Who pays for what? Seven questions on cost boundaries

Most arguments about trade terms are not about risk. They are about a line on an invoice that one side assumed the other side had already paid. These are the seven questions we answer before a quote goes out, in the order they usually arrive.

Q1. How many cost blocks are there in one chain?

Five, and it helps to name them the same way on both sides: origin (pickup, export declaration, terminal handling, loading), main carriage (freight, fuel, surcharges), destination port (terminal handling, documents, chassis, appointments), clearance (broker, duty, import VAT, bond), and door delivery (inland haul, tail lift, residential access, waiting time). A trade term is simply a decision about where your responsibility ends inside those five blocks.

Q2. Under FOB, where does the buyer start paying?

At the ship's rail: the seller pays everything to get the cargo on board, including export declaration, origin terminal handling and loading. From that point the buyer books and pays the main carriage, insures, pays destination charges, clears import and delivers. Note the practical wrinkle: some carriers bill origin THC to the buyer's account regardless of the term, so the invoice looks wrong even when the contract is right.

Q3. Under CIF, how far do freight and insurance actually go?

To the destination port — not to the door. The seller pays freight and insurance, but the cover is normally minimum (Institute Cargo Clauses C), which excludes many of the losses shippers assume are covered. Risk still passes on board, so a casualty in mid-ocean is the buyer's problem even though the seller paid the freight. Discharge, terminal charges at destination, clearance and onward delivery sit with the buyer.

Q4. Where is the line between DDP and DAP?

At the customs entry. Both deliver to the named place and both put destination terminal costs on the seller. Under DDP the seller clears import and pays duty and import VAT; under DAP the buyer is the importer of record and pays them. A quote labelled "DDU, tax included" is DDP with an old name — ask which party appears on the entry.

Q5. Who pays the destination add-ons?

Chassis, pier pass, appointment fees, tail lift, residential delivery and waiting time follow the delivery point, not the freight rate. On FOB and CIF they are the buyer's; on DAP and DDP they are the seller's — which is why a DDP price can look 20% higher and still be the cheaper option once the buyer's own invoices are counted. Whatever the term, write "included / not included" against each line on the quotation.

Q6. Demurrage, detention, inspection and storage: whose cost?

Follow the cause, not the term. Inspection triggered by a wrong declaration, a mis-declared value or a missing certificate belongs to whoever produced the documents. Storage caused by a late pick-up belongs to whoever was supposed to pick up. Free time is set by the carrier and the terminal, and it is shorter than most shippers expect at the destination end. Demurrage is charged on the container inside the terminal; detention on the container outside it — two different invoices with two different clocks.

Q7. How do you write a quote so nobody argues later?

One page, five blocks, each line marked included or excluded, plus the named place and the Incoterm year (Incoterms 2020). If a term is mixed — FOB to the port and DAP to the door — write it as two contracts with two responsibility points, not one sentence that splits the middle.

The cost boundary, in one table

If you are comparing two quotes and cannot tell which lines are inside, send both to us on WhatsApp with the origin, destination and cargo value. We will mark up the cost boundary and tell you which one is actually cheaper at the door.