Three letters on your invoice decide who pays the freight, who carries the risk when a container goes over the side, and who argues with customs. Skip the ICC history lesson — here is the matrix that matters.
The risk/cost matrix
| Incoterm | Who pays main freight? | Where does risk transfer? | Best used for |
|---|---|---|---|
| EXW (Ex Works) | Buyer | At seller's factory gate | Domestic sales, or buyers with their own Indian logistics setup |
| FOB (Free On Board) | Buyer | When loaded on the vessel at the Indian port | Ocean freight where the buyer controls routing and carrier |
| CIF (Cost, Insurance & Freight) | Seller | When loaded on the vessel (risk passes early — cost doesn't) | Ocean freight where the Indian seller controls the main leg |
| DDP (Delivered Duty Paid) | Seller | At the buyer's destination door | E-commerce and buyers who want zero customs involvement |
The CIF subtlety everyone misses
CIF feels like full service — the seller arranges and pays for freight and insurance to the destination port. But risk transfers when the goods are loaded in India, not on arrival. If the vessel diverts around the Cape and the cargo arrives six weeks later damaged by condensation, that's the buyer's insurance claim, on a policy the seller chose (only minimum ICC-C cover is required). Buyers who care about their cargo either upgrade the insurance clause explicitly or buy FOB and insure it themselves.
DDP: powerful, and easy to underestimate
DDP makes the Indian seller the importer of record abroad: destination duties, import GST/VAT, and any de-minimis upheaval land on you. With the US having suspended its $800 de-minimis exemption in 2025, DDP e-commerce pricing into the US needs duty built into the landed cost line by line — by ITC-HS code, not by guesswork. Done right, DDP is a conversion weapon: the overseas customer sees one price and zero customs friction.
- Selling FOB? Insist your forwarder files the Shipping Bill and shares the Let Export Order (LEO) copy promptly — you need it for GST refunds and e-BRC reconciliation.
- Buying CIF into India? Remember Indian assessable value is CIF-based; the 1% notional landing charge was abolished in 2017, so duty is computed on actual CIF.
- Negotiating leverage: whoever controls the main carriage controls cost and visibility. Indian exporters moving from FOB to CIF/CPT typically gain both margin and ETA control.