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Incoterms

11 Terms. One Question: Who Bears the Risk?

Incoterms, published by the International Chamber of Commerce (ICC), define the exact point at which cost, risk and responsibility transfer from seller to buyer. Choosing the wrong term can expose your business to uninsured transit loss, unexpected duty liability, or customs delays at Indian ports.

Always state the edition year in your contract -- e.g. "FOB Mumbai, Incoterms". Without it, older versions may apply by default. Note: DAT (Delivered at Terminal) was removed in the current edition and replaced by DPU.
Any Mode of Transport (Sea, Air, Road, Rail, Multimodal) 7 Terms
EXW
Ex Works
Seller places goods at own premises -- buyer arranges all loading, export, freight, insurance and import
+

The seller places goods at the buyer's disposal at their own premises -- factory, warehouse, or named place. No loading, no export clearance. The buyer bears every cost and risk from that point. In practice, EXW is the most seller-friendly and most buyer-risky term. Foreign buyers must handle Indian export customs formalities, which requires appointing a local CHA.

India Note: Indian Customs requires a Shipping Bill for all exports regardless of Incoterm. Indian exporters selling EXW often assist buyers with this paperwork in practice. Importers buying EXW from India should appoint a local CHA to handle export clearance -- we can assist.
FCA
Free Carrier
Seller delivers export-cleared goods to buyer's nominated carrier at named place -- risk passes at handover
Recommended for Containers+

The seller delivers goods -- cleared for export -- to the buyer's nominated carrier or freight agent at a named place. If at the seller's premises, the seller loads. If elsewhere (CFS, ICD, airport), the seller delivers unloaded. Risk passes when the carrier takes possession. FCA is the ICC's recommended replacement for FOB on containerised shipments, as risk passes at the carrier handover point, not the ship's rail.

India Note: Most Indian exporters are comfortable with FCA. It works well at JNPT, Mundra, Chennai and all major Indian airports. The seller handles the Shipping Bill and export clearance; the buyer nominates the freight forwarder and pays onwards freight and insurance.
CPT
Carriage Paid To
Seller pays freight to named destination -- but risk transfers to buyer at the FIRST carrier, not at destination
+

The seller contracts and pays for carriage to the named destination but risk passes to the buyer when goods are handed to the first carrier at origin -- not on arrival. This critical split means the buyer bears transit risk while the seller is paying for transport. The buyer must arrange their own cargo insurance under CPT.

India Note: CPT is used in Indian trade primarily for air shipments and road/rail cross-border cargo. Indian importers buying CPT must arrange their own marine or air cargo insurance from the point of first carrier handover in the origin country.
CIP
Carriage & Insurance Paid To
Like CPT but seller must now provide all-risks ICC A insurance -- a major change from Incoterms 2010
Insurance Upgraded in 2020+

Same as CPT for cost and risk allocation, but the seller must also provide cargo insurance. The current rules upgraded CIP: it now requires minimum ICC A (all-risks) cover, significantly stronger than the previous ICC C (basic) minimum. This is a significant upgrade for buyers. Risk still passes at first carrier, but the buyer is protected by comprehensive all-risks insurance paid by the seller.

India Note: If your seller quotes CIP, confirm they are providing ICC A (all-risks) insurance, not outdated ICC C cover. For LC transactions, Indian banks typically require the sum insured to be CIF value plus 10%. Ask the seller for the insurance certificate and verify the sum insured and coverage clause before shipment.
DAP
Delivered At Place
Seller delivers to named destination ready for unloading -- buyer handles import clearance, duties and taxes
+

The seller bears all costs and risks to deliver goods to the named place at destination, ready for unloading but not unloaded. The buyer is responsible for import customs clearance, import duties, IGST and all taxes. DAP replaced the old DDU (Delivered Duty Unpaid) from Incoterms 2010.

India Note: DAP is well-suited to Indian imports. Our licensed CHA team handles customs clearance, duty payment, and delivery to your door -- keeping the process under your control. We recommend DAP over DDP for India-bound shipments because foreign sellers often cannot effectively navigate Indian Customs, DGFT and FSSAI/BIS requirements.
DPU
Delivered at Place Unloaded
Seller delivers AND unloads at named destination -- the only Incoterm where unloading is the seller's responsibility
Replaced DAT in 2020+

Introduced in the current edition to replace DAT (Delivered at Terminal). DPU extends the concept to any named place -- not just terminals. The seller bears all risk to the named place and is responsible for unloading the goods. Import customs clearance and duties remain the buyer's responsibility. This is the only Incoterm where the seller must unload at destination.

