Incoterms allocate three things between buyer and seller: who pays for what, who carries the risk for what, and who handles which documents. Picking the right one shapes your landed cost — and your audit trail — more than most importers realise.
The five most common terms for India imports
EXW — Ex Works
Buyer takes everything from the supplier's factory gate. Maximum control over freight cost and documentation. Maximum responsibility — including export clearance from China. Best for importers running consolidated freight programmes.
FOB — Free On Board
Supplier delivers and clears for export at the named port; risk transfers when goods cross the ship's rail. Buyer arranges and pays for sea freight onward. Most Aurum importers run FOB. Why: clean cost transparency, supplier handles their own export, you control the freight and destination side.
CIF — Cost, Insurance & Freight
Supplier arranges freight and insurance to the destination port; buyer takes risk after loading. Convenient if you trust the supplier's freight rate. Watch out for freight padding and weak insurance terms — supplier's insurance is often minimum-cover ICC(C).
DAP — Delivered at Place
Supplier delivers cleared-for-export to a named place in the destination country, but import duty remains buyer's. Useful if you want supplier-managed origin and freight without the duty entanglement.
DDP — Delivered Duty Paid
Supplier handles everything including Indian import duty. Convenient on paper. Three problems for Indian importers: (1) supplier may pad duty, (2) you forfeit IGST input credit traceability if BoE is filed in supplier's name, (3) audit trail breaks. Most accountants advise against DDP for India.
Risk transfer at a glance
| Incoterm | Risk transfers at | Who handles export? | Who handles import? |
|---|---|---|---|
| EXW | Supplier's premises | Buyer | Buyer |
| FOB | Loading port | Supplier | Buyer |
| CIF | Loading port (cost extends to destination) | Supplier | Buyer |
| DAP | Named destination | Supplier | Buyer |
| DDP | Named destination, duty-paid | Supplier | Supplier |
What we recommend
FOB for the vast majority of China imports. Switch to EXW only if you have a freight forwarder coordinating origin pickup and consolidation. Avoid DDP — the IGST input credit problem alone is usually enough to justify the discipline.