Incoterms 2020 for Indian Exporters: FOB, CIF & DAP

What Are Incoterms?

Incoterms (International Commercial Terms) are a set of 11 standardised trade rules published by the International Chamber of Commerce (ICC). They define exactly who (the buyer or the seller) is responsible for costs, risks, and insurance at each stage of an international shipment, from the seller's factory to the buyer's warehouse.

The current edition, Incoterms 2020 , came into effect on 1 January 2020 and replaced the 2010 version. Every international sales contract, purchase order, Letter of Credit, and shipping bill references an Incoterm. Getting it wrong affects your pricing, your insurance coverage, your customs valuation, and your export documentation.

Incoterms do not define the transfer of ownership or title to the goods. They do not govern payment terms (that is your payment terms agreement). And they do not replace the contract of carriage or insurance policy. They sit alongside these documents and clarify who does what.

The 11 Incoterms 2020 at a Glance

Incoterms 2020 has 11 terms split into two groups: seven that work for any mode of transport (road, rail, air, sea, or multimodal) and four that are sea and inland waterway only .

Most Used by Indian Exporters

While there are 11 Incoterms, Indian exports are dominated by just four: FOB , CIF , CFR , and FCA . FOB alone accounts for over 60% of all Indian export shipments by value, according to DGFT shipping bill data.

Why these four? Indian exporters typically sell to buyers who have their own freight forwarding arrangements (hence FOB), or to buyers in regions like the Middle East and Africa who prefer CIF because they want the seller to handle shipping and insurance. CFR sits in between. The seller pays freight but not insurance. And FCA is growing because the ICC now recommends it over FOB for containerised cargo, which makes up the bulk of Indian manufactured exports.

FOB: The Default Indian Export Term

Under FOB (Free on Board) , the seller's obligations end once the goods are loaded onto the vessel at the named port of shipment. Risk transfers from seller to buyer at the ship's rail. The buyer arranges and pays for ocean freight, marine insurance, and destination-side logistics.

As an Indian exporter selling FOB, your responsibilities are:

Seller obligations under FOB

• Manufacture or procure the goods and prepare them for export.
• Transport goods from your factory or warehouse to the port of shipment (inland freight, handling, port charges).
• Handle all export documentation and clear Indian customs (shipping bill, ARE-1 if applicable, IEC, AD code).
• Load the goods onto the vessel nominated by the buyer.
• Provide the buyer with proof of delivery to the vessel (on-board bill of lading).

FOB is popular because it keeps things simple for the exporter. You control the Indian leg of the shipment (from factory to port) and the buyer takes over from there. It works well for bulk commodities, containerised cargo, and any situation where the buyer has preferred shipping lines or better freight rates than you can negotiate.

CIF: When the Buyer Wants You to Handle Shipping

Under CIF (Cost, Insurance, and Freight) , the seller does everything in FOB plus pays for ocean freight and marine insurance to the destination port. The critical nuance: risk still transfers at the port of shipment , not at the destination. The seller pays for transit, but the buyer bears the risk during transit.

Buyers in the Middle East, Africa, and parts of South-East Asia frequently demand CIF because they want a single landed price at their port. For the Indian exporter, CIF means higher invoice values (your price includes freight and insurance) but also more logistics responsibility.

When quoting CIF, always get freight quotes from at least two shipping lines before committing to a price. Freight rates fluctuate significantly, and a quote that was viable three months ago may eat into your margins today. Build a freight buffer of 5-10% into your CIF pricing to absorb rate fluctuations between quotation and shipment.

DAP and DDP: Door-to-Door Delivery

DAP (Delivered at Place) means the seller bears all costs and risks to deliver goods to the buyer's named destination. Their warehouse, factory, or any agreed location. The buyer handles import customs clearance and pays import duties and taxes. DAP works for any mode of transport.

DDP (Delivered Duty Paid) goes one step further: the seller pays everything, including import duties, taxes, and customs clearance at the destination country. DDP represents the maximum obligation for a seller. You are responsible for the entire supply chain from your factory to the buyer's door.

When to use DAP/DDP

• E-commerce shipments where the end customer expects a delivered price with no surprise duties at the door.
• High-value machinery or capital equipment exports where the buyer wants turnkey delivery and installation.
• Turnkey project exports where you are supplying and commissioning equipment at the buyer's site.
• Markets where the buyer has no import infrastructure or customs brokerage capability.

FCA: The Modern Alternative to FOB

FCA (Free Carrier) means the seller delivers goods to the carrier at a named place. Which could be the seller's factory, a container freight station, an inland container depot (ICD), or the port terminal. The seller clears export customs. Risk transfers when the goods are handed over to the carrier.

