Importing
Incoterms explained for South African importers
By Hurugo · · 5 min read
Two quotes for the same product can look very different depending on the three letters printed next to the price. Incoterms decide who pays for each stage of the journey, who arranges it, and exactly where the risk of loss or damage moves from seller to buyer. Choosing the right one is one of the simplest ways for an importer to control cost and avoid disputes.
What Incoterms are, and what they are not
Incoterms are standard trade terms published by the International Chamber of Commerce (ICC). The current edition, Incoterms 2020, contains eleven rules. Each one defines three things: which costs the seller pays and which the buyer pays, who handles export and import formalities, and the point at which risk passes from seller to buyer.
Incoterms do not set the price, the payment terms, or when ownership of the goods transfers. Those belong in your contract.
The two groups of rules
- Rules for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU, and DDP.
- Rules for sea and inland waterway only: FAS, FOB, CFR, and CIF.
Using a sea-only rule for air freight, or for goods handed over in a container at an inland depot, is a common mistake and can leave risk sitting with the wrong party.
The terms importers use most
| Term | Seller's responsibility | Risk passes to buyer |
|---|---|---|
| EXW (Ex Works) | Makes goods available at its premises | At the seller's premises |
| FCA (Free Carrier) | Export clears and hands goods to the buyer's carrier | When handed to the carrier |
| FOB (Free On Board) | Export clears and loads goods on the vessel | When goods are on board |
| CFR / CIF | As FOB, plus pays sea freight (and insurance for CIF) | When goods are on board, at origin |
| DAP (Delivered At Place) | Delivers to a named place, ready to unload | At the named destination |
| DDP (Delivered Duty Paid) | As DAP, plus import clearance, duty, and VAT | At the named destination |
EXW: maximum control, maximum responsibility
Under EXW the buyer handles everything, including export clearance in the seller's country, which can be difficult for a foreign buyer. It often looks cheapest on paper but shifts work and risk to you.
FCA and FOB: the importer's workhorses
FOB is the most familiar term for sea freight: the supplier delivers the goods on board the vessel at the named port, export cleared, and you take over from there. For containerised goods, the ICC recommends FCA instead, because containers are usually handed to the carrier at a terminal before loading. Both terms let you choose your own freight forwarder, which gives you control over cost, routing, and visibility.
CFR and CIF: convenient, with a catch
With CFR and CIF, the seller pays the sea freight to your port, and under CIF also buys insurance. The catch is that risk still passes to you when the goods are loaded at origin, not when they arrive. CIF only requires minimum insurance cover, so check the policy and consider extending it. Because the seller chooses the shipping line, you also have less control over transit times and destination charges.
DAP and DDP: delivered to your door
DAP puts delivery to your named place on the seller, while you handle import clearance, duty, and VAT. DDP goes further and makes the seller responsible for import clearance and taxes too. For imports into South Africa, DDP is often impractical, because a foreign seller would need to clear goods through SARS and account for South African VAT.
Which Incoterm should a South African importer choose?
For most regular importers, FOB or FCA strikes the best balance. The supplier handles what it is best placed to handle, export clearance and delivery to the port or carrier, and you control the international freight with a forwarder you trust.
There is a local reason too. South Africa generally calculates customs duty on the FOB value of imported goods. Quoting on FOB terms makes the duty calculation clearer and keeps your freight costs separate and visible.
How Hurugo can help
Choosing terms is part of the procurement work we do for clients: negotiating price, Incoterms, and delivery schedules, then coordinating the logistics from the supplier's door to yours. If you are new to importing, our step-by-step import guide is a good place to start.
Frequently asked questions
Is FOB or CIF better for importers?
FOB usually gives importers more control, because you choose the freight forwarder and can see the true freight cost. CIF is convenient, but risk still passes to you at the port of loading, insurance cover is only the minimum required, and the seller chooses the shipping line.
Does CIF include insurance?
Yes. Under CIF the seller must buy cargo insurance, but Incoterms 2020 only requires minimum cover. Many buyers arrange additional cover of their own.
Do Incoterms transfer ownership of the goods?
No. Incoterms deal with costs, formalities, and the transfer of risk. When ownership passes is a matter for your sales contract.
What is the difference between FOB and FCA?
Under FOB, risk passes when the goods are loaded on board the vessel. Under FCA, it passes when the goods are handed to the buyer's carrier, often at a container terminal. FCA works for any mode of transport and is recommended for containerised goods.