Incoterms (International Commercial Terms) are standardised trade terms published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international transactions — specifically who pays for freight, insurance, customs, and who bears the risk at each stage.
Understanding Incoterms is crucial before importing goods into South Africa or exporting.
The 11 Incoterms (2020)
Group E — Departure
EXW (Ex Works)
Seller's obligation: Make goods available at their premises.
Buyer's obligation: Everything else — collection, export clearance, freight, insurance, import clearance, delivery.
Use: Buyer has maximum responsibility and control.
Group F — Main Carriage Unpaid
FCA (Free Carrier)
Seller: Delivers goods to a carrier at a named place, clears exports.
Buyer: Pays main freight, insurance, import clearance.
Use: Flexible, increasingly popular.
FAS (Free Alongside Ship)
Seller: Delivers goods alongside the vessel at the port of shipment.
Buyer: Loads, pays freight, insurance, import clearance.
Use: Sea freight only, typically for bulk cargo.
FOB (Free On Board)
Seller: Loads goods onto the vessel and clears exports.
Buyer: Pays sea freight, insurance, import clearance.
Use: Most common for China imports. V & S Freight recommends FOB for most sea freight imports.
Group C — Main Carriage Paid
CFR (Cost and Freight)
Seller: Pays freight to destination port.
Buyer: Bears risk from loading point, pays insurance, import clearance.
Use: Sea freight. Buyer should arrange own insurance.
CIF (Cost, Insurance and Freight)
Seller: Pays freight and minimum insurance to destination port.
Buyer: Bears risk from loading, pays import clearance.
Use: Common for international trade. Note: CIF insurance is minimum coverage; we recommend additional cargo insurance.
CPT (Carriage Paid To)
Seller: Pays freight to named destination.
Buyer: Bears risk from handover to carrier.
Use: Any mode of transport.
CIP (Carriage and Insurance Paid To)
Seller: Pays freight and insurance to named destination.
Buyer: Bears risk from handover point.
Use: Any mode. CIP 2020 requires comprehensive insurance (better than CIF).
Group D — Arrival
DAP (Delivered at Place)
Seller: Delivers goods to named destination, ready for unloading. Pays all freight.
Buyer: Unloads, pays import customs clearance, duty, VAT.
Use: Door-to-door minus customs.
DPU (Delivered at Place Unloaded)
Seller: Delivers and unloads at destination.
Buyer: Pays import customs, duty, VAT.
Use: Specific destinations like warehouses.
DDP (Delivered Duty Paid)
Seller: Maximum obligation — delivers to buyer's premises, pays all freight, insurance, import duty, and VAT.
Buyer: Just receives the goods.
Use: Buyer has minimum responsibility. Often used for e-commerce.
Which Incoterm Should You Use?
| Situation | Recommended | Why |
|---|---|---|
| Regular sea freight imports | FOB | You control freight costs and insurance |
| First-time importer, wants simplicity | CIF or DDP | Supplier handles more |
| Exporting from SA | FOB or CIF | Common in international trade |
| Cross-border road freight | DAP | Clear responsibility division at border |
How Incoterms Affect Your Import Costs
The Incoterm you choose affects:
- Who pays for freight — Which impacts your cash flow
- Customs value — Duty is calculated on the CIF value regardless of Incoterm
- Risk — When responsibility for damage/loss transfers to you
- Insurance — Whether the seller provides it
Need Advice?
V & S Freight helps clients choose the right Incoterm for every transaction. Contact us for guidance.
Get a Free Quote → | Call: 076 982 0036