Key takeaways
- The Incoterm describes delivery, risk and cost. It does not transfer title or set payment terms.
- FCA suits containerised cargo better than FOB, because FOB puts the seller at risk until the goods are on board.
- Under EXW the buyer is meant to clear export, which is awkward when the seller is the Indian exporter of record.
- DDP is rare on Indian exports because it makes the seller responsible for import clearance in the destination country.
Why the term matters more than it looks
An Incoterm is a three letter shorthand for a set of obligations. It says where the seller delivers, where risk passes, who pays for carriage, who insures and who clears customs at each end. It does not say who owns the goods, when payment is due or which law governs the contract. Those belong in the sales contract.
On an Indian export, the term also decides who appears in front of Indian customs. That matters because the exporter of record needs a valid IEC, the right documents and a GST position. A term that puts export clearance on a buyer with no Indian presence creates a practical problem, even if it looks tidy on a quote sheet.
The chain behind the term
Every export move has the same physical steps. The term allocates them between the two parties. Reading the chain in order makes the allocation visible.
- 01
Goods ready at the plant
Packing, marking and the commercial invoice are prepared by the seller.
- 02
Loading and inland haul
The cargo moves to a container freight station, an inland depot or a port.
- 03
Export clearance
The shipping bill, the export declaration and any licence are filed with Indian customs.
- 04
Origin terminal
The container is gated in, stuffed if needed and loaded against the vessel or flight.
- 05
Main carriage
Sea or air freight to the destination port or airport.
- 06
Destination clearance and delivery
Import duty, destination formalities and the final leg to the buyer.
The terms that cover most Indian exports
A small number of terms cover most shipments. The table is a starting point, not a substitute for the Incoterms 2020 text, which sets out the detailed obligations.
| Term | Risk passes | Main carriage paid by | India note |
|---|---|---|---|
| EXW | At the seller's premises | Buyer | Buyer clears export, which is awkward without an Indian entity |
| FCA | When goods are handed to the buyer's carrier | Buyer | Works well for containers and for an inland handover |
| FOB | When goods are on board the vessel | Buyer | Seller carries risk until loading, so port delays hurt |
| CIF | When goods are on board the vessel | Seller | Seller insures at the minimum cover, often too little |
| DAP | At the named destination, not unloaded | Seller | Buyer clears import and pays duty |
| DDP | At the named destination, import cleared | Seller | Seller needs a destination presence or a reliable agent |
Based on Incoterms 2020. Always read the full rule and state the named place precisely.
Export clearance and the Indian paperwork
Under most terms other than EXW, the seller handles Indian export clearance. That means a shipping bill, the commercial invoice and packing list, the IEC, and the certificate of origin where the destination or the buyer needs one. A customs broker usually files the documents, but the exporter remains responsible for their accuracy.
The GST position is part of the same conversation. Exports are zero rated, and the evidence of export supports the refund or the input credit position. A mismatch between the invoice value, the shipping bill and the bank realisation can hold up a refund. Keep the invoice, the shipping bill, the bill of lading and the payment record consistent, and use the same description and quantity across all of them.
Insurance is the other document that follows the term. Under CIF the seller arranges cover, but the buyer needs the certificate to claim. Under FCA or FOB the buyer arranges cover from the point of risk, so the policy must start at the right place. A policy that starts at the destination port leaves the main carriage uninsured.
The errors that recur
The first is using FOB for a container that is handed over at a terminal days before it is loaded. Under FOB, risk stays with the seller until the goods are on board. If the container is damaged in the yard or the vessel sails late, the seller carries a risk that the delivery point did not reflect. FCA, with a named place such as the terminal or the carrier's depot, matches the physical handover better.
The second is CIF insurance read as full cover. The rule requires minimum cover, which is narrower than most buyers assume. If the cargo is high value, fragile or routed through a risky area, agree a wider cover and name it in the contract. The third is DDP offered without a destination entity that can act as importer of record. The term looks simple and becomes a customs problem.
Matching the term to the route
For a first shipment to a new buyer, FCA or FOB with the buyer's forwarder is the simplest structure. The seller controls the export documents, the buyer controls the main carriage and the destination clearance. Both sides know where their responsibility ends.
For an established buyer that wants a delivered price, DAP is usually more workable than DDP. The seller carries the goods to the door, and the buyer clears import and pays duty. If the buyer insists on DDP, treat it as a separate service with a named importer, a duty estimate and a clear rule for what happens if the duty changes.
For a small urgent shipment by air, the term matters less than the cut-off and the packing. But the same rule applies: name the place, name the carrier and agree who clears what. A term without a named place is an argument waiting to happen.
The named place is part of the term
FCA Mumbai is not the same as FCA the supplier's warehouse. Write the full address and the handover point, and make sure the forwarder's booking matches it.
A short checklist before you quote
Before a term goes on a quotation, check that the physical handover, the risk point and the customs responsibility all line up. Then check that the price includes everything the term assigns to the seller, including the inland haul, the terminal charges, the documentation and the insurance where required.
- Term and the named place, written in full
- Who books the main carriage and who pays it
- Who clears export and who clears import
- Insurance cover, value and clauses
- Packing and loading responsibility
- Duty and tax estimate if the term is delivered
- Documents the buyer needs for destination clearance
Frequently asked questions
Should Indian exporters use FOB or FCA?
For containerised cargo, FCA usually matches the physical handover better, because risk passes when the container is handed to the carrier. FOB remains common and is suitable for break bulk or cargo loaded directly on board.
Does CIF include all insurance?
No. CIF requires a minimum level of cover, which is narrower than many buyers expect. If the cargo needs wider protection, agree the cover and the clauses in the contract rather than relying on the default.
Why is DDP difficult for Indian exporters?
DDP makes the seller responsible for import clearance and duty in the destination country. That usually needs a local entity or a reliable agent, plus a view on duty and tax. Many exporters prefer DAP and leave import clearance to the buyer.
Do Incoterms decide when the buyer pays?
No. Incoterms deal with delivery, risk, cost and customs. Payment terms, title and credit risk belong in the sales contract or the letter of credit.
Sources and further reading
- International Chamber of Commerce, Incoterms 2020
- DGFT, Foreign Trade Policy and export procedure, https://www.dgft.gov.in
- Central Board of Indirect Taxes and Customs, export documentation guidance, https://www.cbic.gov.in
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