Understanding CIF, FOB and Other International Trade Terms in the Coffee Business

A Kenya Coffee School Trade Education Series

#MakeItAfrica | #MadeInAfrica

International coffee trade is built on trust, contracts, quality standards, and clearly defined responsibilities between buyers and sellers. One of the most important concepts every coffee farmer, cooperative, exporter, roaster, and entrepreneur should understand is the use of Incoterms® (International Commercial Terms).

Published by the International Chamber of Commerce (ICC), Incoterms define who is responsible for transportation, insurance, customs clearance, costs, and risk during international trade. They reduce misunderstandings and help buyers and sellers conduct business with confidence.

1. FOB – Free On Board

FOB is one of the most common trade terms used in coffee exports.

Under FOB, the seller is responsible for:

• Processing and preparing the coffee for export.
• Packaging and documentation.
• Delivering the coffee to the named port of shipment.
• Loading the goods onto the buyer’s nominated vessel.

Once the coffee is loaded onto the ship, the risk transfers to the buyer. From that point, the buyer pays for ocean freight, marine insurance, and import costs.

Example: A Kenyan exporter sells coffee FOB Mombasa Port. The exporter delivers the coffee onto the vessel in Mombasa. The overseas buyer then pays for shipping from Mombasa to Europe, Asia, or North America.

2. CIF – Cost, Insurance and Freight

CIF is another widely used Incoterm in commodity trade.

Under CIF, the seller pays for:

• Export preparation.
• Ocean freight.
• Minimum marine insurance.
• Transportation to the destination port.

Although the seller pays these costs, the risk generally transfers to the buyer once the goods are loaded onto the vessel at the port of shipment. The insurance is intended to protect the buyer during transit.

Example: Coffee sold CIF Hamburg means the Kenyan exporter pays to transport and insure the shipment to the Port of Hamburg, while the buyer handles import clearance and inland transport after arrival.

3. EXW – Ex Works

The seller makes the goods available at their premises.

The buyer assumes almost all responsibilities, including:

• Collection.
• Export procedures.
• Shipping.
• Insurance.
• Import clearance.

This term places the greatest responsibility on the buyer.

4. FCA – Free Carrier

The seller delivers the goods to a carrier nominated by the buyer at an agreed location.

This is increasingly used for containerized shipments because it clearly defines the handover point before ocean transport.

5. CFR – Cost and Freight

The seller pays:

• Export costs.
• Ocean freight.

However, insurance is not included. The buyer arranges insurance if desired.

6. CPT – Carriage Paid To

The seller pays for transport to a named destination, but the risk transfers to the buyer when the goods are handed to the first carrier, not when they reach the destination.

7. CIP – Carriage and Insurance Paid To

Similar to CPT, but the seller also purchases cargo insurance for the buyer.

This is commonly used for multimodal transport involving road, rail, air, or sea.

8. DAP – Delivered at Place

The seller delivers the goods to a named destination, ready for unloading.

The buyer is responsible for:

• Import duties.
• Taxes.
• Customs clearance in the destination country.

9. DPU – Delivered at Place Unloaded

The seller is responsible until the goods are delivered and unloaded at the agreed destination.

10. DDP – Delivered Duty Paid

DDP places the greatest responsibility on the seller.

The seller pays for:

• Transport.
• Insurance (if applicable).
• Export procedures.
• Import duties and taxes.
• Delivery to the buyer’s location.

The buyer simply receives the goods.

Why These Terms Matter in Specialty Coffee

Understanding Incoterms helps coffee businesses:

• Price contracts accurately.
• Allocate costs and risks clearly.
• Avoid costly disputes.
• Plan logistics efficiently.
• Meet customer expectations.
• Strengthen export readiness.

For specialty coffee exporters, choosing the appropriate Incoterm depends on the relationship with the buyer, the destination market, logistics capability, and the level of service offered.

Building Export Competence

At Kenya Coffee School, export education goes beyond coffee quality. We train learners to understand:

• Coffee export documentation.
• International logistics.
• Trade finance.
• Marine cargo insurance.
• Customs procedures.
• Contract negotiation.
• Market access.
• Digital traceability.
• Sustainability and compliance requirements.

A successful coffee business requires not only producing excellent coffee but also mastering the language of global trade.

By understanding Incoterms such as FOB, CIF, FCA, CIP, DAP, and DDP, African coffee businesses can negotiate confidently, reduce commercial risk, and compete effectively in international markets.

Knowledge is value. Skills create opportunity. Trade creates prosperity.

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