The 7 Incoterms used in agri-food
There are 11 official Incoterms® 2020 rules, but seven cover over 95% of containerised agri-food contracts from India. An Incoterm is a three-letter code that defines exactly where the seller's responsibility ends and the buyer's begins — covering costs, risk and logistics at every stage of the journey. Incoterms govern delivery, risk and cost only; transfer of title and payment timing are separate matters in your sale contract.
Ordered below from least seller involvement (EXW) to most (DDP). Each bar shows the journey in seven stages — green = seller's cost & risk, navy = buyer's, orange dot = handover point.
The seller's only obligation is to make the goods available at their own premises, properly packed. The buyer arranges and pays for everything else — loading the truck, export customs clearance in India, all freight, insurance, import duties and final delivery. Note: EXW places Indian export customs on the foreign buyer, who typically cannot legally clear it. In practice most EXW deals convert to FCA at the first port.
Seller
- Pack goods to export standard
- Make available at agreed date & place
- Provide commercial invoice
Buyer
- All transport, every leg
- Export customs clearance in India
- Freight, insurance, import duties
The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at a named place. If that place is the seller's own premises, the seller loads the vehicle. If it is a CFS or container freight station, the seller delivers there unloaded. FCA is the ICC's recommended term for containerised cargo as it correctly reflects the moment the box is handed to the carrier.
Seller
- Load vehicle (if at own premises)
- Clear export customs in India
- Deliver to carrier at named place
Buyer
- Nominate and pay for main carriage
- Arrange marine insurance
- Import duties and inland delivery
The seller delivers goods on board the vessel nominated by the buyer at the named port of shipment, cleared for export. Risk transfers the moment goods are on the vessel. FOB remains the most widely used term on agri-commodity contracts globally, even for containerised cargo where FCA is technically more appropriate — because containers are handed to the carrier at the terminal, not over the ship's rail.
Seller
- Inland transport to origin port
- Export customs and port handling
- Load goods on board the vessel
Buyer
- Nominate the vessel
- Pay sea freight and marine insurance
- Import customs and delivery
Identical to FOB in terms of when risk transfers — when goods are on board the vessel at origin — but the seller also pays the sea freight to the named destination port. The buyer carries the sea-voyage risk even though the seller is paying the freight bill. CFR is often quoted when the buyer wants a single landed-at-port price but will arrange their own insurance.
Seller
- All costs from premises to destination port
- Export customs and loading
- Sea freight
Buyer
- Risk from the moment goods are on board
- Marine insurance
- Import customs and delivery
Identical to CFR with the addition that the seller must arrange and pay for marine cargo insurance on the buyer's behalf for the sea leg. Default cover is minimum (ICC Clause C) unless the contract specifies otherwise. Risk still passes when goods are on board at the origin port. For high-value cargo — saffron, premium coffee, frozen fruit pulp — specify ICC-A all-risks cover in the contract.
Seller
- All costs to destination port
- Sea freight and marine insurance (min. ICC-C)
- Export customs and loading
Buyer
- Risk from loading at origin port
- Import customs and delivery
- Additional insurance if needed
The all-mode equivalent of CIF. The seller arranges and pays for carriage and insurance to any named destination, including an inland warehouse or distribution centre. Risk transfers when goods are handed to the first carrier at origin. Under Incoterms 2020, CIP now requires ICC-A all-risks insurance by default — a change from the 2010 rules where minimum cover applied.
Seller
- Export customs and all freight
- ICC-A all-risks insurance (default 2020)
- Delivery to named inland place
Buyer
- Risk from handover to first carrier
- Import customs and duties
- Final delivery from named place
The seller delivers goods, ready for unloading, at the named place in the destination country. The seller bears all costs and risks for the entire journey except import customs clearance and import duties, which remain the buyer's responsibility. Useful when the buyer has a capable customs broker but does not want to manage freight.
Seller
- All costs and risk to named place
- Export and import freight
- Delivery ready for unloading
Buyer
- Import customs clearance
- Import duties and taxes
- Unloading at destination
The maximum obligation for the seller. Goods are delivered to the buyer's premises with everything paid — including import duties, import VAT and customs clearance in the buyer's country. The buyer simply receives and unloads the shipment. DDP requires the seller to have a registered legal or fiscal presence in the destination country to pay import duties; without this it is not legally achievable.
Seller
- All costs and risk, entire journey
- Import customs clearance
- Import duties and VAT
Buyer
- Receive and unload the goods
- No logistics obligations
The four not covered here
FAS (Free Alongside Ship) is used for loose bulk cargo in open-hatch vessels and is not relevant to containerised agri-food. CPT (Carriage Paid To) follows the same logic as CIP but without the insurance requirement; CIP is almost always preferred. DPU (Delivered at Place Unloaded) is like DAP but with the seller responsible for unloading at destination — occasionally used for palletised reefer deliveries to a specific facility.
