If you are an exporter or importer, one of the most critical things you must understand is delivery terms — also known as Incoterms. These terms define exactly who pays for what at every stage of a shipment, from the seller’s warehouse all the way to the buyer’s door. Getting this wrong can cost you thousands of dollars in unexpected charges. This guide breaks down every major delivery term in plain language so you never get confused again.
📋 Table of Contents
- What Are Delivery Terms (Incoterms)?
- Why Delivery Terms Matter in Export Business
- EXW – Ex Works
- FCA – Free Carrier
- FAS – Free Alongside Ship
- FOB – Free On Board
- CFR – Cost and Freight
- CIF – Cost, Insurance and Freight
- CPT – Carriage Paid To
- CIP – Carriage and Insurance Paid To
- DAP – Delivered at Place
- DPU – Delivered at Place Unloaded
- DDP – Delivered Duty Paid
- Quick Comparison: All Incoterms at a Glance
- Most Commonly Used Delivery Terms in 2026
- Pro Tips: How to Quote Delivery Terms Correctly
- Frequently Asked Questions
1. What Are Delivery Terms (Incoterms)?
Delivery terms, officially known as Incoterms (International Commercial Terms), are a set of standardized international trade rules published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers when it comes to the delivery of goods in cross-border trade.
In simple terms: delivery terms tell you who is responsible for paying each charge — from packing the goods at the factory, to loading them onto a truck, to ocean freight, insurance, customs clearance at the destination, and final delivery to the buyer’s warehouse.
Without clearly agreed delivery terms, exporters and importers often face serious disputes: “Who was supposed to pay the port terminal charges?” or “Who handles customs clearance at the destination?” These terms eliminate all such confusion.
2. Why Delivery Terms Matter in Export Business
When you send a price quotation to a foreign buyer, you must always mention the delivery term. Why? Because the price you quote is only valid in the context of a specific delivery term. For example:
If you quote $10/kg CFR Jebel Ali Port, UAE, it means your price of $10 includes everything up to delivering the goods at Jebel Ali Port — the buyer clears customs and delivers the goods to their warehouse at their own cost.
But if you quote $10/kg EXW, the buyer must pay for everything from your factory door onward — trucking, port charges, freight, insurance, customs, and final delivery. The same $10 quote means very different things under different Incoterms!
Understanding delivery terms properly also helps you:
- Price your exports correctly and competitively
- Avoid unexpected costs eating into your profit margins
- Negotiate confidently with international buyers
- Know exactly when your legal responsibility for the goods ends
3. EXW – Ex Works
EXW is the delivery term with the absolute minimum responsibility on the seller. The seller only packs the goods for export at their factory or warehouse. From that point onward, every single cost and responsibility is borne by the buyer.
| Task / Charge | Who Pays? |
|---|---|
|
Export packing of goods |
Seller |
|
Loading onto truck at seller’s warehouse |
Buyer |
|
Inland transportation to the port |
Buyer |
|
Origin terminal charges |
Buyer |
|
Export customs clearance |
Buyer |
|
Ocean / air freight |
Buyer |
|
Insurance |
Buyer |
|
Destination port charges |
Buyer |
|
Import customs clearance & duties |
Buyer |
|
Delivery to buyer’s warehouse |
Buyer |
💡 Important: EXW is almost never used in practice for international trade because it is very difficult for a foreign buyer to handle export customs in another country. It is sometimes used for domestic trade within a country.
