What are Incoterms?
Incoterms are a set of 11 standardized international rules developed by the International Chamber of Commerce (ICC) and used in international sale and purchase contracts. These rules specify: who pays for freight, insurance, and customs clearance; at what point the risk of damage or loss of the goods transfers from seller to buyer; and who is responsible for preparing the required documents. Choosing the right Incoterm directly affects your landed cost and your level of risk in importing.
7 Rules for Any Mode of Transport (road, air, sea, multimodal)
Group 1 — Any Mode of Transport
EXWEx Works — delivery at the factory gate
The lowest responsibility for the seller. The goods are simply made available at the seller's premises (factory/warehouse); from that moment, all cost and risk (loading, transport, export and import clearance) fall to the buyer.
Risk transfer: seller's factory gate
FCAFree Carrier — delivery to the carrier
After export clearance, the seller delivers the goods to the carrier nominated by the buyer at the agreed location.
Risk transfer: delivery to the buyer's carrier
CPTCarriage Paid To
The seller pays freight to the destination, but risk transfers as soon as the goods are handed to the first carrier, not at destination.
Risk transfer: delivery to the first carrier
CIPCarriage and Insurance Paid To
Same as CPT, except the seller is also required to arrange insurance with broad (maximum) coverage of the goods to destination.
Risk transfer: delivery to the first carrier
DAPDelivered at Place
The seller delivers the goods at the agreed destination, ready for unloading; the buyer is responsible for unloading and import clearance.
Risk transfer: agreed destination, before unloading
DPUDelivered at Place Unloaded
The only Incoterm under which the seller must also unload the goods at destination. The buyer is still responsible for import clearance.
Risk transfer: destination, after unloading
DDPDelivered Duty Paid
The highest responsibility for the seller. All costs, including clearance and import duties, fall to the seller; the buyer only unloads.
Risk transfer: final destination door
4 Rules Specific to Sea and Inland Waterway Transport
Group 2 — Sea and Inland Waterway Transport
FASFree Alongside Ship
The seller delivers the goods alongside the ship (on the quay at the port of origin). Loading onto the ship and all subsequent steps are the buyer's responsibility.
Risk transfer: alongside the ship, port of origin
FOBFree on Board
The seller delivers the goods on board the ship at the port of origin; the most common Incoterm in Iran's sea imports.
Risk transfer: the moment goods are loaded on board
CFRCost and Freight
The seller pays freight to the destination port, but risk transfers at the port of origin, same as FOB.
Risk transfer: the moment goods are loaded on board
CIFCost, Insurance and Freight
Same as CFR, plus the seller's obligation to arrange insurance with minimum coverage to the destination port.
Risk transfer: the moment goods are loaded on board
Step-by-Step Responsibility Table — All Modes of Transport
🟢 Seller is responsible🟠 Buyer is responsible
Step-by-Step Responsibility Table — Sea Transport Only
🟢 Seller is responsible🟠 Buyer is responsible
Step-by-Step Example: The FOB Route from Bandar Abbas to Your Warehouse
Seller
1. Packing, loading, and inland transport to the port of origin
The foreign seller is responsible for all steps until the goods reach the port of the country of origin.
Seller
2. Export clearance and loading on board the ship
At this exact moment — when the goods are loaded on board — risk transfers from the seller to the buyer (you).
Buyer (You)
3. Sea freight and insurance (if needed)
From this point on, paying freight to the destination port and any insurance is your responsibility.
Buyer (You)
4. Unloading at the destination port (e.g. Bandar Abbas)
The cost of unloading the container/goods from the ship at the destination port is your responsibility.
Buyer (You)
5. Import customs clearance
Buyer (You)
6. Inland transport to your warehouse or factory
The final step — final delivery of the goods to your desired location within Iran.
💡 Incoterm selection tip: For importers with less experience, FOB or CIF are usually the simplest options — because the foreign supplier is responsible for getting the goods to the ship/destination port, and MYTARKHISKAR handles the rest (inland transport, clearance) for you. Be sure to consult our experts to choose the right Incoterm for your specific goods.
What Purpose Do Incoterms Serve in International Trade?
✓A common language between buyer and seller in the contract, without needing to explain each cost separately
✓Fewer trade disputes by clearly defining the exact point of transfer of risk and cost
✓A solid basis for accurately calculating landed cost before purchase
✓A reliable reference in insurance policies, shipping documents, and customs declarations
What Don't Incoterms Cover?
- Legal ownership of the goods and when it transfers (a matter of the sale contract, not Incoterms)
- The price of the goods and method of payment (cash, credit, transfer)
- The governing law of the contract and dispute resolution forum
- Quality guarantees and warranty terms for the goods
Key Tips for Using Incoterms Correctly
Tip 1
Always state the edition year
Write "FOB Incoterms 2020" in the contract, not just "FOB" — because different Incoterms editions (2010, 2020) differ in details such as CIP.
Tip 2
Specify the location or port precisely and completely
For example "FOB Bandar Abbas" or "DAP Customer Warehouse, Tehran" — an ambiguous location is a leading cause of customs and insurance disputes.
Tip 3
Choose between CIF and CIP based on your insurance needs
CIF only provides minimum insurance coverage; if your goods are sensitive or high-value, CIP with maximum coverage is safer.
Tip 4
Match the Incoterm to your actual mode of transport
FAS, FOB, CFR, and CIF are only for sea/inland waterway transport; for air or road transport you must use one of the other 7 Group 1 rules.
Frequently Asked Questions About Incoterms
What is the difference between FOB and CIF? +
In both, risk transfers to the buyer once the goods are loaded on board the ship; the difference is in costs — under CIF the seller also pays freight to the destination port and minimum insurance, while under FOB those costs fall to the buyer.
Which Incoterm is best for a first-time importer? +
Usually FOB or CIF, because the difficult part (export and loading at origin) is handled by the seller, and you only need to manage international transport onward and clearance — which is exactly what MYTARKHISKAR does for you.
Is DDP the best option for the buyer since the seller pays for everything? +
Not necessarily — under DDP the seller must be familiar with the customs regulations of the destination country (Iran), which many foreign suppliers lack expertise in; this can cause delays or errors in clearance.
Can the Incoterm be changed after the contract is signed? +
Only with mutual written agreement and amendment of the contract and related shipping documents; a unilateral change to the Incoterm after the contract is signed is not valid.
Not Sure Which Incoterm to Choose or How to Clear Your Goods?
MYTARKHISKAR's experts recommend the best Incoterm for you based on your product type and shipping route