Incoterms for Agri Buyers: FOB, CIF and EXW Compared

At a glance

• FOB (Free on Board): risk and cost pass to the buyer once the goods are on board at the origin port; the buyer arranges ocean freight and insurance.
• CIF (Cost, Insurance and Freight): the seller pays freight and insurance to the destination port — but risk still transfers at loading, the most misread clause in the trade.
• CFR (Cost and Freight): CIF without the insurance; buyers with annual marine policies use it to avoid insuring twice.
• EXW (Ex Works): the buyer carries every cost and risk from the seller's premises — usually the most expensive term for a foreign buyer to actually execute.
• Voyage risk sits with the buyer under all four terms; the terms only decide who pays for the journey.
• Our default quote is FOB Dar es Salaam or FOB Mtwara — strictly FCA in Incoterms language for containerised cargo.

The three letters after a price decide who pays for every leg of the journey and — more importantly — where the risk changes hands. Two quotes for the same container can differ by thousands of dollars and still be the same deal, or match to the cent and be very different deals. Here are the four terms that cover almost every African agri shipment, defined the way they actually play out.

The four terms, defined

FOB (Free on Board) — the seller delivers the goods on board the vessel at the named port of shipment, cleared for export. Risk and cost transfer to the buyer once the goods are on board; the buyer arranges and pays ocean freight and insurance. FOB Dar es Salaam means we carry everything up to and including loading at Dar, and the sea is yours.

CIF (Cost, Insurance and Freight) — the seller pays ocean freight and marine insurance to the named destination port, but risk still transfers at the load port, when the goods are on board. This is the clause most buyers misread: a CIF Rotterdam cargo damaged mid-voyage is the buyer's claim against the insurance policy, not the seller's problem to reship.

CFR (Cost and Freight) — identical to CIF except the seller does not buy insurance. The seller pays freight to the destination port, risk transfers on board at origin, and insuring the voyage is the buyer's job. Buyers with their own annual marine policies often prefer CFR to avoid paying twice.

EXW (Ex Works) — the seller makes the goods available at their premises, and everything else is the buyer's: inland haulage, export clearance, port charges, loading, freight, insurance. EXW looks like the cheapest number on the page and is usually the most expensive term for a foreign buyer to actually execute, because clearing exports in a country where you have no presence is slow, unfamiliar work.

Who pays for what

• Inland transport to port: seller under FOB, CFR and CIF; buyer under EXW.
• Export clearance and port charges at origin: seller under FOB, CFR and CIF; buyer under EXW.
• Ocean freight: buyer under FOB and EXW; seller under CFR and CIF.
• Marine insurance: buyer under FOB, EXW and CFR; seller under CIF.
• Risk during the voyage: the buyer's in all four terms — under CFR and CIF the seller pays for the journey, but never carries its risk.

Why we default to FOB

We quote FOB Dar es Salaam or FOB Mtwara by default because it splits the work along the line of competence. We are better placed than any foreign buyer to manage Tanzanian inland transport, export documentation and port handling; an established importer is usually better placed than us to buy ocean freight to their own port, where their volumes and carrier relationships live. FOB also keeps the price honest — freight is volatile, and a CIF quote must hide a freight guess inside the commodity price. Strictly speaking, the containerised version of this arrangement is FCA, and we are glad to contract on FCA terms with buyers who prefer the textbook fit — commercially, the trade still calls it FOB. We quote CFR or CIF on request for buyers who want one number to the destination port.

“Pick the term that matches what each side is genuinely good at. We know our ports; you know your freight market. FOB draws the line exactly there.”

— Daniel Mahenge, Logistics Coordinator