Choosing an Incoterm
The right choice depends on how much control the seller wants over the logistics chain and how capable the buyer is of handling their end. The table below maps common situations to the appropriate term.
| Situation | Counterparty | Use | Reason |
|---|---|---|---|
| Indian exporter, starting out | Established importer with own forwarder | FCA / FOB | Buyer handles freight they already move. Seller quotes a clean ex-port price. |
| Indian exporter, experienced | Mid-size buyer wanting one landed number | CFR / CIF | Seller controls freight and (for CIF) insurance — better margin and simpler for buyer. |
| Seller with a destination partner | Smaller buyer, retail or food-service | CIP / DAP | Deliver to a named inland point; buyer handles only duties and last mile. |
| Seller with full local infrastructure | End-user wanting a domestic-feel purchase | DDP | Viable only with a registered presence in the destination country. |
| Foreign importer, new to Indian supply | Established Indian exporter | CIF / CIP | Supplier handles everything to the destination; buyer manages import. |
When selling CIF, always confirm with your freight forwarder who pays destination port charges (terminal handling, documentation, ISPS surcharges). These are sometimes billed to the consignee separately and are not included in the ocean freight rate.
Payment terms
Each payment method represents a different balance of risk between seller and buyer. The meter below each term shows seller risk in green and buyer risk in navy — five pips each, fully filled = maximum risk for that party.
The buyer wires the full invoice amount — or an agreed split such as 30% in advance and 70% on presentation of the Bill of Lading copy — before the goods leave India. Standard for new trading relationships, sample shipments and high-value or volatile commodities.
The buyer's bank issues an irrevocable undertaking to pay the seller upon presentation of shipping documents that comply exactly with the LC terms. Payment is made immediately ("at sight") once the bank confirms the documents are in order. The most common instrument for first-time or unfamiliar trading relationships.
The seller's payment is guaranteed by the bank, subject to document compliance. The buyer's bank releases payment only against documentary evidence of shipment. Documents must be prepared against the LC itself, not the original proforma invoice — the two often diverge after negotiation, and the bank pays only on the LC.
The seller extends a credit period. Documents are released to the buyer against their formal acceptance of a draft (bill of exchange) that matures in 30, 60 or 90 days. The seller can discount the accepted draft with their bank to receive early payment at a discount rate. Used with established buyers who need working capital time between cargo arrival and resale.
The seller's bank forwards the shipping documents to the buyer's bank, which releases them only against immediate payment. There is no bank guarantee of payment — but the buyer cannot legally take possession of the cargo without the documents. If the buyer refuses to pay, the goods remain at the destination port at the seller's risk and cost.
The seller ships the goods, sends the commercial documents directly to the buyer, and waits for payment per agreed terms — typically Net 30, 60 or 90 days. No bank involvement and no security instrument. Used only with long-term, well-established buyers such as multinationals or repeat retail accounts. Should be backed by an ECGC (Export Credit Guarantee Corporation of India) policy or private trade credit insurance to protect the receivable against buyer default or political risk.
How an LC at sight flows — step by step
Documents per shipment
Every agri-food export requires at minimum a commercial invoice, packing list and bill of lading. Additional documents depend on the product, destination country and payment term.
| Document | Purpose | Issued by |
|---|---|---|
| Commercial Invoice | States the value, Incoterm, HS code, payment terms and details of both parties. The primary financial document for customs. | Seller |
| Packing List | Box-level detail: net/gross weights, dimensions, number of packages, container number and seal number. | Seller |
| Bill of Lading (B/L) | The title document for the cargo. Possession of an original B/L = legal right to collect the goods. | Shipping line / NVOCC |
| Certificate of Origin | Certifies where the goods were produced. Required for preferential duty rates under Free Trade Agreements. | Chamber of Commerce / APEDA |
| Phytosanitary Certificate | Confirms that plant-based products are free from pests and disease. Mandatory for grains, pulses, spices and fresh produce. | Plant Quarantine Authority, India |
| Health Certificate | Required for processed foods entering the EU, GCC and other regulated markets. Confirms FSSAI compliance. | FSSAI / authorised inspection body |
| Certificate of Analysis (CoA) | Laboratory results for pesticide residues, aflatoxin levels, microbiology and heavy metals. Required by most regulated markets. | NABL / ILAC-accredited laboratory |
| Fumigation Certificate | Confirms fumigation of wooden pallets or dunnage under ISPM-15 standards. Required for most export markets. | Approved fumigation agency |
| Insurance Certificate | Evidence of marine cargo insurance. Mandatory when the Incoterm is CIF or CIP; recommended for all other terms. | Marine insurer |
Quick reference summary
A single-view reference of all key terms on this page — Incoterms ranked by seller responsibility, payment terms ranked by seller risk, and the core document set.
AIncoterms — seller responsibility, low to high
BPayment terms — risk spectrum
CCore documents
Structuring a shipment?
We advise on the right Incoterm, payment instrument and document set for your product, destination and counterparty.