FOB, CIF or DAP: choosing an Incoterm for paper packaging imports

Under FOB, you book the ship and the risk becomes yours once the goods are on board at the export port. Under CIF, the seller pays freight and basic insurance to your port, but the risk still passes at the export port. Under DAP, the seller gets the goods to your named place, and you clear customs and pay the duty.

For most importers of paper packaging, the choice comes down to one question. Do you have a forwarder you trust?

If yes, FOB usually gives you more control and better freight rates. If no, CIF or DAP lets the supplier carry that work. We quote FOB Mundra as standard, and CIF or DAP when freight to your port can be booked at a stable rate.

What do FOB, CIF and DAP mean in practice?

These are three of the eleven Incoterms 2020 rules, published by the International Chamber of Commerce. Each rule fixes two things: where the costs switch from seller to buyer, and where the risk of loss or damage switches.

The CIF row surprises most new importers. The seller pays the freight to your port, but the risk is yours from the moment the goods are on board in India.

If a container is damaged at sea, you claim on the insurance, not from the seller.

What does ICC say about FOB and CIF for containers?

This is the part most importers never hear. The Incoterms 2020 text (ICC Digital Library) says FOB and CIF are to be used only for sea or inland waterway transport. It also says FOB is not appropriate where goods are handed over to a carrier at a container terminal, which ICC itself calls the common case for containers. For that case ICC points to FCA instead of FOB, and CIP instead of CIF.

The reason is risk. A container from an inland plant like ours in Jaipur is normally handed over at the port terminal, and the line loads it on the ship later. Under FOB, the risk only passes on board, so the days between the terminal gate and the ship sit in a grey zone.

In practice, FOB and CIF are still used every day for container trade, and banks are used to them. I would not refuse an FOB order because of this. But if you want the cleanest terms, ask your supplier whether it will quote FCA Mundra or CIP to your port. Ask us too.

Insurance is the other point. Under CIF, the seller only has to buy minimum cover, Institute Cargo Clauses (C), for at least 110% of the contract price. Under CIP, the minimum is the wider Institute Cargo Clauses (A). ICC's own rule text sets both. For paper, which can be ruined by water without anything being "lost", I would ask for (A) cover whichever term you use.

Which Incoterm should I choose?

It depends on who you are and what you already have. This is how I would decide if I were in your seat.

1. You import regularly and have a forwarder. Choose FOB. Your forwarder can usually buy freight at better rates than a seller adds into a CIF price, and you control the booking and the timing.
2. You import now and then, and have no forwarder. Choose CIF. The seller books the ship and you only deal with your customs broker at the destination port.
3. You want a single price to your warehouse. Choose DAP. You still clear customs and pay duty, but you have one delivered number to compare.
4. You want the seller to handle your customs and taxes too. That is DDP. It is rare for bulk paper, and I would not push for it.

Why we quote FOB Mundra as standard

Because ocean freight on most routes moves faster than paper prices do. If we quote CIF in a week when freight is swinging, one of us loses. Either we add a cushion you pay for, or we absorb a jump we did not plan for.

Under FOB, our price covers what we control: the paper, the cutting, the packing, the inland truck to Mundra, export customs and loading. You buy freight on the day, at the market rate, from someone you choose.

When freight to your port is stable, we are happy to quote CIF or DAP instead. We have quoted DAP to a customer's warehouse in the UK.

I like DAP when freight is calm. It is simpler for the buyer, and it is fair to both sides when the freight is predictable.

There is one limit I should admit. Our quotes are valid for 7 days, and a CIF or DAP quote is more exposed to that clock than an FOB one, because it carries freight inside it. If you need a long validity, FOB is the honest choice.

What should the quote and invoice say?

The Incoterm, the version and the named place, in full. "FOB" on its own is not enough.

1. Write it as "FOB Mundra, India, Incoterms 2020", or "CIF Felixstowe, Incoterms 2020", or "DAP your warehouse address, Incoterms 2020".
2. Put the same wording on the proforma invoice, the commercial invoice and any letter of credit.
3. For CIF, ask what the insurance covers and for how much.
4. For DAP, confirm who pays to unload at your warehouse. Under DAP the goods are delivered ready for unloading, so unloading is normally your job.

How the Incoterm changes your landed cost

It changes who pays, not the total.

Freight, insurance and port charges still have to be paid by someone, and under CIF or DAP they sit inside the price.

So compare offers on the same basis. Add your forwarder's freight and insurance to an FOB price before you compare it with a CIF price. Our guide to landed cost per roll shows the full sum, and our guide on how to import honeycomb paper from India puts the Incoterm in its place among the other steps.

The Incoterm can also change your duty. Some countries charge duty on a value that includes freight to their border, and some do not. Your customs broker will tell you which applies to you.

Your next step

Tell us your destination port and whether you have a forwarder, through our contact page. We will quote FOB Mundra, and CIF or DAP as well where freight to your port is stable, so you can compare both on paper before you decide.