4. FCA – Free Carrier
Under FCA, the seller sends the goods to a specific carrier or freight forwarder at a specific location, which is usually the seller’s business or a freight terminal. The seller also takes care of all the export customs paperwork, packing for export, loading at their location, and transporting the goods to the specified location.
| Task / Charge | Who Pays? |
|---|---|
|
Export packing |
Seller |
|
Loading at seller’s premises |
Seller |
|
Inland transport to named place |
Seller |
|
Export customs clearance |
Seller |
|
Origin terminal charges |
Buyer |
|
Ocean / air freight |
Buyer |
|
Insurance |
Negotiable |
|
Import duties & customs |
Buyer |
|
Delivery to buyer’s warehouse |
Buyer |
5. FAS – Free Alongside Ship
Under FAS, the seller is responsible for bringing the goods to the named port of shipment and putting them next to the ship on the dock or quay. Once the goods are next to the ship, the buyer is responsible for everything else, including loading the goods onto the ship.
| Task / Charge | Who Pays? |
|---|---|
|
Export packing |
Seller |
|
Inland transport to port |
Seller |
|
Export customs clearance |
Seller |
|
Origin terminal charges |
Seller |
|
Loading onto the vessel |
Buyer |
|
Ocean freight |
Buyer |
|
Insurance |
Buyer |
|
Import duties & customs |
Buyer |
💡 Note: FAS is mostly used for shipping large amounts of cargo, like when a whole ship is hired to carry thousands of tons of grain, coal, or raw materials. FOB is much more common for standard container shipments.
6. FOB – Free On Board
FOB is a delivery term that is used a lot in international trade. Once the goods are loaded onto the ship at the agreed-upon port of shipment, the seller is no longer responsible. This is the main difference between FAS and FOB: with FAS, the seller only puts the goods next to the ship; with FOB, the seller also puts the goods on the ship.
| Task / Charge | Who Pays? |
|---|---|
|
Export packing |
Seller |
|
Inland transport to port |
Seller |
|
Export customs clearance |
Seller |
|
Origin terminal charges |
Seller |
|
Loading onto the vessel |
Seller |
|
Ocean freight |
Buyer |
|
Insurance |
Buyer |
|
Destination terminal charges |
Buyer |
|
Import customs clearance & duties |
Buyer |
|
Delivery to buyer’s warehouse |
Buyer |
For example, if you say “FOB Karachi Port,” it means that you (the seller/exporter) will take care of everything up to putting the goods on the ship in Karachi. From there, the buyer pays for ocean freight, insurance, import duties, and the final delivery.
7. CFR – Cost and Freight
CFR (which is also known as CNF in trade) is like FOB, but the seller also pays for the ocean freight to get the goods to the buyer’s port of choice. But, just like FOB, the buyer takes on the risk once the goods are loaded onto the ship at the port of origin.
| Task / Charge | Who Pays? |
|---|---|
|
Export packing |
Seller |
|
Inland transport to port |
Seller |
|
Export customs clearance |
Seller |
|
Origin terminal charges & loading |
Seller |
|
Ocean freight to destination port |
Seller |
|
Marine insurance |
Buyer |
|
Destination port / terminal charges |
Buyer |
|
Import customs clearance & duties |
Buyer |
|
Delivery to buyer’s warehouse |
Buyer |
📝 Example from Real World – When quoting “CFR Jebel Ali Port, UAE” we only provide a price including all costs associated with delivering the product to Jebel Ali Port in Dubai. The remaining costs associated with these goods once at the port will be borne by the UAE buyer including port clearance, import duties, as well as any trucking from the port to the buyer’s warehouse.
8. CIF – Cost, Insurance and Freight
CIF has the same general definition as CFR, except that CIF includes the responsibility of the seller to provide marine cargo insurance covering any damages to the goods while they are in transit. Buyers who wish to ensure that the shipment will be insured before it is shipped will prefer this option because it allows them to know that their shipment will be insured through the seller.
| Task / Charge | Who Pays? |
|---|---|
|
Everything covered under CFR |
Seller |
|
Marine insurance (minimum cover) |
Seller |
|
Destination port charges |
Buyer |
|
Import customs clearance & duties |
Buyer |
|
Delivery to buyer’s warehouse |
Buyer |
There are two major differences between CFR and CIF shipping. The only real difference is who arranges for the insurance. With CFR shipping, the buyer is responsible for arranging their own insurance, while with CIF shipping, the seller provides and pays for a minimum of marine insurance on behalf of the buyer. If your customer requests that the shipping cost includes delivery insurance, you should consider your shipping terms to be CIF instead of CFR.
