The short answer: under FOB, CFR and CIF the coco peat becomes your risk the moment it's loaded on the ship at origin, even when the supplier pays the freight. Under DAP and DDP it stays the supplier's risk until it reaches the place you name in your country. Pick FOB (or better, FCA) if you have a forwarder and want control of freight, CIF or CFR if you want one landed-at-port price, and DAP if you want the box delivered but will clear it yourself. DDP rarely suits coir, because plant-health paperwork at import usually has to be in the importer's name.
Key facts
- Incoterms 2020 has eleven rules. Seven work for any transport mode and four (FAS, FOB, CFR, CIF) are for sea and inland waterway only.
- Under CFR and CIF the seller pays freight to your port, but risk passes to you when the goods are on board at the port of shipment.
- CIF only obliges the seller to buy minimum cover, Institute Cargo Clauses (C). CIP requires the wider Clauses (A).
- FOB may be inappropriate for containers handed to the carrier at a terminal before loading. FCA is the term written for that case.
- Incoterms don't settle price, payment, transfer of ownership or what happens if the coir doesn't meet the specification.
What an Incoterm does and doesn't do
An Incoterm is three letters plus a named place. Together they decide who books and pays for each leg of the journey, who handles export and import clearance, and the point where the risk of loss or damage moves from seller to buyer.
They don't cover everything. Incoterms don't fix the price or the payment method. They don't say when ownership passes. And they say nothing about what happens if the blocks arrive with high EC or the wrong expansion volume. Those belong in your contract and specification. Our guide to importing coco peat from India covers the specification and payment clauses, and has a quick-reference table of the common terms. This article goes further into what each term means in practice for a coir container.
Always write the version and the place: "FOB [named port] Incoterms 2020" is a term, "FOB" on its own isn't.
Following one coir container through the chain
Here's where each cost and risk lands for the five terms buyers use most.
| Step | FOB | CFR | CIF | DAP | DDP |
|---|---|---|---|---|---|
| Stuffing at the factory, inland haulage to port | Seller | Seller | Seller | Seller | Seller |
| Export clearance | Seller | Seller | Seller | Seller | Seller |
| Loading on board | Seller | Seller | Seller | Seller | Seller |
| Risk passes to you | On board, origin port | On board, origin port | On board, origin port | At your named place, ready for unloading | At your named place, ready for unloading |
| Ocean freight | You | Seller | Seller | Seller | Seller |
| Cargo insurance for the voyage | Your choice, your cost | Your choice, your cost | Seller buys minimum cover for you | Seller's own risk, so seller's choice | Seller's own risk, so seller's choice |
| Unloading and charges at destination port | You | You, unless in the seller's freight contract | You, unless in the seller's freight contract | Seller, to the named place | Seller, to the named place |
| Import clearance, duty, import VAT | You | You | You | You | Seller |
| Unloading at your warehouse | You | You | You | You | You |
Two lines in that table cause most of the trouble.
Risk passes at origin under CFR and CIF. The supplier books and pays the ship, so it feels like the supplier's shipment. It isn't. If the container is dropped at transhipment or arrives with wet blocks from roof condensation, that's your loss and your insurance claim. Under CFR there's no insurance unless you buy it.
Destination charges under CFR and CIF. The seller pays freight to your port, but terminal handling and delivery-order fees at your end are often billed to you by the carrier's local agent. Ask the supplier exactly what the freight contract includes, in writing, before you compare a CIF quote against FOB plus your own freight.
Each term from a coir buyer's side
FOB (Free on Board)
The seller clears the coir for export and delivers it loaded on the vessel you've nominated. From that point the freight, insurance and risk are yours.
FOB suits buyers with a forwarder on the route who want to control routing, transit time and insurance.
The weakness is containers. A coir container is handed to the carrier at a terminal or container yard and may sit there for days before it's lifted on board. Under FOB the seller still carries the risk during those days but has no control over the box. That's why the guidance notes say FOB may be inappropriate for containerised goods delivered to a terminal, and that FCA should be used instead.
FCA (Free Carrier)
FCA is the container-friendly version of FOB. The seller delivers to your carrier at a named place, usually the container yard or the factory, and risk passes there. Since the 2020 revision, the parties can agree that the buyer will instruct the carrier to issue an on-board bill of lading to the seller. That fixes the old objection that banks under a letter of credit want an on-board bill.
CFR (Cost and Freight)
The seller pays freight to your port of discharge. Risk passes at loading in the origin port, exactly as under FOB. CFR suits a buyer who wants a single price to the port but prefers to buy their own insurance, often because they hold an annual open cover policy for all imports.
