Two quotes for the same steel pipe can look completely different — one at USD 820 per tonne, another at USD 905. The difference is often not the steel. It is the Incoterms. These three-letter terms decide who pays for freight and insurance, who handles customs, and the exact point where risk passes from seller to buyer. For metal exporters, choosing and quoting the right Incoterm is just as important as the price itself.
What Incoterms are
Incoterms are standard trade terms published by the International Chamber of Commerce (ICC). The current version is Incoterms 2020, which has 11 rules. They define:
- Costs — who pays for each leg: loading, inland transport, export clearance, sea freight, insurance, import duty, delivery.
- Risk — when responsibility for loss or damage moves to the buyer.
- Tasks — who arranges transport, insurance and customs formalities.
Incoterms do not decide when ownership passes, the payment terms or what happens if the buyer does not pay. Those belong in your contract.
Always write the term with a named place and the version, for example: "FOB Nhava Sheva, Incoterms 2020".
The terms metal exporters use most
EXW — Ex Works
You make the goods available at your factory or warehouse. The buyer handles everything else, including loading and export clearance.
- Simple for you, but often impractical for foreign buyers who cannot clear exports in your country.
- For international sales, FCA is usually a better choice than EXW.
FCA — Free Carrier
You deliver the goods, cleared for export, to the buyer's carrier at a named place — your works or a container freight station. Risk passes on handover. FCA works well for containerised steel.
FOB — Free On Board
You deliver the goods on board the vessel nominated by the buyer at the named port of shipment. Risk passes once the goods are on board. The buyer pays sea freight and insurance.
- Common for bulk and break-bulk steel such as coils, plates and long pipes.
- ICC guidance says FOB is meant for sea and inland waterway transport, not for containers handed over at a terminal — FCA fits containers better, though FOB is still widely used in practice.
CFR — Cost and Freight
You pay sea freight to the named destination port, but risk passes to the buyer when the goods are loaded on board at origin. The buyer arranges insurance.
CIF — Cost, Insurance and Freight
Like CFR, but you also buy marine insurance for the buyer. Under Incoterms 2020, CIF requires only minimum cover (Institute Cargo Clauses C) unless agreed otherwise — tell buyers if you offer broader cover.
Important: under both CFR and CIF, risk passes at the port of loading, even though you pay freight to the destination.
DAP — Delivered At Place
You deliver to a named place in the buyer's country, ready for unloading. You carry the risk until then. The buyer pays import duties and clears customs.
DDP — Delivered Duty Paid
You deliver to the buyer's door with duties and taxes paid. This is the maximum obligation for the seller and requires knowledge of the destination's customs and tax rules. Use it only when you are confident about local costs and registration.
Quick comparison
| Term | Seller pays main freight? | Risk passes at | Seller insures? |
|---|---|---|---|
| EXW | No | Seller's premises | No |
| FCA | No | Handover to carrier | No |
| FOB | No | On board at origin port | No |
| CFR | Yes | On board at origin port | No |
| CIF | Yes | On board at origin port | Yes (min. cover) |
| DAP | Yes | Named destination | No (but bears risk) |
| DDP | Yes, plus duties | Named destination | No (but bears risk) |
Choosing the right term for steel shipments
- New buyers and LC payments: FOB, CFR or CIF are familiar and work smoothly with letters of credit and bills of lading.
- Buyers with their own forwarder: FOB or FCA lets them use contracted freight rates.
- Small or inexperienced buyers: CFR or CIF makes your quote easier to compare because sea freight is included.
- Project buyers wanting a landed price: DAP is attractive, but get freight and destination charges confirmed first.
Common mistakes
- Quoting "CIF" with no named port.
- Assuming CIF means you carry risk to destination — you do not.
- Forgetting terminal handling charges, which can be significant for heavy steel.
- Using DDP without knowing import duties or anti-dumping duties on steel in the destination country.
Put the term on every quote
A professional export quotation always shows the Incoterm, named place, currency, validity and payment terms. QuoteMitra builds export quotes in USD, EUR, AED and other currencies, with your terms printed clearly on every PDF.
Frequently asked questions
Which Incoterm is best for a new exporter?
FOB or CFR are often a good start. They are widely understood, work well with letters of credit and keep your risk limited to the port of loading.
Does CIF mean I am responsible until the goods reach the destination?
No. Under CIF you pay freight and minimum insurance to the destination port, but risk passes to the buyer once the goods are loaded on board at the origin port.
Do Incoterms cover payment terms?
No. Payment terms, ownership transfer and dispute resolution must be agreed separately in your contract or proforma invoice.
Should I still mention 'Incoterms 2020'?
Yes. Older versions such as Incoterms 2010 are still used by some parties, so writing the version avoids confusion.
Key takeaways
- Incoterms set costs, risk and tasks — not ownership or payment.
- Always state the term, the named place and "Incoterms 2020".
- CFR and CIF move risk at the origin port; DAP and DDP at destination.
The right Incoterm makes your price clear, your risk controlled and your buyer confident.
