Incoterms Explained for Bangladeshi Importers and Exporters
The difference between “FOB Chattogram” and “CIF Rotterdam” is not jargon, it is who pays the freight, who insures the cargo, and the precise moment your risk ends. For anyone importing or exporting from Bangladesh, picking the right Incoterm is one of the cheapest ways to avoid an expensive dispute.
What are Incoterms?
Incoterms are standard trade terms published by the International Chamber of Commerce that define, in a cross-border sale, who arranges and pays for carriage and insurance and where risk passes from seller to buyer. They do not decide payment, title, or breach, so they work alongside the sale contract.
What they cover, and what they do not
An Incoterm settles three practical questions: who arranges transport, who insures the goods, and where risk passes from seller to buyer. It does not decide who owns the goods, when and how payment is made, or what happens on a breach. Those belong to the sale contract and to your payment terms, such as a letter of credit.
The terms you will meet most
Described in plain outline:
- EXW (Ex Works). The buyer collects from the seller’s premises and bears almost everything from there.
- FOB (Free On Board). The seller loads the goods onto the vessel; risk and onward carriage pass to the buyer at that point.
- CFR / CIF (Cost and Freight / Cost, Insurance and Freight). The seller pays carriage to the destination port, and under CIF also arranges insurance, but risk still passes to the buyer on loading.
- DAP / DDP (Delivered At Place / Delivered Duty Paid). The seller carries the goods to a named destination, and under DDP also clears import duties.
The exact obligations are set by the current ICC rules, so contracts should state the version being used.
Why the wrong term causes disputes
The classic trap is assuming that whoever pays for carriage or insurance also bears the risk during it. Under terms like CIF that is not so, the seller insures, but the buyer carries the risk in transit. Mismatched expectations here surface exactly when cargo is lost or damaged, which is the worst moment to discover them.
Where this firm fits
Getting Incoterms right sits alongside the firm’s work on letter of credit disputes and customs and import disputes within its international trade practice. If you are negotiating a cross-border contract, or a shipment has gone wrong and the Incoterm is now in issue, a short review can save a long argument, speak with the advocate.
This article is general information, not legal advice. For your specific matter, speak with the advocate.
Frequently asked questions
What are Incoterms?
Incoterms are standard trade terms published by the International Chamber of Commerce that define, in a cross-border sale, who arranges and pays for carriage and insurance and where risk passes from seller to buyer. They do not decide payment, title, or breach, so they work alongside the sale contract.
What is the difference between FOB and CIF?
Under FOB, the seller delivers the goods onto the vessel and the buyer arranges and pays for carriage and insurance from there. Under CIF, the seller arranges and pays for carriage and insurance to the destination port, but risk still passes to the buyer once the goods are loaded.
Do Incoterms decide who owns the goods or when payment is due?
No. Incoterms allocate transport costs, insurance responsibility, and the point where risk passes. They do not transfer title, fix the price or payment method, or govern breach of contract. Those matters are dealt with by the sale contract and, for payment, by terms such as a letter of credit.