CIF (Cost, Insurance and Freight)
As CFR, plus the seller has to insure the cargo in your favour for the voyage. The catch is the level. CIF only requires the minimum cover, Institute Cargo Clauses (C). That's the lower of the two standard levels, not all-risks cover. Check whether it would respond to the damage coir actually suffers, such as water damage inside the box.
If you buy CIF, either ask for Clauses (A) in the contract or top it up with your own policy. And read what the policy excludes. Claims for mould or wet blocks will turn on whether the coir was loaded too wet, which brings you back to the moisture limit in your specification. For that side of it see coco peat moisture content and weight.
CIP is the multimodal equivalent and requires the higher Clauses (A) cover by default.
DAP (Delivered at Place)
The seller carries the cost and risk all the way to the place you name, such as your warehouse, and hands the goods over still on the truck. You clear import, pay duty and import taxes, and unload.
DAP suits a buyer who wants one delivered price and no transport bookings, but who can handle customs, or has a broker who can. Since the plant-health import side stays with you, it's also the D-term that fits coir best. DPU is the same idea except the seller also unloads.
DDP (Delivered Duty Paid)
The seller does everything, including import clearance and paying duty and import VAT. It sounds simplest. For coir it usually isn't.
The seller has to be able to act as importer in your country. That can mean registering for VAT there. Import permits, phytosanitary pre-notification, and any registration of growing media are normally tied to a local importer, not a foreign supplier. If a plant-health inspection fails, the seller is trying to manage it from abroad. For most coir buyers DDP is better replaced by DAP plus a local broker.
Which term should you pick?
| Your situation | Usually the best fit |
|---|---|
| First container, no forwarder, want one number | CIF with Clauses (A) cover written in, or CFR plus your own insurance |
| Experienced importer with a forwarder and open-cover insurance | FCA at the container yard (or FOB if your bank or habit demands it) |
| Paying by letter of credit | FCA with an on-board bill of lading clause, or CIF |
| Want delivery to your door but can clear customs | DAP to your warehouse |
| Can't clear imports yourself at all | DAP plus a local broker before you consider DDP |
Whatever you choose, write these into the contract as well:
- The Incoterm, the version and the precise named place.
- Who pays for the phytosanitary certificate, any treatment and any third-party inspection.
- The insurance level if CIF or CIP, and who the insured party is.
- What the freight under CFR or CIF includes at the destination end.
- The latest shipment date and what happens if it's missed.
Plant-health requirements and customs rules change. Confirm the current import requirements for coir with your authority and broker before the first shipment, whichever term you use. And if you're comparing quotes from several mills, line up the Incoterm first, as we explain in buying coco coir in bulk. Otherwise you're comparing freight, not coir.
FAQ
What is the difference between FOB and CIF for coco peat?
Under FOB you book and pay the ocean freight and insurance yourself. Under CIF the seller pays freight to your port and buys minimum insurance for you. In both cases the risk passes to you when the container is loaded on the ship at origin.
Who is responsible if coco peat arrives wet or mouldy under CIF?
The risk was yours from the moment the goods were loaded, so you claim on the insurance. Whether the minimum CIF cover pays depends on the cause and the policy wording. If the blocks were loaded above the agreed moisture limit, the claim is against the supplier under the contract instead.
Is FCA better than FOB for container shipments?
Usually yes. Containers are handed to the carrier at a terminal before they're loaded, and FCA moves the risk at that handover. Since 2020 the parties can also agree that the buyer's carrier issues an on-board bill of lading to the seller, which suits letters of credit.
Does CIF insurance cover everything?
No. CIF only requires the minimum Institute Cargo Clauses (C), a lower level of cover than Clauses (A). Ask for Clauses (A) in the contract or buy your own top-up cover if you want something closer to all risks.
Should I buy coco peat DDP?
Rarely. Under DDP the seller must clear the goods into your country and pay duty and import VAT, which can mean registering there. Plant-health permits and inspections are usually tied to a local importer, so DAP with your own broker tends to work better.
Who pays for the phytosanitary certificate?
Under all five of these terms the seller handles export clearance, and the phytosanitary inspection normally happens during loading at origin. But the trade term doesn't spell out every inspection cost. Write who pays for the certificate, any treatment and any inspection into the contract.
Which Incoterms version should I use?
Incoterms 2020 is the current version. You can still use an older one if both sides agree and state it clearly, but always write the version and the named place next to the three letters.
Get a quote on the term that suits you
CVM Fiber and Industries makes coco peat blocks, briquettes, grow bags and husk chips in Kanyakumari, Tamil Nadu, India. The coco peat is washed with water to reduce EC, with no calcium nitrate or other chemicals. See how we handle shipments on the export page, then contact us with your destination and preferred Incoterm.