Commercial guide
Who loads, who clears export, who pays the freight and where the risk passes, under the five Incoterms rules garment buyers meet most. And why FCA is often better than FOB for containers.
AI renderIn short
Incoterms rules say who does what and who bears risk at each stage of a shipment. Under FOB the seller delivers the goods on board the buyer's vessel at the named port and clears export, and risk passes when the goods are on board. Under EXW the buyer takes the goods at the seller's premises and clears export. FCA hands over to the buyer's carrier. CFR and CIF have the seller pay freight to the destination, but risk still passes at loading.
8 min read
Written by the AHM International product development team
Updated October 2026. Every worked figure is checked by automated tests.
What Incoterms are
Incoterms are rules published by the International Chamber of Commerce (ICC) that define the obligations of a seller and a buyer in a sale of goods: who arranges transport and insurance, who handles export and import clearance, and where risk passes. The current edition is Incoterms 2020. They apply only if the contract says so, and the contract should name the rule, the edition and the place, for example "FOB, named port, Incoterms 2020".
Three things are easy to confuse and must be kept apart. Who pays is one question. Where risk passes is another. Where the price stops is a third. Under CIF the seller pays for freight and insurance to the destination, yet the risk of loss passed to the buyer when the goods were loaded at origin.
The five rules compared
A summary of the Incoterms 2020 allocation. The ICC's published rules are the authority, and the contract governs.
| Rule | Transport mode | Seller delivers | Export clearance | Main carriage paid by | Risk passes |
|---|---|---|---|---|---|
| EXW (Ex Works) | Any | At the seller's premises, goods placed at the buyer's disposal and not loaded | Buyer | Buyer | When the goods are placed at the buyer's disposal |
| FCA (Free Carrier) | Any | To the buyer's carrier at the named place, loaded if that place is the seller's premises | Seller | Buyer | On delivery to the carrier |
| FOB (Free On Board) | Sea and inland waterway only | On board the vessel the buyer nominated, at the named port of shipment | Seller | Buyer | When the goods are on board |
| CFR (Cost and Freight) | Sea and inland waterway only | On board the vessel; the seller also pays freight to the named destination port | Seller | Seller | When the goods are on board at origin |
| CIF (Cost, Insurance and Freight) | Sea and inland waterway only | As CFR, and the seller also buys minimum insurance cover | Seller | Seller | When the goods are on board at origin |
Why FCA is often a better fit than FOB for containers
FOB puts risk on the buyer when the goods are on board the vessel. A container is usually handed to the carrier at a terminal or depot before it is loaded, so the seller bears risk for a stretch that, under FOB, it can no longer control. The ICC's own guidance for Incoterms 2020 says FCA is more appropriate than FOB where goods are delivered to the carrier before they are on board, which is the normal case for containers. Many garment shipments still use FOB by custom, and either is workable when both sides understand the allocation.
What a garment price includes under FOB
An FOB price is a price up to a point, and it ends there.
- Included
- The garments, packing for export, delivery to the port, export clearance and loading on board the vessel the buyer has nominated.
- Not included
- Ocean freight, marine insurance, destination port charges, import clearance, duties and taxes, and delivery to the buyer's warehouse.
- The buyer's part
- Nominating the vessel or forwarder and telling the seller in time, paying the freight, and arranging cargo insurance if wanted.
- Risk
- Passes from the seller to the buyer when the goods are on board. After that, insurance is the buyer's protection.
Choosing between them
- FOB
- A buyer who books freight through its own forwarder and wants the supplier to deliver to the vessel. Common and well understood in garment sourcing.
- FCA
- The same arrangement for containerised cargo, with the handover at a named terminal or the supplier's premises.
- EXW
- A buyer that controls the whole chain, including export clearance. It leaves the buyer dependent on local arrangements, so it suits experienced importers.
- CFR and CIF
- A buyer that wants the seller to arrange the ocean leg. Remember that risk still passes at loading, and that CIF insurance is a minimum cover.
What this guide does not cover
It does not give freight rates, import duties or customs requirements, because those differ by country, product and date. For the buyer's country, ask the customs authority or a licensed customs broker, and for the rules themselves use the ICC's published Incoterms 2020 text.
Work the numbers
Try it on your own fabric.
Related questions
Free On Board. The seller delivers the goods on board the vessel the buyer nominates at the named port, clears them for export and bears risk until they are on board. Ocean freight and insurance are the buyer's.
Yes. FOB is intended for sea and inland waterway transport. For other modes, or for containers handed over before loading, FCA is the matching rule.
The buyer, because risk passed to the buyer when the goods were on board. This is why a buyer under FOB normally arranges cargo insurance.
Under CIF the seller pays freight and minimum insurance to the destination port. Under FOB the buyer does. Under both, risk passes when the goods are on board at origin.
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