Incoterms 2020 for FMCG Buyers: EXW, FOB, CIF and DAP
Three letters decide who pays for what, who carries the risk while the goods are moving, and how much of your landed cost is already sitting inside the number you were quoted. Here is what each of the four terms consumer-goods buyers meet most often actually does.
Ask two European suppliers to quote the same pallets and the figures often arrive far apart before a single case has been discounted. Usually nothing is wrong with either offer: one is EXW and one is CIF, and the gap is freight, handling, clearance and insurance that somebody pays either way. Consumer goods run on thin per-unit margins and high physical volume, so the term you agree moves your landed cost more than the case price you spent the call negotiating.
This page is written for buyers, not lawyers. It covers the four rules we are asked for most — EXW, FOB, CIF and DAP — what each obliges either side to do, where risk changes hands, and the mistakes that keep costing importers money.
What an Incoterm settles, and what it leaves open
The rules are published by the International Chamber of Commerce, and Incoterms 2020 is the current edition. ICC describes them as eleven three-letter trade terms reflecting business-to-business practice, used to clarify the tasks, costs and risks in delivering goods from seller to buyer.
Seven work for any mode of transport, including multimodal moves: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four are written for sea and inland waterway carriage only: FAS, FOB, CFR and CIF. That distinction matters — FOB and CIF describe goods crossing a ship's side, so applying them to a container handed over at an inland depot leaves the moment of delivery ambiguous, which is the ambiguity you were trying to remove.
What the rules do not do is the shorter and more useful list. They are not a contract of sale on their own. They do not transfer title or ownership. They say nothing about price, currency, payment method or timing. They do not decide what happens if the goods fail to conform, if delivery is late, or if a dispute goes to arbitration. And apart from CIF and CIP, they impose no obligation on either party to insure the cargo at all.
Incoterms® is a registered trademark of the International Chamber of Commerce. This page describes how the rules behave in practice for consumer-goods shipments; it neither reproduces the rule text nor is an ICC publication. For binding wording, work from the ICC's own edition.
Side by side: cost, risk, clearance, insurance and documents
Six dimensions separate the four terms. Read down a column rather than across a row — the differences that hurt are rarely the ones on the price line.
Who pays the carriage
Under EXW the buyer pays everything from the warehouse door onward. Under FOB the seller pays to get the container on board and the buyer holds the ocean contract. Under CIF the seller pays sea freight to a named discharge port. Under DAP the seller pays to a named address.
Where risk changes hands
EXW: when the goods are placed at your disposal at the seller's premises. FOB and CIF: when on board the vessel at the loading port. DAP: on arrival at the named place, ready to unload. Note that CIF moves cost and risk at different moments — the most misread feature of the rule.
Export clearance
EXW leaves export formalities with the buyer, which for a non-EU buyer means finding a party willing to act as exporter of record out of Belgium. FOB, CIF and DAP all put clearance and the declaration on the seller — the practical reason EXW is heavier than its price suggests.
Import clearance and duty
On all four terms the buyer imports. Duty, import VAT or sales tax, registration and local inspection stay with you as importer of record, including under DAP. Only DDP shifts import clearance to the seller, and it needs a tax presence in your market.
Insurance obligation
EXW, FOB and DAP oblige nobody to insure — cover is a commercial decision, and on DAP the seller insures its own exposure, not yours. CIF is the only one of the four with a compulsory policy, and ICC confirms Institute Cargo Clauses (C) remains its default level, with parties free to agree higher.
Documents each side produces
Every term here produces a commercial invoice, packing list and transport document; from FOB upward the seller also holds the export declaration. Proof of origin — a EUR.1 movement certificate or a Certificate of Origin — is requested by the buyer and issued in Belgium regardless of term, so it must be agreed at quotation rather than after loading.
The four rules, one at a time
EXW — lowest headline figure, longest to-do list
Ex Works means the seller makes the goods available at its own premises, packed and identified, and does nothing else. It is the only one of the four where the seller is not obliged to load your truck and where export formalities sit on your side. The quoted number is genuinely the goods, which is why it looks attractive beside a delivered offer.
It works well for one profile: a buyer already running a European consolidation programme, with a forwarder instructed to collect, a party able to act as exporter out of the EU, and enough volume from other suppliers that our pallets join a load already being built. For that buyer EXW is the cheapest and cleanest structure available.
