Incoterms 2020 are the eleven ICC rules that say where the seller delivers, who pays for transport and insurance, and where risk passes from seller to buyer. For palm oil and rubber shipped in containers from Liberia, the rules you will meet most are FOB, FCA, CFR, CIF and, less often, DAP. This guide sets out all eleven, then explains what each means for a crude palm oil or TSR20 shipment from the Freeport of Monrovia.
Incoterms do not cover payment, title or the quality of the goods. Those belong in the sales contract. See buying commodities from West Africa for how the pieces fit together.
The eleven rules at a glance
| Rule | Name | Seller delivers | Risk passes | Seller pays main freight | Seller insures |
|---|---|---|---|---|---|
| EXW | Ex Works | At seller's premises, not loaded | At seller's premises | No | No |
| FCA | Free Carrier | To the buyer's carrier at a named place | On handover to carrier | No | No |
| FAS | Free Alongside Ship | Alongside the vessel at the load port | Alongside the vessel | No | No |
| FOB | Free On Board | On board the vessel at the load port | On board at load port | No | No |
| CFR | Cost and Freight | On board the vessel at the load port | On board at load port | Yes | No |
| CIF | Cost, Insurance and Freight | On board the vessel at the load port | On board at load port | Yes | Yes, minimum cover |
| CPT | Carriage Paid To | To the seller's carrier | On handover to carrier | Yes | No |
| CIP | Carriage and Insurance Paid To | To the seller's carrier | On handover to carrier | Yes | Yes, all risks cover |
| DAP | Delivered at Place | At the named destination, ready for unloading | At destination | Yes | Not required (seller carries the risk) |
| DPU | Delivered at Place Unloaded | At the named destination, unloaded | At destination, after unloading | Yes | Not required (seller carries the risk) |
| DDP | Delivered Duty Paid | At the named destination, import cleared | At destination | Yes | Not required (seller carries the risk) |
FAS, FOB, CFR and CIF are for sea and inland waterway transport only. The other seven work for any mode.
Who pays for what
| Cost | FCA Monrovia | FOB Monrovia | CFR destination | CIF destination | DAP destination | DDP destination |
|---|---|---|---|---|---|---|
| Export clearance in Liberia | Seller | Seller | Seller | Seller | Seller | Seller |
| Inland transport to port | Seller | Seller | Seller | Seller | Seller | Seller |
| Terminal handling at Monrovia | Buyer (usually) | Seller | Seller | Seller | Seller | Seller |
| Ocean freight | Buyer | Buyer | Seller | Seller | Seller | Seller |
| Cargo insurance | Buyer (optional) | Buyer (optional) | Buyer (optional) | Seller (minimum) | Seller carries risk | Seller carries risk |
| Destination terminal handling | Buyer | Buyer | Buyer (unless in freight) | Buyer (unless in freight) | Seller (usually) | Seller |
| Import clearance and duty | Buyer | Buyer | Buyer | Buyer | Buyer | Seller |
| EUDR due diligence statement (EU) | Buyer as operator | Buyer as operator | Buyer as operator | Buyer as operator | Buyer as operator | See below |
Terminal handling charges are where most disputes start. Write in the contract who pays them at each end.
The rules that matter for palm oil and rubber
FOB Monrovia
The seller clears the goods for export and delivers them on board the vessel at Monrovia. The buyer books and pays the freight. FOB suits buyers with their own freight contracts. Risk passes when the cargo is on board, so the buyer should insure from that point.
FCA Monrovia
The seller hands the containers to the buyer's carrier at the terminal. The ICC recommends FCA instead of FOB for containers, because the seller loses control of a container once it is handed over at the terminal, well before it is lifted onto the ship. Under Incoterms 2020, the parties can agree that the buyer's carrier issues an on board bill of lading to the seller, which helps with letters of credit.
CFR and CIF destination
The seller books and pays freight to the destination port. Risk still passes on board at Monrovia. That surprises some buyers: if the vessel is delayed or the cargo is damaged at sea, the buyer bears the loss and claims on the insurance.
Under CIF the seller must buy insurance, but only minimum cover (Institute Cargo Clauses C). For palm oil and rubber, ask for wider cover (Institute Cargo Clauses A) or arrange your own top-up.
DAP destination
The seller carries the risk until the cargo reaches the named place. DAP suits buyers who want a delivered price, but it costs more, because the seller prices in the extra risk.
DDP into the EU
Under DDP the seller acts as importer and clears the goods through customs. For EUDR products, the importer placing the goods on the EU market is normally the operator who files the due diligence statement. DDP can therefore move EUDR responsibility to the seller, which most non-EU sellers cannot take on.
Choosing a rule
- You have your own freight contracts: FOB or FCA Monrovia.
- You want the seller to handle freight: CFR, or CIF if you want insurance included.
- You want a delivered price and the seller to carry transit risk: DAP.
- You are buying with a letter of credit: CFR or CIF are common, because the seller controls the bill of lading. Make sure the documents in the LC match the rule. See payment terms: LC, CAD and TT.
Writing the rule into the contract
Always write the rule, the named place and the version, for example "CIF Rotterdam, Incoterms 2020". Add anything the rule does not settle: terminal handling charges, demurrage and detention, the latest shipment date and the documents required. Our sales contract checklist covers the full set of clauses, and shipping from Monrovia covers routes and transit times.
Incoterms® is a trademark of the International Chamber of Commerce. This guide summarises the rules for buyers and is not a substitute for the ICC text.