Incoterms for steel: what FOB, CFR, CIF and DAP really change
An Incoterm is not a price adjustment. It is a division of two things — where risk passes from seller to buyer, and which costs sit on which side of that line — and on a steel shipment both matter more than on almost any other cargo, because the parcels are heavy, the port time is long and the damage is expensive. The terms below are the ones that appear on our quotations; the differences between them are worth more than the negotiation that usually follows.
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The four terms that cover almost every steel order
| Term | Risk passes | Seller pays | Buyer pays | Typical use |
|---|---|---|---|---|
| EXW Dilovası | At our gate, on collection | Nothing beyond making the goods available | Loading, inland haulage, export clearance, everything after | Buyers with their own Turkish forwarder |
| FCA Dilovası / FCA port | When the goods are handed to the buyer's carrier | Export clearance, loading at our works | Main carriage and everything after | Container shipments where the buyer holds the freight contract |
| FOB Istanbul | When the goods are on board the vessel | Inland haulage, export clearance, loading on board | Sea freight, insurance, discharge, import clearance | Breakbulk and bulk parcels; the reference term for coil |
| CFR destination port | On board at load port — same as FOB | Everything to FOB, plus sea freight | Insurance, discharge, import clearance, delivery | Buyers who want one freight number but their own insurance |
| CIF destination port | On board at load port — same as FOB | Everything to CFR, plus minimum cover insurance | Discharge, import clearance, delivery | Letters of credit; the most quoted term into the Gulf and Africa |
| DAP named place | At the named place, ready for unloading | Everything to the named address except import duty and taxes | Import clearance, duty, unloading | Truck deliveries into Europe and the Balkans |
The pairing that surprises buyers: under CFR and CIF the seller pays the freight but the risk has already passed on board. If the cargo is damaged at sea on a CIF shipment, it is the buyer's loss — recovered from the insurance the seller bought in the buyer's favour.
Risk and cost are two different lines
The single most common misunderstanding on a steel contract is that the term which makes the seller pay furthest also protects the buyer furthest. It does not.
FOB, CFR and CIF all pass risk at the same point — when the goods are on board at the load port. What changes between them is only who pays for the carriage and the insurance. A buyer who moves from FOB to CIF has bought a service, not a protection.
DAP moves the risk line, which is why it reads differently: the seller carries the cargo, and the risk, all the way to the named address. That is the term to ask for when the value of certainty exceeds the value of controlling the freight.
What each term means for a steel parcel in practice
- Coil and plate in breakbulk: FOB is the market reference and the one most easily compared between offers.
- Containerised sections, tube and panel: CFR or CIF, because the freight is a published rate and the comparison stays clean.
- Truck into Europe, the Balkans, Iraq or the Caucasus: DAP to the site, which is what most buyers actually want and rarely ask for by name.
- Letters of credit: CIF, because the documentary set the bank expects — invoice, bill of lading, insurance certificate — matches the term.
- Buyers with their own freight contracts: FCA, and give us the forwarder's booking reference rather than a port name.
- EXW only where the buyer has a Turkish entity or forwarder; otherwise the export clearance becomes a problem nobody has priced.
The costs that sit in the gap
Between the seller's last cost and the buyer's first there is a set of charges that no Incoterm names explicitly, and on steel they are large enough to decide a comparison.
| Charge | Who normally carries it | Why it is argued about |
|---|---|---|
| Terminal handling at load port | Seller under FOB and above | Often quoted separately by the line and missed in a comparison |
| Terminal handling at discharge | Buyer under CFR and CIF | Can exceed the sea freight on a short route |
| Demurrage and detention | Whoever caused the delay, in principle | In practice, whoever holds the freight contract argues it |
| Port storage | Buyer after free time ends | Clearance documents arriving late is the usual cause |
| Lashing and securing | Seller under FOB for breakbulk | Heavy steel needs more than the standard allowance |
| Import duty and taxes | Buyer under every term including DAP | Only DDP moves it, and we do not normally quote DDP |
When comparing two offers on different terms, rebuild both to the same point before comparing. An FOB price plus your own freight is not comparable to a CIF price until the discharge-side charges are added to the FOB column.
