Incoterms for chemical shipments: where risk actually moves

Most arguments about a chemical shipment that went wrong are not about the product. They are about who owned the goods at the moment the problem happened. Incoterms exist to answer that question, and they only work if both sides mean the same thing by the three letters in the quotation.

What Incoterms decide, and what they do not

An Incoterm fixes the point where risk passes from seller to buyer, and which side pays for carriage, insurance and customs clearance. It does not decide the quality standard, the payment terms, the packaging specification or who is liable for a labelling error. Those belong in the contract.

A quotation that says CIF without naming a port is not an Incoterm. It is a word.

EXW, FOB, CIF and DAP in practice

• EXW, ex works: risk passes at the seller's premises. The buyer handles export clearance, inland transport and everything after. Simple for the seller, and usually a poor deal for a first-time importer who has no Chinese export agent.
• FOB, free on board: risk passes when the goods are loaded on the vessel at the named port. The seller handles export clearance and inland movement to the port.
• CIF, cost insurance and freight: the seller pays freight and minimum insurance to the destination port, but risk still passes at the port of shipment, not at destination.
• DAP, delivered at place: risk passes at the named destination, with the seller bearing transport risk. Duties and import clearance usually remain with the buyer.

The trap in CIF

CIF feels like door delivery because the seller arranges freight, but risk moves at the loading port. If a container is damaged in transit, the buyer holds the loss and has to claim on an insurance policy the seller arranged, at the minimum cover level the term requires. That cover is often narrower than the value of the goods.

If the cargo is high value, ask for the insurance terms and consider arranging your own cover.

What to specify when you request a quotation

Name the port or place, not just the country. Ask which Incoterm edition applies. Ask what is included in the price: export documentation, dangerous goods declaration, palletisation, fumigation, and any surcharge for hazardous cargo.

For chemicals, packaging and dangerous goods handling are frequently excluded from a headline price. A quotation you can only compare after adding three surcharges is not a quotation you can compare.

Insurance is not the same as liability

Insurance pays for a loss. Liability decides who is responsible for it. A seller can be insured and still not liable, or liable and uninsured. Keep the two separate when you read a contract, and make sure the party holding the risk is the party with the cover.