9. CPT – Carriage Paid To
CPT is different than CFR because it applies to every type of transport (land-based, air-based, etc.) instead of just sea shipping, as with CFR. The agreement that the seller has made with the carrier (or transport provider) covers all of the transportation costs up to the buyer’s named destination. However, the seller is NOT responsible for paying for any terminal unloading costs and for delivering the freight to the buyer’s ultimate destination (the buyer is responsible for paying all of these costs).
| Task / Charge | Who Pays? |
|---|---|
|
Export packing, inland transport, export customs |
Seller |
|
Freight to named destination |
Seller |
|
Insurance |
Negotiable |
|
Destination terminal charges |
Buyer |
|
Import duties & customs |
Buyer |
|
Final delivery to buyer’s premises |
Buyer |
10. CIP – Carriage and Insurance Paid To
CIP includes comprehensive insurance and the cost of shipping; however, when buying under CIP terms, you should note that you will likely need to pay for higher levels of insurance coverage than would be required under a CIF (CIF cargo can be insured with only a minimum amount of coverage based on the Institute Cargo Clauses C).
| Task / Charge | Who Pays? |
|---|---|
|
Everything under CPT |
Seller |
|
Comprehensive insurance (ICC A) |
Seller |
|
Destination terminal charges |
Buyer |
|
Import duties & customs |
Buyer |
11. DAP – Delivered at Place
Under DAP, the seller transports and delivers the goods to the designated recipient location (such as their warehouse or distribution centre). All transportation costs are borne by the seller. However, it is the buyer who is responsible for unloading the goods and paying any import duties or customs clearance associated with the delivery.
| Task / Charge | Who Pays? |
|---|---|
|
Export packing, transport, customs, freight |
Seller |
|
Delivery to named destination place |
Seller |
|
Unloading at destination |
Buyer |
|
Import customs clearance & duties |
Buyer |
12. DPU – Delivered at Place Unloaded
DPU expands upon the terms of DAP as the seller must deliver to the destination but is also responsible for the unloading of the product(s) from the means of transport at the destination. The seller’s responsibility to unload at the destination is the only instance of an Incoterm where the seller is held accountable for this action. The seller may also be tasked with storing the product(s) at the destination.
| Task / Charge | Who Pays? |
|---|---|
|
All charges under DAP |
Seller |
|
Unloading at named destination |
Seller |
|
Import customs clearance & duties |
Buyer |
13. DDP – Delivered Duty Paid
DDP is the maximum level of service in terms of delivery. The vendor bears all costs associated with delivering the product to the buyer’s location including paying the import duty, the taxes owed on the goods, and completing the customs clearance process.
DDP can be thought of as a seller performing the process of delivering to the buyer, including packing the products at its factory, transporting them to the buyer’s location, and loading them into the buyer’s warehouse in the country of destination.
| Task / Charge | Who Pays? |
|---|---|
|
Export packing & loading |
Seller |
|
Inland transport, export customs |
Seller |
|
Ocean freight & insurance |
Seller |
|
Destination port charges |
Seller |
|
Import customs clearance & duties |
Seller |
|
Delivery to buyer’s warehouse |
Seller |
|
Unloading at buyer’s premises |
Seller |
|
Nothing — all costs covered |
Buyer |
⚠️ Important Requirement: To provide DDP terms, the seller must have an established business entity within the destination country (or have incorporated a local agent) in order to import customs clearance legally. Without having a local registered entity it is impossible to legally provide DDP in the majority of countries.
Most Commonly Used Delivery Terms in 2026
Out of all the Incoterms, three dominate international trade in practice — especially for exports from Pakistan and other South Asian countries:
🥇 #1 — CFR (Cost and Freight)
CFR is the most widely used delivery term in Pakistan’s export industry. The exporter handles everything from factory packing to delivering the goods at the destination seaport. The buyer then clears the goods at the destination and arranges final delivery.