It works badly for a first-time importer of mixed pallets, who inherits collection scheduling, the export declaration, terminal handling charges not seen before, and risk from the moment the goods are at their disposal — which is before they are on a vehicle. Buyers who ask for EXW because it is the lowest quotation, then ask us to arrange the collection and the declaration anyway, have bought FCA or FOB with none of the clarity.
FOB — on board, export cleared, then your carrier's problem
Free On Board is a sea and inland waterway rule. The seller delivers the goods on board the vessel at the named loading port and clears them for export; risk passes at that point and the buyer holds the contract of carriage. For consumer goods it is the standard structure once a buyer has negotiated their own carrier rates, because it lets you apply a freight tariff you already control to cargo somebody else has cleared.
The practical friction with FOB is timing rather than cost. The booking is yours, so the cut-off is yours: the terminal delivery window, not the speed of picking, decides which sailing a consignment catches. Send the booking reference and empty-release detail early and FOB is frictionless.
One accuracy point: FOB is drafted around loading on board a vessel, so using it for a container handed over at an inland depot stretches the rule. ICC's answer is FCA, and Incoterms 2020 added a mechanism letting the parties agree an on-board bill of lading under FCA.
CIF — the seller buys freight and a policy, but not your risk cover
Cost, Insurance and Freight puts the ocean leg and a marine cargo policy on the seller's side, delivered to the discharge port you name; clearance, duty and the inland move remain yours. It is the easiest structure for comparing an EU offer against a local landed cost, because one figure lands at your port and you add only the domestic side.
Two things about CIF are misunderstood constantly. First, risk still passes when the goods are loaded on board at the port of shipment, not when they arrive: if a box goes over the side mid-ocean they were your goods when it happened, and what the seller owes you is the policy, not replacement cargo. Second, the level of that policy — dealt with below, because on higher-value lines it is the most expensive assumption on this page.
DAP — delivered to your address, with duty still yours
Delivered At Place obliges the seller to carry the goods to a named destination and place them at your disposal on the arriving vehicle, ready for unloading; risk passes there. It is as close to turnkey as we usually go, and a common shape for a first order into a market still being tested, or for a regional distributor who wants one delivered number to build a price list from.
DAP is not DDP. Import clearance, duty, import VAT and any local registration remain the buyer's, and if the goods sit at the border for want of an import licence, they sit at your cost. Two details are worth settling in writing: who unloads at the named place, and how the customs value will be built, since a DAP price already contains freight to destination.
Why four quotations for one pallet look nothing alike
The arithmetic is simpler than the confusion around it. Write the goods value as G, pre-carriage and export costs in Belgium as E, sea freight as F, the marine insurance premium as I, and your market's duty rate as d. Then, roughly: EXW is G; FOB is G + E; CIF is G + E + F + I; DAP is G + E + F plus destination handling and inland haulage.
Nothing is saved or added at any step — the same costs are distributed differently between two invoices. What changes materially is the base your duty is calculated on: many customs regimes assess duty on a value including cost, insurance and freight to the frontier, so a CIF-shaped declaration carries duty on (G + E + F + I) × d. Whether another structure presents a lower dutiable base depends on your destination's valuation rules, and is a question for your broker.
This matters more in consumer goods because of density. A container of still water in PET and similar beverage lines reaches its permitted payload with floor space visible; a container of crisps and extruded snacks fills the cube long before mass matters. When freight is a large fraction of delivered value, the term deciding who books it is not an administrative detail. Our export and freight process shows how those loads are built.
Where CIF insurance stops being enough
ICC states that for CIF the Institute Cargo Clauses (C) remains the default level of cover, with the parties free to agree higher. CIP, by contrast, was raised in the 2020 edition to require cover compliant with Institute Cargo Clauses (A) or similar. That deliberate difference is why a CIF policy can disappoint.
Clauses (C) is a named-perils cover. It responds to major casualty events — sinking, stranding, fire, collision, general average, jettison. It is not designed for the losses that actually happen to consumer goods: pilferage from a broken seal, water ingress, condensation sweat on cartonboard, crushing from bad stow, part-consignment non-delivery. Clauses (A) is an all-risks form and responds to most of those, subject to its exclusions.
