Short answer: Incoterms define who pays for and arranges transport, insurance and customs, and where risk passes from seller to buyer. For air and courier shipments of instruments, FCA, CPT, CIP and DAP are common; FOB and CIF are for sea freight.
| Incoterm | Seller arranges | Risk passes |
|---|---|---|
| EXW | Goods ready at factory | At the factory |
| FCA | Delivery to buyer’s carrier, export cleared | When handed to carrier |
| FOB | Loading on ship (sea only) | On board the ship |
| CPT | Transport to named place | When handed to first carrier |
| CIP | Transport and insurance | When handed to first carrier |
| CIF | Sea freight and insurance (sea only) | On board the ship |
| DAP | Delivery to buyer’s address | At destination, before unloading |
| DDP | Delivery with duties paid | At destination |
Choosing an Incoterm
- Decide who manages freight
- Decide who insures
- Consider customs knowledge
- Compare total cost
- Write the Incoterm and place in the contract
Common mistakes
- FOB for air freight: FOB is for sea
- No named place: Always name the place
- Insurance gap: Check who insures
- DDP abroad: Seller may not handle buyer’s duties
- Mismatched invoice: Incoterm must match documents
- Assuming risk: Risk and cost can pass at different points
Contract wording
- Incoterm and version (e.g. FCA Incoterms 2020)
- Named place
- Insurance responsibility
- Delivery date
- Payment terms
In detail: why named place matters
“CIF” alone is incomplete; “CIF Port of Veracruz Incoterms 2020” is clear. The named place decides where costs and risks change.
Worked example
A buyer quoted “FOB Lahore” for air freight realises FOB is for sea; the parties change to “FCA Lahore Airport Incoterms 2020”.
Proof box
Proof: Incoterms 2020 are published by the International Chamber of Commerce (ICC) and are the current version.
Frequently asked questions
Which Incoterm is best? The one that matches who can manage freight best.
Does Incoterm cover payment? No, payment terms are separate.
Who pays import duty under DAP? The buyer.
What is CIP insurance level? Incoterms 2020 requires higher cover for CIP than CIF.
Glossary
- Named place: location stated with the Incoterm.
- Risk transfer: point where risk moves to buyer.
- Carrier: company transporting goods.
Key takeaways
- Use the right term for the transport mode
- Always name the place
- Check insurance
Standards and sources
- ICC: Incoterms rules
- Related: payment terms (see Payment terms and Incoterms explained for medical importers), importing guide (see Importing surgical instruments: the complete step-by-step guide)
Quotes from Tata Surgical
In the Incoterm that suits you. Request a quote.
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