Sri Lanka Trade Tools

Incoterms 2020 Explained: FOB, CIF & the Rest

Incoterms decide who pays for what and where risk passes between seller and buyer. Tap a term to see exactly what it means for your shipment, built for anyone importing from or exporting through Sri Lanka.

Every international quote rests on an Incoterm (International Commercial Term). It is the single most important thing to agree up front: it sets the dividing line for cost and risk between the seller and you. The most common for Sri Lankan trade are FOB Colombo and CIF [your port], tap any term below for a plain-English breakdown.

EXW: Ex Works Any transport

The seller only makes the goods available at their own premises. You, the buyer, arrange and pay for everything else: collection, export clearance, freight, insurance and import. Maximum buyer responsibility.

Best for: Buyers who want full control of the whole logistics chain. · Risk transfers: Export packaging.

FCA: Free Carrier Any transport

The seller delivers the goods, cleared for export, to a carrier or place you nominate. Risk passes to you once they’re handed over. You pay the main carriage onward. The modern, container-friendly alternative to FOB.

Best for: Containerised cargo (recommended over FOB for containers). · Risk transfers: Origin haulage.

FAS: Free Alongside Ship Sea transport

The seller delivers the goods alongside the vessel at the port of shipment, cleared for export. Risk and cost pass to you from that point, including loading on board. Used mainly for bulk / break-bulk cargo.

Best for: Bulk and break-bulk cargo loaded directly at the quay. · Risk transfers: Origin haulage.

FOB: Free On Board Sea transport

The seller delivers the goods on board the vessel at the port of shipment, cleared for export. Risk passes to you once they’re on board; you pay the freight, insurance and import. The classic sea-freight term. Most Sri Lankan exports quote FOB Colombo.

Best for: Traditional sea freight; the default quote for Sri Lankan exports. · Risk transfers: Origin terminal / on-board.

CFR: Cost and Freight Sea transport

The seller pays the freight to the destination port, but risk still passes to you when the goods are loaded on board at origin. So the seller’s cost runs further than their risk. You arrange insurance and import.

Best for: Buyers who want the seller to book ocean freight but will insure themselves. · Risk transfers: Origin terminal / on-board.

CIF: Cost, Insurance and Freight Sea transport

Like CFR, plus the seller buys (minimum) marine insurance. Risk still passes to you at the origin port when loaded on board, even though the seller’s cost and insurance run to the destination port. The other common Sri Lankan export quote, CIF [your port].

Best for: Buyers who want freight + basic insurance handled by the seller. · Risk transfers: Origin terminal / on-board.

CPT: Carriage Paid To Any transport

The seller pays carriage to the named destination, but risk passes to you when the goods are handed to the first carrier. The multimodal equivalent of CFR.

Best for: Air, road or multimodal shipments where the seller books carriage. · Risk transfers: Origin haulage.

CIP: Carriage and Insurance Paid To Any transport

Like CPT, plus the seller buys (all-risk) insurance to the destination. Risk passes to you at the first carrier. The multimodal equivalent of CIF (with higher insurance cover).

Best for: Multimodal shipments where the seller arranges carriage + full insurance. · Risk transfers: Origin haulage.

DAP: Delivered at Place Any transport

The seller delivers the goods to the named destination, ready for unloading. The seller carries all risk and cost to that point, but you handle import customs and duties, and you unload.

Best for: Buyers who want door delivery but will clear import themselves. · Risk transfers: Delivery to destination.

DPU: Delivered at Place Unloaded Any transport

The only term where the seller unloads. The seller delivers and unloads at the named place; you handle import customs and duties. Risk passes after unloading.

Best for: Deliveries where the seller is responsible for unloading at destination. · Risk transfers: Unloading at destination.

DDP: Delivered Duty Paid Any transport

Maximum seller responsibility: the seller delivers to the named destination cleared for import with all duties paid. You usually only unload. Simplest for the buyer, but the seller takes on your country’s import obligations.

Best for: Buyers who want a fully landed, duty-paid delivery and minimal hassle. · Risk transfers: Delivery to destination.

Who pays for what: the full Incoterms 2020 matrix

Seller-paid stages are shown in maroon, buyer-paid in grey. Tap a column header to highlight it. The last row shows where risk passes from seller to you (note that for C-terms the seller’s cost runs further than their risk).

Cost / responsibilityEXWAnyFCAAnyFASSeaFOBSeaCFRSeaCIFSeaCPTAnyCIPAnyDAPAnyDPUAnyDDPAny
Export packagingSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Loading at originBuyerSellerBuyerSellerSellerSellerSellerSellerSellerSellerSeller
Export customsBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Origin haulageBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Origin terminal / on-boardBuyerBuyerBuyerSellerSellerSellerSellerSellerSellerSellerSeller
Main carriage (freight)BuyerBuyerBuyerBuyerSellerSellerSellerSellerSellerSellerSeller
InsuranceBuyerBuyerBuyerBuyerBuyerSellerBuyerSellerBuyerBuyerBuyer
Destination terminalBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSellerSellerSeller
Import customs & dutiesBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSeller
Delivery to destinationBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSellerSellerSeller
Unloading at destinationBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSellerBuyer
⚠ Risk transfersExport packagingOrigin haulageOrigin haulageOrigin terminal / on-boardOrigin terminal / on-boardOrigin terminal / on-boardOrigin haulageOrigin haulageDelivery to destinationUnloading at destinationDelivery to destination
Guide only. This summarizes Incoterms® 2020. The exact named place/port and any variations must be written into your contract, and Incoterms do not transfer title or set payment terms. Confirm the precise allocation with your exporter and freight forwarder.

FOB vs CIF: which should you use?

Under FOB Colombo you take over once the goods are on board at Colombo: you book and pay the ocean freight, insure the cargo and clear it at your end, more control, and often cheaper if you have good freight rates. Under CIF the seller arranges and pays the freight and basic insurance to your port, which is simpler but bundles their margin into the freight. Either way, risk passes to you at Colombo when the goods are loaded, so insure from origin. Estimate the freight either way with our freight & landed-cost calculator, and plan your container with the container load calculator.

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Frequently asked questions

What is the difference between FOB and CIF?

With FOB the seller delivers the goods on board the vessel at the origin port and you pay the freight, insurance and import. With CIF the seller also pays the freight and minimum insurance to your destination port. In both, risk passes to you when the goods are loaded at the origin port.

Which Incoterm do Sri Lankan exporters usually quote?

Most quote FOB Colombo or CIF [your port]. FOB gives you control of the freight; CIF has the exporter arrange it. For containers, FCA is technically the better fit than FOB.

Under CIF, who carries the risk during the sea voyage?

You do. Even though the seller pays the freight and basic insurance to your port, risk passes to you the moment the goods are on board at the origin port. Which is why you should make sure the insurance cover is adequate from origin.

What changed in Incoterms 2020?

The main changes from 2010: DAT became DPU (Delivered at Place Unloaded), CIP now requires higher (all-risk) insurance, and the rules give clearer guidance for FCA with on-board bills of lading and for own-transport deliveries.