Incoterms answer three questions and only three. Who arranges transport, who pays for it, and at what precise point risk passes from seller to buyer. They do not settle ownership, they do not set payment terms, and they are not interchangeable shorthand for "delivered".
Here are the four that cover almost all agro-export trade.
FOB: Free On Board
The seller delivers the goods on board the vessel at the named port of loading. Everything up to that point, including inland haulage, export clearance, terminal handling and loading, is the seller's cost and risk. From the moment the cargo is on board, both transfer to the buyer.
Choose FOB if you have your own freight forwarder or a negotiated carrier rate. You control the ocean leg, you see the actual freight cost rather than a bundled figure, and you arrange insurance to your own standard.
The obligation people forget: you need marine insurance in place from the moment of loading. Under FOB nobody else is insuring your cargo.
CFR: Cost and Freight
The seller arranges and pays ocean freight to the named destination port. Risk still passes when the goods are loaded at origin.
This split surprises people. Under CFR the seller pays for a voyage during which the buyer carries the risk. It is not an error. It reflects the fact that the seller has the commercial relationship with the carrier while the buyer owns the cargo at sea.
Choose CFR if you want the seller to handle freight booking but you prefer to arrange your own insurance.
Still your obligation: insurance, exactly as under FOB.
CIF: Cost, Insurance and Freight
CFR plus the seller arranging marine insurance. Risk still passes at loading, but the seller's policy responds.
Choose CIF if you want the simplest possible arrangement for a first shipment from a new origin. One quotation, one counterparty, one document set.
The catch: CIF requires only minimum cover, which is a restricted-perils policy rather than all-risks. For high-value cargo, either specify a higher level of cover in the contract or take out your own top-up. Buyers routinely assume CIF means comprehensively insured. It does not.
If you take one thing from this article, take this. The default insurance level under CIF is the minimum the Incoterm requires, not the level a prudent cargo owner would buy.
DAP: Delivered At Place
The seller delivers to a named place in the destination country, usually your warehouse, with risk transferring only on arrival and ready for unloading. Import duty and customs clearance remain the buyer's responsibility.
Choose DAP if you want a delivered price and have no interest in managing any part of the logistics.
The trade-off: it is the most expensive term, and you lose sight of the freight component. You also depend on the seller's ability to manage a destination-country leg they may not know well.
Quick comparison
| Term | Freight arranged by | Insurance by | Risk passes at |
|---|---|---|---|
| FOB | Buyer | Buyer | Loading (origin) |
| CFR | Seller | Buyer | Loading (origin) |
| CIF | Seller | Seller (minimum) | Loading (origin) |
| DAP | Seller | Seller | Destination |
Practical advice for palm produce
For a first shipment from Nigeria, CIF with an agreed insurance level above the minimum is usually the right balance. It keeps the transaction simple while you learn the corridor, and specifying the cover level closes the one real weakness of the term.
Once you have run a few shipments and know the route, FOB frequently works out cheaper, particularly if you already move volume with a carrier and can apply your own rates.
Whichever you choose, always name the port precisely. "CIF Nigeria" means nothing. "CIF Rotterdam" means something enforceable.
