Every supplier quote carries a three-letter term — EXW, FOB, CIF, DAP — that allocates cost, risk and control between buyer and seller. Importers who treat these letters as boilerplate routinely discover, mid-shipment, that they agreed to something they did not intend. Here is what the common terms actually mean for a Pakistani buyer.
The terms you will meet most
- EXW (Ex Works) — you take over at the supplier's gate; every step after is yours to arrange, including export formalities at origin.
- FOB (Free On Board) — the supplier delivers export-cleared onto the vessel; you control the main carriage and choose the forwarder.
- CIF (Cost, Insurance & Freight) — the supplier arranges carriage and minimum insurance to your port, but risk transfers at loading, not arrival.
- DAP (Delivered At Place) — the supplier delivers to a named destination; import clearance and duties remain the buyer's.
Why importers often prefer FOB
Under FOB you choose the forwarder, control the freight rate and own the visibility. CIF looks convenient — one price to your port — but the freight is chosen by the seller, priced into the goods, and the arrival-side surprises (charges, agents, timing) are still yours. Control of the main carriage is worth more than the apparent simplicity of a bundled quote.
The clauses to check twice
Where risk transfers (CIF surprises many buyers by transferring at origin), what insurance actually covers, and who pays destination charges — the gap between "freight paid" and "everything paid" is where disputes live. Put the term, the named place and the version year on the purchase order explicitly.
- Incoterms
- FOB
- CIF
- EXW
- trade terms
