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Incoterms 2020 Guide for Agricultural Export from India | FOB, CIF, DAP, DDP Explained

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Trade Terms · Incoterms 2020

Incoterms 2020 Guide for Exporters & Importers

Plain-English explanations of the Incoterms 2020 rules — covering who pays freight, who carries risk, and which terms are most practical for trade between India and global markets.

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The Basics

What Incoterms Do — and Don’t — Define

Incoterms — International Commercial Terms, published by the International Chamber of Commerce — are the standard three-letter rules that define the responsibilities of buyer and seller in a sale of goods. They set the point of delivery, who pays freight and insurance, who carries the risk of loss, and who handles export and import customs.

Incoterms do not define the price of goods, payment terms, title transfer, or applicable law — those belong in the sales contract. Every Incoterm must also be followed by a named place, such as FOB Nhava Sheva or CIF Rotterdam, which fixes exactly where cost and risk transfer.

11 Rules
Incoterms 2020
7
Any-Mode Terms
4
Sea / Waterway Terms
FOB / CIF
Most Used in India
The Key Terms

The Incoterms You’ll Use Most

The six rules that cover the large majority of India trade transactions.

🚢

FOB — Free On Board

Risk transfers when goods are loaded on the vessel at origin. Seller pays export costs and loading; buyer pays ocean freight, insurance, and import duties. The most common term for Indian exports.

💰

CIF — Cost, Insurance & Freight

Seller pays freight and minimum insurance to the destination port, but risk still transfers at the origin port on loading. Popular with GCC and South Asian buyers wanting all-in pricing.

📄

CFR — Cost & Freight

Same as CIF but without insurance — the seller pays freight, the buyer arranges their own cargo cover. Suits buyers with their own insurance policies.

🚚

DAP — Delivered at Place

Seller delivers to the named destination place; the buyer handles only import clearance and duties. Convenient for newer buyers who want the seller to manage logistics.

📦

DDP — Delivered Duty Paid

Maximum seller obligation — the seller delivers with import duties and taxes paid. Should only be agreed when the seller fully understands destination duties and has a broker in place.

🏭

EXW — Ex Works

Minimum seller obligation — goods are made available at the seller’s premises and the buyer handles everything, including Indian export customs. Rarely practical for international trade.

Choosing Wisely

How to Choose the Right Incoterm

Match the term to your experience, your logistics setup, and your market.

1

Assess Your Logistics Capability

Buyers with their own freight forwarder often prefer FOB to control freight costs; those without prefer CIF, DAP, or DDP.

2

Decide Who Carries Risk and Insurance

Confirm where risk transfers and ensure cargo insurance is arranged — even on terms where the seller is not obliged to provide it.

3

Always Name the Place

State the exact named place — port or address — after the term, so the cost and risk transfer point is unambiguous.

4

Align the Term with the Price

Changing the Incoterm changes who pays freight and duties, so the quoted price must be renegotiated alongside it.

Practical Tips

Incoterms in Practice

Field-tested guidance that prevents costly misunderstandings.

📍

Never Skip the Named Place

FOB or CIF alone is incomplete. Without the named place the transfer point is ambiguous and disputes follow.

🛡

Insure Regardless of the Term

Under FOB and CFR the seller need not insure the cargo. The buyer should still take marine insurance to cover transit risk.

📈

Compare Quotes on the Same Term

An FOB price and a CIF price are not comparable. Always evaluate competing quotes on an identical Incoterm and named place.

⚡

Match the Term to the Buyer

First-time buyers benefit from DAP or DDP convenience; experienced importers usually save with FOB.

FAQ

Frequently Asked Questions

What is the difference between FOB and CIF?
Under both, risk transfers to the buyer when goods are loaded on the vessel at the origin port. The difference is cost: with FOB the buyer pays ocean freight and insurance, while with CIF the seller pays freight and minimum insurance to the destination port.
Does the seller stop being responsible after loading under FOB?
Risk and freight cost obligations end at loading, but the seller must still provide all correct export documentation and ensure the goods conform to the contract specification.
Who arranges insurance under CFR?
Under CFR the seller pays freight but is not obliged to insure the cargo. The buyer should arrange their own marine cargo insurance to cover transit risk.
Can the Incoterm be changed after a price is agreed?
Yes, but the price must be renegotiated with it. The Incoterm decides who pays freight, insurance, and duties, which directly changes the total landed cost.
Which Incoterm is best for a first-time importer?
DAP or DDP are usually easiest — the seller manages most or all of the logistics, and the buyer handles little or nothing at the destination. As buyers gain experience, FOB often becomes more cost-effective.
Explore More

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Practical guidance to help you export from and import into India with confidence.

