Incoterms 2020 are the international rules, published by the International Chamber of Commerce (ICC), that define who is responsible for transport, insurance, customs and risk in a sale of goods. Using the right Incoterm in your contract avoids disputes and surprise costs.
The 11 Incoterms 2020 rules at a glance
| Term | Full name | Risk passes to buyer | Main freight paid by | Mode |
|---|---|---|---|---|
| EXW | Ex Works | At seller's premises | Buyer | Any |
| FCA | Free Carrier | When handed to buyer's carrier | Buyer | Any |
| CPT | Carriage Paid To | When handed to first carrier | Seller | Any |
| CIP | Carriage & Insurance Paid To | When handed to first carrier | Seller (+ all-risk insurance) | Any |
| DAP | Delivered at Place | At named destination, ready to unload | Seller | Any |
| DPU | Delivered at Place Unloaded | At destination, after unloading | Seller | Any |
| DDP | Delivered Duty Paid | At destination, duties paid | Seller (incl. import duties) | Any |
| FAS | Free Alongside Ship | Alongside the vessel at origin port | Buyer | Sea |
| FOB | Free on Board | On board the vessel at origin port | Buyer | Sea |
| CFR | Cost and Freight | On board the vessel at origin port | Seller | Sea |
| CIF | Cost, Insurance & Freight | On board the vessel at origin port | Seller (+ minimum insurance) | Sea |
Which Incoterm should Pakistani exporters use?
FOB Karachi is the most common term for Pakistani exports: you deliver the goods on board at Karachi or Port Qasim and the buyer pays the ocean freight. If your buyer wants a delivered price, CFR or CIF lets you include freight (and insurance), and NSL can quote it for you. For containerised cargo, the ICC recommends FCA instead of FOB, because the seller usually hands the container to the carrier at the terminal, not on board.
Which Incoterm should importers into Pakistan use?
When buying from China or elsewhere, FOB or FCA gives you control over freight and lets your forwarder (NSL) negotiate the best rate and schedule. EXW can work if your forwarder handles export clearance at origin. Avoid DDP into Pakistan unless the seller can legally clear goods here.
Common Incoterm mistakes to avoid
- Using FOB or CIF for air freight — these are sea-only rules.
- Not naming the exact place, e.g. write FOB Karachi Port, Incoterms 2020.
- Assuming CIF insurance is enough — it is only minimum cover; consider all-risk cargo insurance.
- Confusing who pays destination terminal handling charges (THC) — agree it in the contract.
Not sure which term fits your deal? Ask NSL's team or request a quote on both FOB and CIF terms.
