A supplier's quote looks simple until you see that one price includes shipping and another does not. Incoterms are standard shipping terms published by the International Chamber of Commerce that say who does what, who pays and where risk passes from seller to buyer. Knowing four or five of them lets you compare quotes properly.

Why they matter

Terms decide the price you compare, who pays freight and insurance, who is responsible if goods are damaged on the way and who handles the paperwork for export and import. Mix up the terms and a cheaper quote may turn out to cost more.

The common terms

EXW (Ex Works). The seller makes goods available at their premises. You pay for everything after that: loading, export clearance, freight, insurance and import. It gives the lowest quoted price and the most work for you.

FOB (Free on Board). The seller delivers the goods on board the ship at the port of departure and handles export clearance. You pay freight and insurance and take the risk from loading. It is widely used for sea freight.

CIF (Cost, Insurance and Freight). The seller pays freight and insurance to the destination port. Risk passes to you when goods are loaded on the ship. Customs value in Kenya is normally on a CIF basis, so a CIF price is closest to it; see customs valuation explained.

DAP (Delivered at Place). The seller delivers to a named place in Kenya, ready for unloading, and you handle import clearance and duty.

DDP (Delivered Duty Paid). The seller handles everything, including import duty and taxes. It is the most convenient and usually the most expensive, and the importer of record must be clear.

Comparing two quotes

Supplier A quotes USD 10,000 FOB. Supplier B quotes USD 11,200 CIF. To compare them, add freight and insurance to A. If freight and insurance would cost USD 1,000, A is USD 11,000 CIF and cheaper. Always convert to the same terms first, then add duty and fees; see how to calculate import duty on goods.

Which to choose

  • First-time importers may prefer CIF or DAP for simplicity.
  • Regular importers often prefer FOB, so that they control the freight forwarder and the cost.
  • EXW suits those with a forwarder in the supplier's country.
  • DDP shifts work to the seller but can hide costs and tax risks.

What stays with you whatever the term

Import clearance, duty and VAT in Kenya are normally yours, except under DDP. Keep the documents; see the import documents checklist. Use a clearing agent if needed; see clearing agent or clear it yourself.

Insurance

Under FOB and EXW you must insure the goods yourself. Marine insurance is a small cost compared with the risk of losing a container.

Put it in your model

Enter each shipment's terms, freight, insurance and fees in the import duty and landed cost workbook or the landed cost calculator so the total reflects what you will really pay. See how to lower your landed cost legally for more savings.

Quotes on different terms only compare once duty and fees are added: use the import duty calculator for the taxes and how to calculate import duty on goods for the method. Documents that go with each term are in the import documents checklist, and the fees that apply to all imports are in IDF and RDL explained.

Terms are set by the ICC and agreed in the contract. Confirm them with your supplier and your forwarder in writing.

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