Incoterms for timber buyers: EXW, FOB, CFR and CIF compared

General information, not legal or insurance advice. Incoterms are a published rule set of the International Chamber of Commerce and are revised from time to time. This article describes the terms as set out in the Incoterms 2020 edition, which was the current edition when it was written. Check which edition your own contract incorporates, and read the rule text itself before you rely on any detail here.

Most first-time buyers of Cameroonian timber do not choose an Incoterm. They receive a quotation that already has one attached, usually FOB Douala or CIF their own port, and they read the number rather than the term. That is the wrong way round: the three letters decide what the number includes, where your liability starts, and what you are holding if the container never arrives.

This article is the detail behind the Incoterms section of the Buyer Academy pillar. If you want the whole purchase sequence — specification, qualification, payment, inspection — start there and come back here when you reach the quotation stage.

The one thing to understand first

An Incoterm answers three questions, and it is easy to assume they all have the same answer. They do not.

1. Who pays for what — the cost line.
2. Where the risk of loss or damage passes from seller to buyer — the risk line.
3. Who handles which formalities — export clearance, import clearance, documents.

The cost line and the risk line are not the same line. This is where buyers actually lose money. Under CFR and CIF the seller pays the ocean freight all the way to your destination port, so the cost line sits at destination — but the risk line sits back at the port of shipment, at the moment the goods are on board. If the cargo is damaged mid-ocean, it is damaged at your risk, on a voyage someone else booked and paid for. The word "delivered" in a CIF quotation refers to the seller's delivery obligation being performed at shipment, not to the timber arriving in your yard.

And a fourth question the Incoterm does not answer at all: when ownership passes. Incoterms allocate cost, risk and obligations. Title, retention of title, and what happens on insolvency are matters for the sale contract and its governing law. A contract that names an Incoterm and says nothing about title has a gap in it.

Nor does an Incoterm say when the goods must arrive, what quality is acceptable, what happens if the vessel is late, or how a claim is made. Those are separate clauses you have to write.

EXW — Ex Works

The seller makes the goods available at their own premises or another named place. Under the 2020 edition the seller is not obliged to load them onto the collecting vehicle and is not obliged to clear them for export.

• Risk passes when the goods are placed at your disposal at the named place — before they have moved at all.
• You pay for everything after that: loading, inland haulage to Douala or Kribi, export formalities, terminal handling, ocean freight, insurance, import.
• You handle export clearance out of Cameroon.

That last point is what makes EXW a poor fit for most international buyers. A foreign company with no presence in Cameroon is being asked to complete export formalities in a jurisdiction where it cannot practically act, and to take responsibility for the timber from the moment it is standing in a mill yard. EXW gives you maximum theoretical control over the logistics and hands you the part of the chain you are least equipped to run.

It has real uses: a buyer with an established agent or freight forwarder in Cameroon, buying repeatedly, may genuinely want to control the inland leg. For a first purchase from a new origin, it is rarely the right term.

FOB — Free On Board, named port of shipment

The seller delivers the goods on board the vessel at the named port. This is the most common working term in the Cameroonian export trade, and the site glossary states it the same way: the seller's responsibility ends once the goods are loaded on board at the named port of shipment.

• Risk passes when the goods are on board the vessel at the named port.
• The seller pays inland transport within Cameroon, export clearance and the costs of getting the goods on board.
• You pay the ocean freight, insurance if you want any, and everything at the destination end.
• You contract the carriage, which means you choose the carrier, the routing and the schedule.

FOB suits a buyer with their own freight arrangements or a forwarder they trust. It gives you control over the sea leg and full visibility of what the freight actually costs, rather than having it folded invisibly into a timber price.

Note that FOB obliges nobody to insure. Between the ship's rail at Douala and your port, an uninsured FOB shipment is your uninsured shipment. Buyers who move from CIF to FOB to save money sometimes drop the insurance without noticing they have done it.

CFR — Cost and Freight

The seller contracts and pays for the carriage to the named destination port. Everything else follows FOB.

• Risk passes on board at the port of shipment — not on arrival.
• The seller pays the ocean freight to the named destination port.
• Neither party is obliged to insure. CFR has no insurance obligation at all.

CFR is the term where the split between the cost line and the risk line is starkest, and where the absence of insurance is easiest to miss, because the quotation reads like a delivered price. If you buy CFR, arrange your own cargo cover, and make sure it attaches from the point where your risk begins rather than from arrival.

CIF — Cost, Insurance and Freight

CFR plus an insurance obligation. The seller contracts carriage to the named destination port and also contracts cargo insurance for the buyer's benefit.

• Risk passes on board at the port of shipment, exactly as under CFR.
• The seller pays freight and the insurance premium.
• The insurance is minimum cover. Under the 2020 edition the seller's default obligation under CIF is cover complying with the more limited of the standard cargo clause sets, for the duration of the carriage, with the sum insured set by the rules at 110% of the contract value in the currency of the contract. The buyer may agree broader cover, but has to ask for it in the contract.