🥈 #2 — FOB (Free On Board)
FOB is the second most popular term. Many buyers — especially large importers in Europe and the USA — prefer FOB because they have their own freight contracts and can negotiate better rates with shipping lines directly. The exporter’s responsibility ends at the origin port once goods are loaded onto the vessel.
🥉 #3 — CIF (Cost, Insurance and Freight)
CIF is popular when buyers want the convenience of the exporter arranging both freight and insurance. It is commonly used in trade with buyers in the Middle East, Africa, and Southeast Asia who prefer an all-inclusive price to the destination port.
Pro Tips: How to Quote Delivery Terms Correctly
⚡ Always Name the Port or Place in Your Quote
Never write just “CFR” or “FOB” without specifying the destination port or place. The correct format is: [Incoterm] + [Named Port or Place]. For example: CFR Jebel Ali Port, UAE or FOB Port Qasim, Pakistan. This eliminates all ambiguity about where the seller’s responsibility ends.
Here are some additional best practices every exporter should follow:
Always include the Incoterm year when writing formal contracts or invoices. Write it as “CFR (Incoterms® 2020)” to be specific about which version of the rules applies.
Choose the right term for your capabilities. If you don’t have experience arranging international freight, offering FOB is safer than CFR. If the buyer insists on a delivered price, consider DAP or CIF depending on whether they want import duties included.
Understand the risk transfer point. Under FOB and CFR, the risk (loss or damage) transfers to the buyer once goods are loaded onto the vessel — even though the CFR seller is paying the freight. This is why insurance is especially important under CFR.
Don’t use EXW for international trade if you can avoid it. It creates practical problems because foreign buyers typically cannot handle export customs clearance in your country. FCA is a much better alternative with similar minimal seller obligations.
Frequently Asked Questions (FAQ)
Under FOB, the buyer pays the ocean freight; under CFR, the seller pays the ocean freight. Everything else at the origin end is the same. The risk transfer point is also the same for both — it moves to the buyer when goods are loaded onto the vessel at the origin port.
CFR and CIF are identical except for marine insurance. Under CFR, the buyer arranges their own insurance. Under CIF, the seller arranges and pays for minimum marine insurance on the shipment.
Under FAS, the seller places goods alongside (next to) the ship at the port. The buyer is responsible for loading the goods onto the vessel. Under FOB, the seller is responsible for loading the goods onto the vessel. FAS is mainly used for bulk cargo shipments.
Generally, no. DDP requires the seller to handle import customs clearance in the destination country, which typically requires a registered local entity or a licensed customs agent working on your behalf. Without a local registration, offering DDP terms is legally problematic in most countries.
For new exporters, FOB is usually the safest starting point. You handle everything up to loading goods at the port — which is within your control — and the buyer takes care of freight and everything beyond. As you gain experience and freight contacts, you can move to offering CFR or CIF terms.
It means the price you have quoted includes all costs to deliver the goods to Jebel Ali Port in Dubai, UAE — including export packing, inland transport, export customs, and ocean freight. The buyer is responsible for clearing the goods at Jebel Ali, paying import duties, and trucking the goods to their warehouse.
Under CPT, the seller pays freight to the named destination but the buyer is responsible for terminal unloading and final delivery to their premises. Under DAP, the seller delivers the goods all the way to the buyer’s named premises (ready for unloading), so the seller covers terminal charges and last-mile delivery costs as well.
Final Thoughts
Understanding delivery terms is not optional for anyone doing business internationally — it is an absolute necessity. Whether you are an exporter quoting prices to overseas buyers or an importer calculating your total landed cost, knowing which charges fall on which party under each Incoterm can make or break your deal.
The three most important terms to master first are FOB, CFR, and CIF — they cover the vast majority of international sea freight shipments. From there, build your knowledge of DAP and DDP as your business grows and buyers start demanding delivered prices to their door.
Always state the delivery term clearly in your quotation, always name the specific port or place, and always ensure your price calculation correctly reflects all the costs you are agreeing to cover. Do that, and you will always be on solid ground in any international trade deal.
