Incoterms on a Proforma Invoice — FOB, CIF, EXW and More Explained

Every export proforma invoice must state an Incoterm — a standardized trade term that defines exactly where the seller's responsibility ends and the buyer's begins. Choose the wrong Incoterm and your quoted price will not match your actual costs; state it incorrectly and your LC payment will be refused.

What Incoterms are and why they matter

Incoterms (International Commercial Terms) are published by the International Chamber of Commerce (ICC). They define three things for each shipment: who pays for transport, who pays for insurance, and where risk transfers from seller to buyer. The current version is Incoterms® 2020.

On a proforma invoice, the Incoterm must always be written with the named place — "FOB" alone is invalid under Incoterms 2020.

The most common Incoterms on proforma invoices

EXW — Ex Works

Write as: EXW [Seller's address] e.g. "EXW Factory Gate, Pune, India"

Seller makes goods available at their premises. Buyer arranges all transport, insurance, and export clearance. Seller's cost is minimal. Used when the buyer has their own freight forwarder.

FOB — Free On Board

Write as: FOB [Port of Loading] e.g. "FOB Shanghai" or "FOB Mumbai JNPT"

Seller delivers goods on board the vessel at the named port of loading. Seller pays for export clearance and delivery to port. Buyer pays for freight and insurance from port. Most common for sea freight exports.

CIF — Cost, Insurance and Freight

Write as: CIF [Port of Destination] e.g. "CIF Rotterdam" or "CIF Dubai Port"

Seller pays for freight and minimum insurance to the destination port. Risk transfers to buyer as soon as goods are on board the vessel — even though seller pays freight. The most common Incoterm when the seller books the vessel.

CFR — Cost and Freight

Write as: CFR [Port of Destination] e.g. "CFR Hamburg"

Same as CIF but seller does not pay for insurance. Buyer is responsible for marine insurance from the port of loading onwards (even though seller books and pays freight).

DAP — Delivered At Place

Write as: DAP [Named Destination] e.g. "DAP Buyer's Warehouse, Berlin, Germany"

Seller delivers to the named destination, bears all transport costs and risk. Buyer pays import duty and local delivery. Common for road freight within Europe or door-to-door courier.

DDP — Delivered Duty Paid

Write as: DDP [Named Destination] e.g. "DDP Buyer's Address, New York, USA"

Seller pays everything including import duty at destination. The most comprehensive and expensive Incoterm for the seller. Used when the seller wants to offer a fully landed price.

Which Incoterm to choose?

Common mistakes with Incoterms on proforma invoices

• No named place — "FOB" is not valid. Always write "FOB Port of Loading."
• Using FOB for air freight — FOB is for sea and inland waterway only. Use CPT or CIP for air shipments.
• CIF with wrong named place — CIF names the destination port, not origin. "CIF Shanghai" means you are quoting cost+insurance+freight to Shanghai — probably not what you intended if you are the exporter in Shanghai.
• Incoterm does not match price — if you quoted CIF but calculated a FOB price, you are absorbing freight costs without billing for them.
• Incoterm mismatch with LC — the LC will specify the Incoterm. If your commercial invoice uses a different term, the bank rejects the presentation.

For the full export proforma invoice checklist, read our export proforma invoice guide. Download a free export-ready template with an Incoterms field pre-formatted.