That is the sentence buyers most often get wrong, and it is why the site glossary describes CIF as carriage plus minimum insurance. Minimum cover is named-perils cover: it responds to a defined list of events, not to loss or damage generally. A parcel of sawn timber that arrives water-stained, or short, or crushed, may fall entirely outside it.

There is a second problem specific to CIF. The seller chooses the insurer, the policy and the wording, and the buyer is the one who has to claim on it, in a dispute with an insurer they did not select and a broker they have no relationship with. If cargo cover matters to your business — and for containers of hardwood it usually should — you are generally better served buying FOB or CFR and placing your own policy on terms you understand, than accepting a CIF policy you have never read.

A container of sawn timber, four ways

Take the same shipment: one container of Cameroonian sawn timber leaving Douala or Kribi for an overseas buyer.

Read the risk row across. It barely moves. Under three of the four terms your risk begins at Douala, and under EXW it begins earlier still. No term in this group leaves the risk with the seller during the ocean voyage. If you want delivered risk you are looking at a different family of terms altogether — the D-terms, of which DAP is the one you are most likely to be offered — and you should expect the price to reflect it.

Read the insurance row and the cost row together. CIF is the only one of the four that obliges anyone to insure, and it obliges only the minimum. That is a weak form of protection dressed up as a comprehensive one.

Why quotes on different terms are not comparable

A buyer with an EXW quote from one mill, an FOB Douala quote from another and a CIF quote from a third does not have three prices. They have three different scopes of supply, and the lowest number is usually the one carrying the least scope.

To compare them you have to bring them onto one term. The practical method:

1. Pick one term as your basis. FOB at the named port of shipment is usually the cleanest, because it is the point every Cameroonian quotation can reach and the point at which the exporter's obligations are naturally complete.
2. Add the missing legs to the cheaper-scope quotes. For an EXW quote, that means loading, inland haulage to the port, export formalities and terminal charges — figures your forwarder can give you for that route; do not guess them.
3. Subtract the extra legs from the wider-scope quotes. Ask a CFR or CIF supplier to also quote FOB. Most will. The difference between their CIF and FOB numbers is what they are charging you for freight and insurance, and comparing that against your own forwarder's number is a useful test on its own.
4. Price the insurance separately, always. Get a cargo rate from your own broker for the voyage and add it to every FOB and CFR line so the comparison includes cover on terms you actually want. Never treat CIF's minimum cover as equivalent.
5. Check what is not in any of them. Destination terminal handling, customs clearance, duty and taxes, demurrage and detention if the container sits, and inland delivery at your end sit outside all four of these terms.

Where the numbers you need are not available to you, say so rather than estimating. A comparison built on a guessed freight figure is a guess wearing a spreadsheet.

Writing it into the contract

Four habits prevent most Incoterm arguments.

Name the place, always. "FOB" is not a term. "FOB Douala" is. For CFR and CIF the named place is the destination port, and for FOB it is the shipment port — naming the wrong end of the voyage is a common and expensive drafting slip.

Name the edition. Write "CIF Antwerp, Incoterms 2020", not "CIF Antwerp". The rules are revised periodically and the obligations attached to a code are not identical across editions.

Say what the Incoterm does not. Delivery date or shipment window, quality specification, tolerance, inspection and its consequences, documents and who produces each, claim notice periods, governing law and title. None of that comes with the three letters.

Deal with the container mismatch deliberately. FOB, CFR and CIF are sea and inland-waterway terms built around goods going on board a vessel. A container is normally handed over at a terminal well before loading, so between hand-over and loading the seller has lost control of the goods but still carries the risk. The ICC's own guidance is that containerised shipments are better served by FCA, CPT and CIP, whose delivery point is the hand-over to the carrier. In practice Cameroonian timber is quoted FOB and CIF regardless, and that is workable — but if you are drafting a contract from scratch, it is worth knowing the alternative exists and why.

Putting it to work

When you post an RFQ on this site, the form asks for an Incoterm and a port alongside the species, form, grade, dimensions, quantity, moisture content and destination. That field is not administrative. It is what makes the replies comparable: several suppliers quoting the same specification on the same term produce numbers you can actually rank, which is the whole reason for writing a brief once and sending it to everyone.

A reasonable default for a first purchase is to ask for FOB at the named port of loading, and to price freight and insurance yourself. You will see what the timber costs and what the shipping costs as two separate numbers, you will choose your own cargo cover, and you will not be relying on a minimum-cover policy bought by the counterparty you would be claiming against.

If you are still deciding what to buy, the timber species directory covers the technical properties, the marketplace shows what is being offered in each form, and the supplier directory shows who holds which documentation. Unfamiliar trade vocabulary is defined in the Cameroon timber glossary, and the mechanics of freight, packing and cargo insurance are covered in the Logistics Academy.

The Incoterms rules themselves are published by the International Chamber of Commerce, which is the authoritative source for the rule text and the only place to settle a question of detail. We have deliberately not linked a URL for them here rather than risk pointing you at the wrong page; search for the Incoterms rules on the ICC's own site, and confirm the edition before you rely on it.