The insured amount is the other half. The rule requires the seller to insure for the contract value plus a ten-per-cent uplift, standing in for lost margin and incidental costs. On a load of dermatological skincare and comparable beauty lines — high value per pallet, easily pilfered, sensitive to heat and handling — the gap between a named-perils policy at that level and an all-risks policy at a properly stated value is not academic.
The fix is a conversation rather than a clause: either agree in the sale contract that CIF cover will be Institute Cargo Clauses (A) at an insured value you specify, or accept the default and place your own top-up cover from the loading port onward. What does not work is assuming that because the letter I appears in the term, the cargo is comprehensively insured for your benefit.
The errors that recur on consumer-goods contracts
Treating the Incoterm as the price. Buyers compare an EXW figure from one supplier with a CIF figure from another and conclude the first is cheaper. Ask every supplier to quote on the same term; where you cannot, rebuild both to the same point yourself.
Using a sea term for a non-sea handover. If goods are handed to a carrier at a depot, or move by air or road into a neighbouring market, FOB and CIF describe a moment that never happens. Road moves under a CMR consignment note belong on FCA, DAP or DPU.
Assuming DAP means duty paid. It does not. Only DDP does. This is the most common misunderstanding on delivered quotations, and it surfaces at the border when the broker asks who is settling the duty.
Leaving proof of origin until after loading. A EUR.1 movement certificate certifies EU preferential origin under an agreement between the EU and your market, and preferential origin follows where the goods were manufactured — not where the brand comes from. A famous European brand manufactured outside the EU does not qualify because the name is European. Some origin documents can be issued retrospectively and some cannot, so the question belongs on the pro-forma.
Ignoring the physical goods. Chocolate and filled confectionery behave differently on a summer sailing, and aerosols in household and cleaning ranges carry dangerous-goods classifications that change carrier options and paperwork. The right Incoterm does not rescue a routing that was wrong for the cargo.
Choosing the term: the questions that actually decide it
There is no best Incoterm, only a best fit for how your business is set up today. Four questions settle it in most cases.
- Do you have a forwarder and negotiated carrier rates? If yes, FOB — or FCA where the handover is at a depot. If no, CIF or DAP, revisited when your volume justifies rates of your own.
- Are you consolidating from several European suppliers? If yes, EXW or FCA so your forwarder builds one load. If we are your only European supplier, there is nothing to consolidate and the extra work buys nothing.
- Is the destination a port or inland? A port destination is naturally CIF; an inland warehouse is naturally DAP, since otherwise you are pricing the domestic leg against a haulier you have not appointed.
- Do you need a fixed landed cost before quoting your own customers? If yes, DAP puts the most of the chain in one number, with duty the only variable left.
Most relationships move along that list rather than picking a point on it: CIF or DAP while the range is being proven, then FOB and occasionally EXW once local clearing and carrier arrangements exist. If you are still deciding, open a wholesale account and ask for the same load on two terms — the fastest way to see what the European side of your chain really costs.
Name the place, name the edition
Two lines of contract hygiene prevent most Incoterm disputes. Write the rule with its named place and its edition — CIF Mombasa, Incoterms 2020 — because earlier editions remain in force wherever parties choose them, and DAT, which existed under the previous edition, was renamed DPU in 2020. "FOB Belgium" is not a term: the named port or place is what fixes the delivery point, and therefore the risk transfer. A term with no edition and no place is an invitation to argue after the fact.
Then check the rule against the goods rather than against habit. The four here are the ones we quote most often, but FCA, CPT, CIP and DPU exist for good reasons and are often the more accurate choice for containerised moves. Remember too what the term leaves to the sale contract: payment, title, inspection, remedies and the document set. Our answers to common trading questions cover how those are handled, and the comparison of routing through Antwerp or Rotterdam covers the other half of the landed-cost decision.
Where an obligation matters commercially, verify it in the ICC text rather than in a summary — including this one. Practitioner guidance is a starting point; the published rules and your customs authority are the authority.
Tell us the destination, the lines and the term you trade on. If you are unsure which fits, say what you have at your end — forwarder, broker, import licence — and our export desk will suggest the structure that costs least to run. Start from the export catalogue or go to a quotation request.
Ask for the same load on two terms
EXW, FOB, CIF or DAP — we will quote your shipment on more than one so you can see exactly what the European leg costs.