Insurance: what CIF actually buys
CIF obliges the seller to take out cargo insurance at minimum cover, for 110 % of the contract value, in the buyer's favour. Minimum cover is exactly what it says — a restricted set of named perils rather than all-risks.
For most steel cargo that is adequate; for high-value coated or stainless material, or for a route with transhipment, it is worth asking for wider cover and paying the difference. The alternative is CFR with the buyer arranging insurance on their own policy, which is what larger buyers generally do because their annual policy is cheaper than a per-shipment premium.
Naming the place properly
An Incoterm without a place is not a term. FOB takes the port of loading, CIF the port of destination, and DAP the actual address — not the city, the address. A DAP quotation to "Bucharest" and one to a warehouse in an industrial park forty kilometres outside it are different numbers.
Where a term and a place do not fit each other, the contract is ambiguous even if both parties think they agree. FOB to an inland destination and DAP to a port are the two combinations that generate the most disputes.
- Write the term, the place and the Incoterms version on the order: "CIF Jebel Ali, Incoterms 2020".
- For DAP, give the full delivery address with access notes — a site without a forklift is a different price.
- For FOB, name the port, not the country.
- State who unloads at a DAP destination; the seller's obligation ends ready for unloading, not unloaded.
- Agree free time and demurrage terms in the contract rather than leaving them to the carrier's tariff.
Which term we recommend, by destination
| Destination | Usual term | Reason |
|---|---|---|
| Germany, Romania, the Balkans | DAP address | Truck delivery; risk to the door is worth more than freight control |
| Gulf: UAE, Saudi Arabia, Qatar, Oman | CIF port | Matches the letter of credit and the buyer's clearance |
| Iraq overland | DAP Erbil or a named crossing | The border, not the sea leg, is the variable |
| North and West Africa | CIF port | Published container rates make the comparison clean |
| Central Asia | DAP or CPT to a named terminal | Multi-modal routing; a port term would be meaningless |
| Buyers with their own forwarder | FCA Dilovası | They hold the freight contract; we hand over cleared |
Any of these can be quoted on another term — say which one you work on and the quotation will come back that way rather than converted afterwards.
Frequently asked questions
What is the difference between CFR and CIF?
Insurance. Both pass risk on board at the load port and both include sea freight; CIF adds cargo insurance at minimum cover for 110 % of the contract value, taken out by the seller in the buyer's favour. Buyers with an annual marine policy usually prefer CFR.
Does the seller carry the risk under CIF?
No, and this is the most common misunderstanding on a steel contract. Under FOB, CFR and CIF alike, risk passes when the goods are on board at the load port. CIF means the seller pays for freight and insurance, not that the seller carries the cargo risk.
Which Incoterm is best for steel?
It depends on the route rather than the product: DAP for truck deliveries into Europe and the Balkans, CIF for Gulf and African port destinations under letters of credit, and FOB where the buyer wants a clean price to compare against other offers.
Who pays import duty under DAP?
The buyer. DAP covers carriage to the named place ready for unloading, but import clearance, duty and taxes stay with the buyer. Only DDP moves them to the seller, and we do not normally quote on that basis.
Why is an FOB price lower than a CIF price for the same steel?
Because it stops earlier. FOB ends when the cargo is on board; CIF adds sea freight and insurance to the same goods. Comparing the two directly is comparing different amounts of service — rebuild both to the same point before choosing.
What happens to demurrage?
In principle it falls on whoever caused the delay; in practice it is argued by whoever holds the freight contract. Late clearance documents are the usual cause on steel shipments, which is why free time and demurrage terms belong in the contract rather than in the carrier's tariff.
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