place, which makes the term unclear.
Quotations from Nefton Exports
Nefton Exports Industries quotes copper, steel and medical gas products on the Incoterm that suits you, such as FOB Indian port, CIF your port or other terms by agreement. Tell us your destination when you request a quotation.
