Incoterms for perishables
Who carries the risk and who pays. It's important you get this right so cargo isn't held at customs or delayed, which can impact product shelf life.
What an Incoterm actually decides
Incoterms are a set of three-letter rules published by the International Chamber of Commerce. Every sales contract needs one, and it answers three questions: who arranges the transport, who pays for each leg, and at what precise point risk passes from seller to buyer.
That last one is what catches people out. Risk and cost do not always transfer at the same place. On CFR and CIF the seller pays the freight, but the buyer has carried the risk since the goods were loaded at origin, so if a reefer fails mid-voyage it is the buyer's claim even though the seller booked the ship.
The eleven Incoterms run from EXW, where the buyer collects from the seller's door and does everything, to DDP, where the seller delivers to the buyer's warehouse with duty paid. Everything else sits between those two poles.
In perishables, most UK shipments are FOB, EXW, CIF or DDP.
Risk: Passes to the buyer at the seller's premises, before the goods are loaded.
Cost: Buyer pays everything from the seller's door onwards, including export clearance.
Least obligation on the seller. You take on export formalities in someone else's country.
Risk: Passes when the goods are handed to the carrier the buyer has nominated.
Cost: Seller covers export clearance and delivery to the carrier; buyer covers everything after.
The container-friendly alternative to FOB, because risk transfers at handover rather than once the box is aboard.
Risk: Passes when the goods are placed alongside the vessel at the port of origin.
Cost: Seller delivers to the quay and clears for export; buyer pays loading and onward carriage.
Written for bulk and break-bulk cargo. Rare in containerised produce.
Risk: Passes once the goods are loaded on board at the port of origin.
Cost: Seller covers costs up to loading; buyer pays freight and insurance from there.
The most common produce term, and the one most often used for containers even though it was written for bulk cargo.
Risk: Passes on loading at origin, the same point as FOB.
Cost: Seller arranges and pays the main carriage; buyer arranges insurance.
Risk and cost part company here. The seller pays the freight but is not carrying the risk during it.
Risk: Passes on loading at origin, the same point as FOB and CFR.
Cost: Seller arranges and pays for carriage and insurance.
CIF requires the seller to insure, but the level of cover is set by the contract. On perishable cargo, check what the policy actually covers.
Risk: Passes when the goods are handed to the first carrier, which can be well inland.
Cost: Seller pays carriage to the named destination; buyer covers import formalities.
Risk can transfer a long way before the goods reach the named place. Know where that point is.
Risk: Passes at handover to the first carrier, as with CPT.
Cost: Seller pays carriage and insurance to the named destination.
Under Incoterms 2020 this carries a higher insurance requirement than CIF.
Risk: Stays with the seller until the goods arrive at the named place, ready for unloading.
Cost: Seller covers carriage to the named place; buyer handles import clearance and duty.
Useful when you want the seller to own the journey but you keep control of the customs entry.
Risk: Stays with the seller until the goods are unloaded at the named place.
Cost: Seller covers carriage and unloading; buyer handles import clearance and duty.
The only term where the seller is responsible for unloading.
Risk: Stays with the seller all the way to the named destination.
Cost: Seller covers everything, including import duty and clearance.
Simplest for the buyer, but the seller files a customs entry in a country where they may not be established.