KEDIRI — In international trade, the same price can mean different things depending on the delivery terms. To avoid misunderstandings, sellers and buyers use Incoterms, the standard trade terms published by the International Chamber of Commerce (ICC). The most widely used version today is Incoterms 2020.
For bulk commodities such as coconut oil and copra shipped by sea, the two terms that appear most often are FOB and CIF.
FOB (Free On Board)
Under FOB, the seller is responsible until the goods are loaded on board the vessel at the port of shipment. Transport from the mill to the port, export clearance and loading are paid by the seller.
Once the goods are on board, risk passes to the buyer. The buyer pays freight, insurance and all costs in the destination country. FOB suits buyers who have their own shipping contracts.
CIF (Cost, Insurance and Freight)
Under CIF, the seller pays the cost of the goods, freight and insurance to the destination port. Note, however, that risk still passes to the buyer when the goods are loaded on the vessel at the port of origin, not on arrival.
CIF is often chosen by buyers who want one complete price to the destination port.
Other terms worth knowing
- CFR (Cost and Freight): similar to CIF, but without insurance from the seller.
- EXW (Ex Works): the buyer collects the goods at the seller's premises and handles almost everything.
- FCA (Free Carrier): the seller hands the goods to a carrier nominated by the buyer.
Tips for buyers
State the Incoterm together with the named port, for example "FOB Surabaya" or "CIF Rotterdam". Make sure shipping documents, insurance and payment method are consistent with the chosen Incoterm.
At CV ECHOTECH, Incoterms and payment method are among the points confirmed with the buyer before every transaction, together with specification, quantity and shipping schedule.