India Note: DPU is uncommon in routine Indian trade. It appears in project cargo and capital goods contracts where the foreign supplier has operational presence in India. If a seller offers DPU at an Indian inland location, clarify who arranges Indian import customs clearance -- it remains the buyer's responsibility regardless.
DDP
Delivered Duty Paid
Seller bears everything -- freight, insurance, Indian import clearance, all duties and taxes to buyer's door
Maximum Seller Obligation+

The seller's maximum obligation. Goods are delivered import-cleared and duty-paid to the buyer's named destination. The seller pays Indian Basic Customs Duty, IGST, all applicable levies, and last-mile delivery. The buyer simply receives goods. DDP is the mirror opposite of EXW.

India Note: DDP is problematic for Indian imports. Foreign sellers must handle Indian Customs clearance, DGFT compliance, BIS/FSSAI licensing, and duty payment -- which they typically cannot do without appointing an Indian CHA. Disputes are common. Indian importers are strongly advised to prefer DAP terms and handle customs clearance in-house with their own licensed CHA.
Sea and Inland Waterway Only -- Use ONLY for conventional, bulk or break-bulk cargo 4 Terms -- Sea Only
Containerised cargo should use FCA, CPT or CIP -- not FOB, CFR or CIF. Under FOB/CFR/CIF, risk passes when goods cross the ship's rail at the port of loading. For container shipments, the cargo is typically handed to the carrier at the CFS or ICD -- well before loading. FCA is the correct current replacement for FOB on container shipments.
FAS
Free Alongside Ship
Seller delivers to origin port alongside vessel cleared for export -- buyer loads, pays freight and insurance
+

The seller delivers goods cleared for export and places them alongside the vessel at the named port of shipment. Risk passes at that point. The buyer is responsible for loading, freight, insurance, and import. FAS is used for bulk and conventional cargo where the buyer controls vessel selection and loading operations.

India Note: FAS is used in Indian commodity exports -- bulk minerals, agri commodities, steel -- from major ports like Paradip, Vizag, Kandla and Mormugao. Our team handles export clearance and port handling for FAS shipments.
FOB
Free On Board
Seller loads goods on vessel and clears for export -- risk passes on board at origin port -- SEA AND BULK ONLY
Dominant in Indian Export Trade+

The seller loads goods onto the vessel and clears for export. Risk passes when goods are on board at the named port. The buyer pays freight and insurance from that point. FOB is the most widely used Incoterm in Indian export trade and is embedded in Indian export documentation, banking, and incentive scheme calculations.

India Note: Export incentives in India -- RoDTEP, Duty Drawback, RoSCTL -- are calculated on FOB value. Shipping Bills filed with Indian Customs declare FOB value. While ICC recommends FCA for container cargo, FOB remains dominant in Indian practice due to banking norms and legacy LC documentation. Both FOB and FCA are accepted by Indian Customs.
CFR
Cost and Freight
Seller pays sea freight to destination port -- risk passes to buyer when goods are loaded at origin -- SEA ONLY
+

The seller clears goods for export and pays sea freight to the named destination port. Risk passes to the buyer when goods are loaded on the vessel at origin -- so the buyer bears transit risk despite the seller paying freight. The buyer must arrange their own cargo insurance. CFR is the sea-only equivalent of CPT.

India Note: Indian importers buying CFR bear transit risk and must arrange their own marine insurance. Indian Customs assesses duty on CIF value -- for CFR imports, you must add the cost of insurance to arrive at the assessable CIF value for the Bill of Entry.
CIF
Cost, Insurance and Freight
Seller pays freight and provides minimum ICC C insurance to destination port -- risk passes at loading -- SEA ONLY
Common for Indian Imports+

The seller pays sea freight and provides minimum cargo insurance (ICC C -- basic cover only) to the destination port. Risk passes to the buyer when goods are loaded on the vessel at origin, same as CFR. CIF is among the most common terms for Indian imports. Critically: unlike CIP, CIF still requires only ICC C (minimum) insurance -- not the upgraded ICC A (all-risks) cover.

India Note: The CIF value on your import documents is the assessable value for Indian Customs duty calculation under the Customs Valuation Rules 2007. Verify that the CIF value declared by the seller is accurate and matches LC terms. If you need all-risks cover on CIF imports, arrange your own marine insurance on top -- the seller's ICC C policy may not cover all loss scenarios.
Not sure which Incoterm applies to your shipment?
We advise on the right term for your trade lane, commodity and risk profile -- before you sign the contract. Getting this right at contract stage saves significant cost and dispute.
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