Incoterms 2020 for Sea Freight: FOB, CFR, CIF and DAP Compared

Incoterms are the ICC rules that define who pays for which part of the transport and where the risk passes from seller to buyer. For sea freight, the four terms traders use most are FOB, CFR, CIF and DAP. The key difference: under FOB, CFR and CIF the risk passes to the buyer when the goods are loaded on the ship at the port of origin, even though under CFR and CIF the seller pays the freight. Under DAP the seller carries the risk until the goods arrive at the agreed destination. Always write the term with a named place and the version, for example "CIF Mombasa, Incoterms 2020".

FOB (Free On Board)

• Seller: clears the goods for export and loads them on board the ship the buyer has nominated.
• Buyer: books and pays for the sea freight, insurance and everything after loading.
• Risk passes: when the goods are on board at the port of loading.

CFR (Cost and Freight)

• Seller: clears for export and books and pays the sea freight to the destination port.
• Buyer: pays destination charges, import clearance and onward transport, and arranges its own insurance.
• Risk passes: on board at the port of loading, not at destination. If the cargo is damaged at sea, the buyer claims on its own insurance.

CIF (Cost, Insurance and Freight)

• Seller: as CFR, and also buys cargo insurance for the buyer's benefit.
• Insurance: under Incoterms 2020, CIF only requires minimum cover, Institute Cargo Clauses (C), for at least 110% of the contract price. If the buyer wants wider (A) cover, it must be agreed in the contract.
• Risk passes: on board at the port of loading, as with CFR.

DAP (Delivered At Place)

• Seller: arranges and pays transport all the way to the named place, which can be a port, a warehouse or the buyer's site.
• Buyer: clears the goods for import, pays duties and taxes, and unloads.
• Risk passes: when the goods are made available to the buyer at the named place, ready for unloading.

Container cargo: FOB versus FCA

FOB, CFR and CIF were written for cargo that the seller can deliver directly over the ship's rail, such as bulk or breakbulk. With containers, the seller usually hands the box to the carrier at a terminal days before loading. Under FOB, the seller still carries the risk until the container is on board, even though it can't control what happens at the terminal. The ICC therefore recommends FCA, CPT or CIP for containerised cargo. Many traders still use FOB and CIF for containers out of habit, so be aware of the gap.

Common mistakes

• Not naming the place. "FOB" alone is incomplete. "FOB Jebel Ali" is clear.
• Assuming the seller is responsible for transit damage under CFR or CIF.
• Relying on CIF insurance without checking it is only (C) cover.
• Using DAP without agreeing who pays destination terminal handling charges.
• Mixing Incoterms 2010 and 2020 rules in one contract.

Which term suits you?

If you want control of the freight and insurance as a buyer, FOB or FCA gives you that. If you want a simple delivered price as a buyer, CIF or DAP shifts more work to the seller. As a seller, DAP means you carry more risk and cost, so price it in. Your Incoterm also decides who pays the freight, so agree it before you ask for quotes. For ways to lower those costs, see our sea freight cost-saving tips.

Get a quote on your Incoterm

Anil Darya quotes FCL and LCL sea freight on FOB, CFR, CIF, DAP and other Incoterms from the UAE. Send the agreed Incoterm and named place, the cargo details, origin, destination and ready date to info@anildarya.co. This article is general guidance; the published Incoterms 2020 rules and your sales contract decide each party's obligations.

Sources

• ICC, Incoterms 2020: iccwbo.org (reviewed 9 November 2026)