Incoterms: who books the freight?
Seven terms cover almost every ingredient and commodity shipment. Here is what each one decides.
In short. A plain table of the incoterms importers actually use — who books the carrier, who pays freight, who clears export and import, and when risk passes. With notes on FOB vs CIF for Asian lanes.
| Term | Who books carrier | Pays main freight | Export clearance | Import clearance & duties | Risk passes to buyer |
|---|---|---|---|---|---|
| EXW Ex Works | Buyer | Buyer | Buyer | Buyer | At seller's door |
| FCA Free Carrier | Buyer | Buyer | Seller | Buyer | When handed to the carrier |
| FOB Free On Board | Buyer | Buyer | Seller | Buyer | On board at loading port |
| CFR Cost and Freight | Seller | Seller | Seller | Buyer | On board at loading port |
| CIF Cost, Insurance and Freight | Seller | Seller (+ insurance) | Seller | Buyer | On board at loading port |
| DAP Delivered At Place | Seller | Seller | Seller | Buyer | At named destination |
| DDP Delivered Duty Paid | Seller | Seller | Seller | Seller | At named destination |
The one thing to remember
Under EXW, FCA and FOB the buyer books the ship; under CFR, CIF, DAP and DDP the seller does. That single fact decides who talks to the forwarder, whose booking confirmation you wait for, and who is late when the container is rolled.
FOB vs CIF on Asian lanes
Many food-ingredient buyers in Japan, Korea and Singapore buy FOB Shanghai or FOB Mundra and book through their own forwarder, which gives them control of the schedule and a lane rate. Suppliers often prefer CIF because it lets them use their own forwarder and quote one number. Neither is wrong; what matters is that the order says which, because the incoterm decides who owns the ETD.
Clearance means paperwork and money
“Export clearance” or “import clearance” in the table means both the responsibility for the declaration and paying the fees, duties and taxes. Under DAP the seller delivers to your door but you still clear import and pay duty; under DDP the seller does that too, which is rare in food because of import licensing.
In Pacifica the incoterm is shown as the code only — your team are experts — and it sets the booking party: FOB order → “Booking: your forwarder”, pre-selected from the last shipment on that lane; CIF order → “Booking: appointed by supplier”.
Questions
Who pays freight under FOB?
The buyer. Under FOB the seller loads the goods on board at the port of loading and clears export; freight from there, insurance and import clearance are the buyer's.
Does CIF include duties?
No. CIF covers cost, insurance and freight to the destination port. Import clearance, duties and taxes remain with the buyer.
Which incoterm should a first-time importer use?
Most importers of ingredients start with FOB (buyer books, so the buyer controls the schedule and rate) or CIF (seller books, one price). EXW is rarely worth it for a buyer without an origin agent.
Where does risk pass under FOB?
When the goods are on board the vessel at the port of loading — not when they leave the factory.
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