Incoterms Guide for UAE Importers and Exporters

Every international trade contract includes an Incoterm — a three-letter code that defines exactly where the seller's responsibility ends and the buyer's begins. Get it wrong and you could find yourself paying unexpected freight charges, facing an uninsured cargo claim, or arguing over who is responsible for a customs delay.

This guide explains the Incoterms that matter most for UAE importers and exporters, with practical examples relevant to Abu Dhabi and UAE trade.

Incoterms (International Commercial Terms) are a set of standardised trade terms published by the International Chamber of Commerce (ICC). The current version, Incoterms 2020, defines 11 terms covering:

• Who arranges and pays for freight (origin, main carriage, destination)
• Who arranges and pays for insurance
• Who handles export and import customs clearance
• Where risk transfers from seller to buyer

Incoterms do not cover payment terms, title transfer, or the consequences of breach of contract — those are governed by the sale contract itself.

Incoterms are divided into two groups:

Rules for any mode of transport (including multimodal):

• EXW — Ex Works
• FCA — Free Carrier
• CPT — Carriage Paid To
• CIP — Carriage and Insurance Paid To
• DAP — Delivered at Place
• DPU — Delivered at Place Unloaded
• DDP — Delivered Duty Paid

Rules for sea and inland waterway transport only:

• FAS — Free Alongside Ship
• FOB — Free on Board
• CFR — Cost and Freight
• CIF — Cost, Insurance and Freight

Risk transfers: At the seller's premises
Seller's responsibility: Make goods available at their factory or warehouse
Buyer's responsibility: Everything — collection, export clearance, freight, insurance, import clearance, delivery

EXW gives the buyer maximum control but maximum responsibility. For UAE importers buying from overseas suppliers, EXW means you arrange everything from the supplier's door. This is only practical if you have a strong logistics partner in the origin country.

Practical note: EXW is often misused. The seller is not responsible for export clearance under EXW — but in many countries, only the local entity can act as exporter of record. If your supplier cannot export under EXW, use FCA instead.

Risk transfers: When goods are loaded on board the vessel at origin port
Seller's responsibility: Export clearance, delivery to port, loading on vessel
Buyer's responsibility: Ocean freight, insurance, import clearance, delivery

FOB is the most widely used Incoterm in UAE import trade, particularly for shipments from China, India, and Southeast Asia. UAE importers buying on FOB terms control the main freight — allowing them to negotiate rates directly with their freight forwarder and choose their preferred carrier.

Example: A UAE company imports steel pipes from China on FOB Shanghai terms. The Chinese supplier delivers the pipes to Shanghai port and loads them on the nominated vessel. From that point, the UAE importer's freight forwarder takes over — booking the ocean freight, arranging marine insurance, and handling Abu Dhabi customs clearance on arrival.

Risk transfers: When goods are loaded on board the vessel at origin port
Seller's responsibility: Export clearance, ocean freight to destination port, minimum insurance cover
Buyer's responsibility: Import clearance, delivery from destination port

Despite the seller paying for freight and insurance under CIF, risk transfers at the origin port — the same point as FOB. This is a common source of confusion: if the cargo is damaged during the ocean voyage, it is the buyer's problem even though the seller paid for the freight.

Important for UAE importers: UAE customs calculates import duty on the CIF value (cost + insurance + freight). If you buy on FOB terms, you must add the freight and insurance costs to arrive at the customs value. Your freight forwarder will handle this calculation, but it is important to understand when comparing landed costs.

Risk transfers: When goods are loaded on board the vessel at origin port
Seller's responsibility: Export clearance, ocean freight to destination port
Buyer's responsibility: Insurance, import clearance, delivery from destination port

CFR is CIF without the insurance obligation. The seller pays freight but the buyer must arrange their own marine cargo insurance. For high-value shipments, buyers should always insist on arranging their own insurance under CFR or FOB terms — the seller's minimum CIF insurance (Institute Cargo Clauses C) provides very limited cover.

Risk transfers: When goods are handed to the buyer's nominated carrier at a named place
Seller's responsibility: Export clearance, delivery to named place
Buyer's responsibility: Main carriage, insurance, import clearance, delivery

FCA is the multimodal equivalent of FOB and is increasingly preferred for containerised shipments. Under Incoterms 2020, FCA includes a provision allowing the buyer to instruct their bank to issue a bill of lading showing "on board" — addressing a long-standing problem with letters of credit under FCA terms.

Risk transfers: When goods arrive at the named destination, ready for unloading
Seller's responsibility: Export clearance, all freight and insurance to destination, delivery to named place
Buyer's responsibility: Import clearance and duties, unloading

DAP is popular for UAE exporters selling to overseas buyers who want door delivery without the complexity of managing freight. The seller controls the entire logistics chain to the buyer's door — but the buyer handles import customs and duties at destination.

Risk transfers: When goods arrive at the named destination, ready for unloading
Seller's responsibility: Everything — export clearance, all freight, insurance, import clearance, duties, delivery
Buyer's responsibility: Unloading only

DDP is the maximum obligation for the seller. For UAE exporters, DDP means you are responsible for import customs clearance and duty payment in the buyer's country — which requires either a local entity or a customs broker in that country. DDP is common in e-commerce and for established trade relationships where the seller has logistics infrastructure at destination.

UAE import duty is calculated on the CIF value regardless of the Incoterm used in the sale contract. Your customs broker will adjust the declared value accordingly:

• If buying on CIF terms: the invoice value is the customs value
• If buying on FOB terms: freight and insurance must be added to the invoice value
• If buying on EXW terms: freight, insurance, and origin charges must all be added

Accurate customs valuation is a legal requirement. Undervaluing — even unintentionally — can result in penalties and delays.

Choosing the wrong Incoterm can cost you significantly — in unexpected freight charges, uninsured cargo losses, or customs penalties. Kavalier Logistics advises clients on Incoterm selection as part of our freight forwarding service, ensuring your trade contracts reflect your actual logistics arrangements.

Contact our freight team to discuss Incoterms for your next shipment, or request a quote with your preferred delivery terms.