The ICC now recommends FCA over FOB for containerised shipments, and here is why: under FOB, risk technically transfers when goods pass the ship's rail. But with containers, the exporter drops the container at the terminal days before the vessel arrives. There is a gap where the container is sitting at the terminal, the exporter has no control over it, but risk has not yet transferred under FOB. FCA eliminates this gap by transferring risk at the point of actual physical handover.

How Incoterms Affect Your Pricing

The Incoterm you choose directly changes your invoice value. An FOB price includes your manufacturing cost, inland freight, port charges, and customs clearance. A CIF price adds ocean freight and insurance on top. A DDP price adds destination freight, duties, and local delivery.

This matters for customs valuation. Indian customs values exports based on the FOB value at the port of shipment (for computing export incentives like RoDTEP and duty drawback). If you sell CIF, your shipping bill still records the FOB component separately. If you sell DDP, you need to correctly break down the FOB, freight, insurance, and duty components for your shipping bill and export documentation.

The Incoterm also affects your insurance costs. Under FOB, you only insure the goods until they are loaded on the vessel (transit insurance for the factory-to-port leg is optional but recommended). Under CIF, you must buy marine insurance for the entire sea voyage. Under DDP, you need coverage for the full door-to-door journey. Factor these differences into your pricing model.

Impact on Compliance and Reporting

The Incoterm you use has direct consequences for your regulatory compliance as an Indian exporter:

Common Mistakes Indian Exporters Make with Incoterms

Using EXW for exports

Under EXW (Ex Works), the buyer is responsible for export customs clearance from India. This means a foreign buyer would need to clear Indian customs. Which is practically impossible without an IEC and a customs broker in India. EXW also means the buyer controls the export process, creating regulatory risk for you as the shipper of record. Avoid EXW for goods exports. Use FCA instead if the buyer wants to collect from your factory.

Wrong Incoterm in the Letter of Credit

If your sales contract says CIF but the LC says FOB, every document you present (invoice, B/L, insurance certificate) will show a mismatch. Banks check Incoterms strictly. Always verify that the LC mirrors the agreed Incoterm before you start production. Read our guide on how to avoid LC discrepancies for more on this.

Not specifying the exact delivery point

Writing "FOB India" or "CIF Europe" is not enough. Incoterms require a specific named place: "FOB Nhava Sheva" or "CIF Rotterdam Port". Without a precise location, disputes arise about where risk transfers and who pays for what. Always name the port or delivery point in full.

Ignoring [packaging obligations](/resources/export-packaging-requirements-international)

Under all Incoterms, the seller must package goods appropriately for the agreed mode of transport. If you sell CIF and the goods arrive damaged because of inadequate packaging, the insurance claim may be rejected. Marine insurance does not cover packaging defects. Ensure your packaging meets the requirements for the full transit route, not just the Indian leg.

Decision Framework: Which Incoterm to Use

Use this table as a starting point. The right Incoterm depends on your shipment type, your buyer's capabilities, the payment terms, and the destination market.

Frequently Asked Questions

What is the difference between FOB and CIF for Indian exporters?

Under FOB, you deliver goods to the vessel at the port of shipment and the buyer arranges freight and insurance. Under CIF, you also pay for ocean freight and marine insurance to the destination port. Risk transfers at the same point (port of shipment) in both cases. FOB is used in over 60% of Indian exports because it keeps the exporter's obligations simpler.

Which Incoterm should I use when the buyer wants door-to-door delivery?

Use DAP if the buyer will handle import customs clearance and duties. Use DDP if you want to deliver fully cleared goods to the buyer's premises. DDP is the maximum obligation for a seller and is typically used for e-commerce, high-value machinery, or turnkey projects. Be cautious with DDP. You need to register for import duties in the destination country and factor those costs accurately into your pricing.

Why does ICC recommend FCA instead of FOB for container shipments?

FOB's risk transfer point (the ship's rail) does not reflect how containers actually move. Containers are delivered to the terminal days before the vessel arrives. FCA transfers risk when goods are handed to the carrier at the named place, matching the actual physical handover. Incoterms 2020 also added a new FCA option where the carrier can issue an on-board bill of lading to the seller, making FCA viable for LC-backed transactions.

Related Guides

• Export Documentation Guide. Complete checklist of documents every Indian exporter needs for international shipments.
• Export Payment Terms Explained. LC, DA, DP, advance payment, open account. Which payment term to use and when.
• How to Avoid LC Discrepancies. The most common Letter of Credit discrepancies and how to prevent rejection at the bank.
• Export Packaging Requirements. Packaging standards for international shipments. ISPM-15, marking, and buyer-specific requirements.

Update history

• 2026-07-01 First published.