Incoterms for Commodity Buyers

This guide explains internationally established Incoterms rules as defined by the International Chamber of Commerce (ICC) in general terms; it is not legal or contractual advice. Always confirm the exact Incoterms version (e.g., Incoterms 2020) directly in your sale contract.

What Incoterms actually do

Incoterms are standardized three-letter trade terms, published by the ICC, that fix two things: the point at which risk of loss or damage passes from seller to buyer, and which party is responsible for which costs. They do not set price and do not cover payment terms or title transfer.

EXW — Ex Works

The seller’s obligation ends at their own premises; the buyer arranges and pays for everything from that point onward. Maximum control, maximum logistics burden.

FCA — Free Carrier

The seller delivers goods, cleared for export, to a carrier or location named by the buyer. FCA has become the generally recommended alternative to FOB for containerized cargo.

FOB — Free on Board

The seller delivers goods on board the vessel at the named port of shipment (for Tanzanian exports, typically Dar es Salaam, or Zanzibar port for cloves). FOB remains very commonly used in commodity trade by convention.

CFR — Cost and Freight / CIF — Cost, Insurance and Freight

The seller pays for carriage to the named destination port, but risk transfers to the buyer once goods are on board at the origin port. CIF additionally requires minimum-level cargo insurance for the buyer’s benefit — check what coverage level is actually being purchased.

DAP — Delivered at Place

The seller arranges and pays for carriage to a named destination and bears risk until arrival, but does not clear the goods for import or pay import duty.

DDP — Delivered Duty Paid

The seller’s maximum obligation: delivery with import clearance and duties paid by the seller. Confirm the seller is actually equipped to handle import formalities in your country before agreeing to DDP.

A practical note for new commodity buyers

FOB and CIF remain the most commonly quoted terms in commodity trade, but FCA is often more technically correct for containerized cargo. Whatever term you use, put it in writing together with the Incoterms version (e.g., “FOB Dar es Salaam, Incoterms 2020”).