If you import or export, Incoterms quietly decide who pays for what, who arranges transport, and exactly where risk passes from seller to buyer. Misunderstanding them is one of the most expensive mistakes in international trade. Here is a clear, practical guide to Incoterms 2020 for UAE businesses.
What are Incoterms?
Incoterms (International Commercial Terms) are a set of standard three-letter rules, published by the International Chamber of Commerce, that define the responsibilities of buyers and sellers for the delivery of goods. They appear on your commercial invoice — for example “FOB Shanghai” or “DAP Dubai”.
The most common Incoterms explained
- EXW (Ex Works) — the seller just makes goods available at their premises; the buyer handles everything else. Maximum responsibility for the buyer.
- FOB (Free On Board) — the seller delivers goods onto the vessel; risk and cost transfer to the buyer from that point. Very common for sea freight.
- CIF (Cost, Insurance & Freight) — the seller pays freight and insurance to the destination port, but risk passes to the buyer once goods are loaded.
- DAP (Delivered At Place) — the seller delivers to a named destination; the buyer handles import clearance and duties.
- DDP (Delivered Duty Paid) — the seller delivers everything, including import duties. Maximum responsibility for the seller.
Why the right Incoterm matters
The Incoterm determines your true cost and risk. Buying “FOB” looks cheaper than “DDP” on paper, but you then carry freight, insurance, clearance and delivery yourself. Choosing the wrong term can leave you unexpectedly liable for costs — or for goods damaged in transit.
Choosing the right term for your business
- New importers often prefer DAP or DDP for simplicity, letting the supplier or forwarder handle the heavy lifting.
- Experienced importers often use FOB to control freight and choose their own forwarder — usually the most cost-effective.
- Always confirm where risk passes and who arranges insurance.
A quick tip on insurance
Under several terms (like CFR and FOB) the goods may be at the buyer’s risk during the main transit with no insurance arranged by the seller. Make sure you have cargo insurance in place to cover the gap.
Get Incoterms working for you
CARGOWISE helps UAE importers and exporters choose the right Incoterms, control landed costs and arrange the freight, insurance and customs clearance that go with them. Request a quote or speak to our team.