Incoterms 2020 for Commodity Buyers: FOB, CIF, CFR, and DAP Without the Jargon

Last month a buyer in Lagos called me at 11pm, panicking. His CIF container had been sitting at Apapa port for 18 days, demurrage was eating him alive, and he was convinced it was my problem because, in his words, "you sold me CIF, so you handle it."

He was wrong. But honestly, I don't blame him. Incoterms confuse even experienced buyers, and the 2020 revision didn't exactly make life simpler. So let me walk you through the four terms that cover maybe 90% of what we actually sign on rice, pulses, and oilseed contracts out of Karachi — FOB, CIF, CFR, and DAP — the way I'd explain it to a buyer over chai, not the way the ICC publishes it.

FOB and CFR — the workhorses of bulk commodity trade

FOB means Free On Board. I (the seller) get the cargo to Karachi port, clear it for export, and load it onto the vessel you nominated. The second those bags cross the ship's rail — risk is yours. Freight, insurance, destination handling, customs at your end. All you.

FOB works when the buyer has a strong freight contract. Big traders in Dubai, Singapore, Rotterdam — they've got better freight rates than I'll ever get. So they say "sell me FOB Karachi, I'll handle the ocean leg." Fair enough. They save 80–120 USD per container versus letting me book it.

But here's the thing about FOB on containerized cargo (which is most rice and pulses): technically Incoterms 2020 still says FOB is for break-bulk and bulk, and recommends FCA for containers. Nobody follows that. The whole industry still writes FOB on container shipments because that's what banks, L/C departments, and customs officers expect to see. I've tried writing FCA on a couple of contracts. The buyer's bank kicked it back twice. So FOB it is.

CFR (Cost and Freight) is FOB plus I pay the ocean freight. Risk still passes at Karachi when the cargo is loaded. Insurance is still your problem. This is the one buyers misunderstand most often. They think because I'm paying freight, I'm responsible if the container gets stuck in Mombasa. Nope. My job ends when it's on the ship.

CFR is good when you don't have freight contracts and you want a delivered-to-port price you can budget around. Most of our African buyers prefer CFR — Lagos, Dar es Salaam, Mombasa, Cotonou. They know their clearing agents, they don't want to deal with booking ships, and they handle insurance locally (which is often cheaper than what I'd quote them anyway).

CIF — the most oversold and misunderstood term

CIF is CFR plus minimum insurance. The keyword is minimum. Under Incoterms 2020, CIF requires Institute Cargo Clauses (C) — which covers basically fire, sinking, collision, and general average. It does not cover theft, water damage, contamination, or rough handling. Roughly 70% of actual rice cargo claims I've seen wouldn't be paid out under ICC(C).

If you're buying CIF and assuming you're covered — please, please read your policy. Or pay the extra 0.15% or so for ICC(A) coverage, which is the all-risk version. I had a buyer in Jeddah lose a partial container to seawater ingress in 2022. The ICC(C) insurance paid nothing. He'd assumed CIF meant "fully insured." It doesn't.

And back to my Lagos buyer from the opening — under CIF, my risk ends at Karachi loading, same as CFR. Port congestion at destination? Not my contractual problem. I'll help, I'll send documents faster, I'll talk to the shipping line. But legally, no.

So when does CIF make sense for a buyer? Honestly, mostly when your bank requires it for the L/C, or when you're a smaller importer who wants one number — landed-at-port cost — without juggling freight forwarders and insurance brokers. The convenience is real. Just understand what insurance you're actually getting.

DAP — when the buyer wants it delivered to their door

DAP means Delivered At Place. I deliver to a named place in your country — your warehouse, an inland depot, wherever you specify — and risk passes when the goods are ready for unloading at that point. I pay freight, I pay destination port handling, I arrange inland transport. You handle import customs clearance and duties.

That last part trips up new buyers. DAP does NOT include import clearance. If you want me to clear customs at your end too, that's DDP (Delivered Duty Paid), and very few exporters will quote DDP because we don't have the local tax registration to do it properly.

DAP is becoming more common for European buyers — Hamburg, Rotterdam, Antwerp — where the inland trucking infrastructure is predictable and we can get reliable quotes. Less common for Africa, where inland logistics is a wildcard and I'd be pricing in 30% risk buffer just to protect myself.

A tip from someone who's gotten this wrong: if you're quoting DAP, build in detention and demurrage buffer at destination. Twice I've quoted DAP Mombasa thinking inland would be smooth, and twice I've eaten container detention charges because the buyer's warehouse wasn't ready. Now I quote DAP only when I trust the buyer's operations.

What I tell new buyers to actually do

Pick the Incoterm based on three questions. Who has better freight rates — you or me? Who's better at handling customs and insurance at destination? And how much control do you want over the shipment versus how much hassle do you want to avoid?

Large experienced importers: go FOB, control your own freight. Mid-size buyers in standard lanes: CFR is the sweet spot. Smaller buyers or first-time importers: CIF gives you simplicity, just upgrade the insurance. Premium buyers who want goods at their door and have predictable inland operations: DAP.

And whatever Incoterm you choose, write it properly in the contract. "CIF Jebel Ali, Incoterms 2020" — not just "CIF." I've seen disputes hinge on whether the parties meant 2010 or 2020 rules, and those revisions changed enough (especially around insurance levels and on-carriage) that it actually matters.

What else are you confused about? Send me the questions — I'll probably write the next one based on whatever keeps coming up in my inbox.