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Quick Reference

What Incoterms Govern — and What They Don't

✅

What Incoterms DO Define

  • Point of delivery from seller to buyer
  • Who pays freight costs
  • Who carries risk of loss or damage
  • Who arranges and pays for insurance
  • Who handles export and import customs
  • Who pays for loading/unloading at port
❌

What Incoterms Do NOT Define

  • Payment terms (LC, TT, DP)
  • Title / ownership transfer
  • Price of goods
  • Consequences of contract breach
  • Applicable law or dispute resolution
  • Specifications of the goods
💡

Key Rule: Name the Named Place

Every Incoterm must be followed by a specific named place — e.g., FOB Nhava Sheva, CIF Rotterdam, or DAP Hamburg. The named place defines exactly where risk and cost transfer occur.

Without naming the place, the term is incomplete and creates legal ambiguity.

Sea Freight Terms

Common Terms for Agricultural Export from India

FOB
Free On Board
Most Used for India Agriculture

Risk transfers: When goods are loaded on the vessel at origin port

Seller pays: Export duties, inland transport to port, loading at origin

Buyer pays: Ocean freight, insurance, destination port charges, import duties

Best for: Buyers who have strong relationships with freight forwarders and can negotiate better freight rates. Most Indian agricultural exporters are comfortable quoting FOB.

CIF
Cost, Insurance & Freight
Common for GCC & South Asia

Risk transfers: When goods are loaded on the vessel at origin port (same as FOB)

Seller pays: Export duties, inland transport, loading, ocean freight, minimum insurance

Buyer pays: Destination port charges, import duties, unloading at destination

Best for: Buyers in GCC/Saudi Arabia who prefer simple pricing inclusive of freight. Note: despite seller paying freight, risk still transfers at origin port.

CFR
Cost & Freight
CIF Without Insurance

Risk transfers: When goods are loaded on the vessel at origin port

Seller pays: Export duties, inland transport, loading, ocean freight

Buyer pays: Insurance, destination port charges, import duties

Best for: Buyers who have their own cargo insurance arrangements and prefer to control insurance coverage themselves.

DAP
Delivered at Place
Door Delivery, Buyer Clears Customs

Risk transfers: At named destination place, before unloading

Seller pays: Everything up to and including delivery to named place

Buyer pays: Import duties, taxes, and unloading at destination

Best for: New buyers who want maximum convenience. Seller controls entire logistics chain to their door, buyer only handles import clearance.

DDP
Delivered Duty Paid
Maximum Obligation for Seller

Risk transfers: At named destination, ready for unloading

Seller pays: Everything including import duties and taxes at destination

Buyer pays: Unloading only (if agreed)

⚠ Caution: DDP puts maximum risk on seller. Indian exporters must understand destination import duties and have customs broker arrangements in place before agreeing to DDP.

EXW
Ex Works
Minimum Obligation for Seller

Risk transfers: At seller's premises / warehouse

Seller pays: Making goods available at their premises only

Buyer pays: All costs from seller's door — transport, export customs, freight, insurance, import duties

⚠ Caution: EXW is rarely used in practice for international trade from India as the buyer must handle Indian export customs — which requires Indian regulatory knowledge.

Decision Guide

Which Incoterm Should You Choose?

Buyer Situation Recommended Term Reason
First-time importer, new to global trade DAP Seller manages all logistics; buyer only handles local customs
Experienced importer with own freight forwarder FOB Buyer controls freight costs and can negotiate better rates
GCC / Middle East buyer, simple all-in pricing CIF CIF port price common in GCC trade; seller arranges freight & insurance
EU buyer with own cargo insurance policy CFR Seller pays freight; buyer controls own insurance coverage
eCommerce / small B2B buyer, door delivery needed DDP All-inclusive delivered price; buyer receives duty-paid goods

FAQ

Incoterms Questions Answered

Does FOB mean the seller stops caring after loading?+
Under FOB, the seller's risk and cost obligations end once goods are loaded onto the vessel at the named port. However, the seller is still responsible for providing all export documentation — including Phytosanitary Certificate, FSSAI certificate, and lab test reports — and must ensure the goods conform to contract specifications. The seller's documentation obligation continues after loading.
What happens if cargo is damaged during sea freight under FOB?+
Under FOB, risk transfers to the buyer when goods are loaded on the vessel. If damage occurs during sea transit, it is the buyer's risk and their cargo insurance should cover it. This is why we strongly recommend buyers always take out marine cargo insurance — even if the Incoterm does not require the seller to arrange it. We can advise buyers on standard marine insurance for agricultural commodities.
Can we negotiate the Incoterm after a price has been agreed?+
Yes, but the price must be renegotiated alongside it. The Incoterm fundamentally changes who pays freight and insurance, which affects the total landed cost. For example, switching from FOB to CIF will increase the seller's quoted price to incorporate freight and insurance costs. We always clarify the Incoterm and named place at the quotation stage to avoid confusion.
What Incoterm do you typically quote on?+
We most commonly quote FOB Nhava Sheva (JNPT) or FOB Mundra for sea freight shipments, and FOB Delhi or FOB Chennai for air freight. For buyers who prefer an all-inclusive price, we are also comfortable quoting CIF to major destination ports in Europe, GCC, and Southeast Asia. We are flexible and will match the Incoterm to the buyer's preference — just specify at the RFQ stage.

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