Trade Terms Guide
Incoterms and payments, in plain language.
First-time importers lose more money to misunderstood terms than to bad salt. This guide explains who handles what under FOB, CFR and CIF, how each payment route works, and which assumptions to check before you sign anything.
The one rule
Terms are confirmed in the written quotation
Everything on this page is general explanation. The trade term, payment term, documents and specification for your order are the ones agreed in the written quotation or order confirmation. If this guide and your quotation differ, the quotation governs — and if a term here is unclear, ask before confirming, not after shipping.
Incoterms
FOB, CFR and CIF: who handles what
An Incoterm divides three things: who arranges transport, who arranges insurance, and where risk passes. It does not divide destination duties — those stay with the buyer under all three terms below, unless the written quotation states otherwise.
Free On Board
Seller: Delivers the goods on board the vessel at the port of loading, cleared for export, with the standard shipment documents.
Buyer: Arranges and pays freight and insurance from the port of loading, plus destination duties, taxes and clearance.
Cost and Freight
Seller: Arranges and pays freight to the destination port, and delivers the standard shipment documents.
Buyer: Arranges and pays insurance, plus destination duties, taxes and clearance.
Cost, Insurance and Freight
Seller: Arranges and pays freight and insurance to the destination port, and delivers the standard shipment documents.
Buyer: Pays destination duties, taxes and clearance. CIF does not include them — this is the point most often misunderstood.
Choosing
Which term fits you?
Choose FOB if you have your own forwarder. You control freight and insurance, and you can consolidate with other cargo. You also carry the work of arranging them.
Choose CFR if you want freight arranged but insurance your way. The seller books the freight to your port; you insure on your own terms.
Choose CIF if you want one arranged door-to-port price. Freight and insurance to your port are included. Destination duties, taxes and clearance are still yours — budget for them separately.
EXW and DDP are not standard offerings here. If you need ex-works or delivered-duty-paid terms, ask us — availability is confirmed at quotation.
Payment
Payment terms, explained briefly
Salzenith's preferred term is 100% irrevocable LC at sight, with D/P, CAD and advance options available. No new payment terms are introduced here — the term for your order is agreed in writing.
LC at sight (preferred)
100% irrevocable LC at sight. The buyer's bank issues a letter of credit that cannot be changed without everyone's agreement, and the seller is paid when compliant documents are presented. Preferred because it protects both sides: documents against payment, through banks.
D/P — documents against payment
Shipping documents are released to the buyer against payment. The buyer pays to receive the documents needed to claim the goods.
CAD — cash against documents
Payment is made against the shipping documents. Similar in spirit to D/P; the exact mechanics are set in the written quotation for the order.
Advance payment
Payment is made before shipment. The simplest route, and the one that asks the most trust of the buyer — which is why samples, specification and documentation discipline matter before money moves.
Documents
Documentation tied to each term
Under every term here, the standard shipment documents travel with the goods: commercial invoice, packing list, certificate of origin, bill of lading and batch COA, with SGS/BV third-party inspection supported on request. The difference between terms is not the documents — it is who arranged the freight and insurance the bill of lading describes. Under LC at sight in particular, document compliance is what triggers payment, so the specification, invoice and COA must match the quotation exactly.
Costly mistakes
Common mistakes that cost real money
Assuming CIF includes destination duties — it does not. CIF covers freight and insurance to the destination port only. Duties, taxes and clearance at destination are the buyer's, and must be budgeted separately.
Confirming a grade from a photograph, not a sample. Approve a sample as the reference standard first. A photograph cannot show grain, colour variation or pack quality.
Leaving labelling to arrival. Destination labelling and food-law compliance are the buyer's responsibility, confirmed before shipment — not discovered at customs.
Treating a quotation as binding before written confirmation. A quotation is not binding until confirmed in writing. Price, term and specification all live in the written confirmation.
Assuming a sample guarantees the batch. The sample approves the grade; the batch COA governs the shipment. Check the COA against the agreed specification on arrival.
Before you confirm
A short checklist for first-time importers
- Sample approved as the reference standard?
- Specification, pack and labelling agreed in writing?
- Trade term (FOB / CFR / CIF) and destination-duty budget settled?
- Payment term (LC at sight / D/P / CAD / advance) agreed in writing?
- Documents, including batch COA and any inspection, listed in the quotation?
- Import permits and destination food-law checks confirmed on your side?
Questions
Trade terms FAQs
There is no single right answer — it depends on whether you have your own freight and insurance arrangements. FOB suits buyers with their own forwarder; CIF suits buyers who want the seller to arrange freight and insurance to the destination port. Either way, destination duties remain yours, and the term is confirmed in the written quotation.
Import with the terms settled first.
Tell us your destination and preferred term — your quotation will confirm trade term, payment term and documents in writing.
Request a quote