Trade Intelligence
Shipping terms: why quotes have different prices
Two quotes for the same product are only comparable on the same Incoterm. The rule decides who pays for which leg, who carries risk and where delivery happens.
What an Incoterm decides
The Incoterms® rules, published by the International Chamber of Commerce, define where the seller delivers, when risk passes to the buyer, and who arranges and pays for carriage, insurance and clearance. The 2020 edition contains eleven rules.
A price quoted FOB at the port of loading and a price quoted CIF at the destination port describe different obligations, so they cannot be compared directly.
Common rules in commodity trade
Four rules apply only to sea and inland waterway transport: FAS, FOB, CFR and CIF. The others — EXW, FCA, CPT, CIP, DAP, DPU and DDP — can be used for any mode.
In a requirement
If you have a preferred rule, state it with the named place — for example, CFR at a named destination port. If you are not sure, say so: suppliers can then quote on a basis they can actually deliver, and the quotes can be put on the same basis for comparison.
What it means
- Always compare quotes on the same rule and named place.
- Name the place, not just the rule.
- “Not sure” is a valid answer that invites a proposal.
Limitations
- A summary, not legal advice. Refer to the ICC’s published rules for definitive wording.
Sources
- International Chamber of Commerce — Incoterms® 2020 rules