FOB, CFR, CIF or DAP? Choosing Incoterms for electrical steel shipments
The Incoterm decides who books the freight, who insures the cargo and where the risk passes. A practical comparison of the terms most used for coil and lamination shipments from China.
Our shipments leave through Guangzhou. The price we quote depends on where our responsibility ends, so stating the Incoterm (Incoterms 2020 rules) at the RFQ stage makes quotations comparable.
| Term | We arrange | Risk passes to the buyer |
|---|---|---|
| FOB | Export clearance and loading on board | When goods are on board at the port of loading |
| CFR | As FOB, plus ocean freight | When goods are on board at the port of loading |
| CIF | As CFR, plus minimum cargo insurance | When goods are on board at the port of loading |
| DAP | Transport to your named place, unloading excluded | At your named place, ready for unloading |
Points that are often missed
- Under CFR and CIF the risk passes at loading, even though we pay the freight. Damage at sea is a claim against the insurance, not against the seller.
- CIF insurance is minimum cover (Institute Cargo Clauses C). Ask for clauses A if you want all-risks cover.
- Under DAP the buyer still handles import clearance and duties.
- Under Incoterms 2020 the insured amount is at least the contract price plus 10%.
FOB or FCA for containers?
FOB was written for goods loaded over the ship’s rail. For container cargo the ICC recommends FCA, where the risk passes when the container is handed to the carrier at the terminal. In practice many steel buyers still use FOB, and it works when both sides understand it. If your bank or insurer asks for strict wording, FCA Guangzhou is the cleaner choice.
An example
Suppose you buy a 20-foot container of slit coils for a plant in Europe. Under FOB Guangzhou your forwarder books the ship and you insure the cargo from loading. Under CIF your price includes freight to the named port and minimum insurance, and you take over at the port of destination. Under DAP our forwarder delivers to your plant gate, and you clear the goods and pay duties. The steel is the same; only the split of cost, risk and paperwork changes.
Whatever the term, the documents follow the goods: we send the commercial invoice, packing list, mill certificates and inspection report by email when the goods ship, and the bill of lading or other transport document as agreed.
If you already work with a forwarder in China, FOB keeps freight in your hands. If you prefer one price to your port, CFR or CIF is simpler. Tell us your preference and we will quote on that basis.
