BYB FUTUREIncoterms decide who pays for freight, insurance and clearance on your order. If you buy from Dubai and misread the delivery term, you may end up paying a cost you assumed the seller had covered. This guide explains what changed in Incoterms 2020 and how EXW, FOB and CIF differ, so purchasing teams can decide with confidence. It is practical guidance, not a substitute for legal advice or a customs broker.
What are Incoterms and why should a buyer know them?
Incoterms are international rules published by the International Chamber of Commerce (ICC) that divide responsibilities between seller and buyer when goods are delivered. Each rule is a three-letter code such as EXW or FOB. They answer three questions: where is the cargo delivered, who pays for transport and insurance, and from which moment does the risk of loss pass to the buyer?
Incoterms are not law. They apply only when written into the contract or proforma invoice, and “FOB” alone is not enough. Write “FOB Jebel Ali, Incoterms 2020”.
What changed in Incoterms 2020?
The 2020 edition took effect on 1 January 2020 and replaced the 2010 edition. The changes are limited but matter in contracts:
- DAT became DPU: the delivery place can be any location, not only a terminal.
- More insurance under CIP: CIP now requires broader cover (Institute Cargo Clauses A). CIF keeps minimum cover (C).
- Bills of lading under FCA: the parties may agree that the buyer instructs the carrier to issue an “on board” bill of lading.
- Own transport: under FCA, DAP, DPU and DDP either party may carry out transport using its own means.
- Security and costs: transport security obligations and the allocation of costs are stated more clearly.
Always state the edition. Older editions remain usable if the contract names them.
Eleven rules in two groups
Any mode of transport (seven rules): EXW, FCA, CPT, CIP, DAP, DPU and DDP. Sea and inland waterway only (four rules): FAS, FOB, CFR and CIF. From EXW to DDP the seller’s responsibility gradually increases. The three most common when buying from Dubai are EXW, FOB and CIF.
EXW (Ex Works): delivery at the seller’s premises
Under EXW the seller makes the goods available at its own warehouse or factory. From that moment almost everything is the buyer’s: loading, domestic transport, export clearance, main carriage, insurance and destination clearance.
- Advantage: the goods price is lower and you choose the carrier.
- Risk: you need a forwarder and export-clearance agent in the UAE. Without one, the shipment stalls.
- Note: under EXW the seller does not load the goods unless separately agreed.
For a first-time importer EXW is usually the most complex choice, because export clearance is handled by the buyer’s side.
FOB (Free On Board): delivery on board the vessel
Under FOB the seller delivers the goods on board the vessel nominated by the buyer at the named port, for example Jebel Ali, and clears them for export. Risk passes to the buyer once the goods are on board. The buyer pays the sea freight, marine insurance and import clearance. FOB suits buyers who have their own forwarder or shipping line contract, and it works only for sea and inland waterway transport. For containers handed over at a terminal, FCA is often more accurate.
CIF (Cost, Insurance and Freight)
Under CIF the seller arranges and pays for sea freight and minimum insurance to the destination port. Note that risk still passes to the buyer once goods are on board at the port of loading, even though the seller pays the freight. Insurance is minimum cover (Institute Cargo Clauses C), so buyers of valuable equipment often arrange additional cover. Destination charges and import clearance remain with the buyer.
EXW, FOB and CIF at a glance
| Item | EXW | FOB | CIF |
|---|---|---|---|
| Export clearance | Buyer | Seller | Seller |
| Main freight | Buyer | Buyer | Seller |
| Insurance | Buyer (optional) | Buyer (optional) | Seller (minimum cover) |
| Risk transfers | At seller’s premises | On board vessel | On board vessel |
| Transport mode | Any | Sea only | Sea only |
Which term is best when importing from Dubai?
There is no universal answer. If you have a trusted forwarder and want control of cost, FOB (or FCA for containers and air) is common. If you want one all-in price and a simpler process, CIF or CIP is easier. For air freight of urgent parts, FCA or CPT is usually more suitable than FOB or CIF, which are sea-only terms.
Common mistakes
- Writing only “FOB” without a named place and the Incoterms edition.
- Using sea-only terms (FOB, CIF) for air or road shipments.
- Assuming CIF means the seller carries the risk until destination.
- Forgetting that import duties and taxes are not included in most terms (only DDP).
Checklist before approving a proforma invoice
- Incoterm, named place and edition are written correctly.
- Freight, insurance and export charges are clearly stated as included or excluded.
- HS codes, weights and package counts match the packing list.
- You know who books the shipment and who files the export declaration.
- Payment terms match the delivery stage.
Frequently asked questions
Are Incoterms mandatory?
No. They are optional contractual terms that apply only if you include them.
Do Incoterms transfer ownership?
No. They deal with delivery, costs and risk, not title to the goods.
Which term gives the seller the least responsibility?
EXW. DDP gives the seller the most.
Conclusion
Read the delivery term before you read the price. A clearly written Incoterm prevents disputes about freight, insurance and clearance. If you would like help structuring an order from Dubai, our team can advise on the delivery term that suits your shipment.