Incoterms for buying and selling olive oil: FOB, CIF, FCA, DDP and more

Incoterms are International Commercial Terms, standardized, globally recognized trade rules published by the International Chamber of Commerce (ICC).

In the international olive oil trade, these rules determine logistics, payment, and risk, including when the risk of loss or damage passes from seller to buyer, who pays which costs along the journey, and who handles export and import paperwork.

On the other hand, they do not determine payment terms, when payment is due, when ownership of the oil transfers, or what happens if either side breaches the deal. These are found in the contract of sale.

The current edition in place is Incoterms 2020, which contains 11 rules. The ones most relevant to olive oil are EXW, FCA, FOB, CFR, CIF, DAP and DDP, although CPT, CIP, DPU and FAS also appear in certain situations.

When buying a container of olive oil, you will most often be quoted FOB (meaning you arrange and pay the main freight) or CIF (the seller arranges and pays the main freight, and adds basic insurance). The risk of picking the wrong incoterm is then having to pay for freight you thought was included, or carrying the risk of oil sitting in a port.

Two groups of rules

Incoterms 2020 splits into two groups:

●       Any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU, DDP. These work for road, rail, sea or multimodal journeys — including containers.

●       Sea and inland waterway only: FAS, FOB, CFR, CIF. These are intended for non-containerized sea freight where the goods are delivered directly alongside or onto the vessel.

The first letter of the term is important. E (EXW) is minimum seller obligation, meaning you collect from the seller's door; F terms (FCA, FOB) mean the seller hands off to a carrier you arrange, with main freight unpaid by the seller; C terms (CFR, CIF, CPT, CIP) mean the seller pays the main freight but risk still passes to you before that freight begins; D terms (DAP, DPU, DDP) mean the seller carries the risk all the way to your destination.

All the olive oil incoterms

●       EXW (Ex Works): The buyer collects the oil from the seller's mill or warehouse and handles everything thereafter, such as export clearance and freight. Minimum seller obligation, good for when the buyer has reliable logistics in the origin country.

●       FCA (Free Carrier): Seller delivers the oil, export-cleared, to a carrier nominated by the buyer at a named place. Risk passes there. The ICC's recommended term for containers.

●       FOB (Free On Board): Seller loads onto buyer's vessel; buyer pays freight and insurance onward. Sea-only. Commonly used.

●       CFR (Cost and Freight): Seller pays freight to the destination port but not insurance; risk still passes at loading.

●       CIF (Cost, Insurance and Freight): Like CFR, plus minimum insurance. Convenient for hands-off buyers.

●       CPT / CIP (Carriage Paid To / Carriage and Insurance Paid To): The container-friendly versions of CFR/CIF. CIP is notable because it requires the seller to buy all-risks cover (Clause A), an upgrade over CIF's minimum.

●       DAP (Delivered At Place): Seller delivers to the named destination, then the buyer handles import customs clearance and pays any import duties and taxes.

●       DPU (Delivered at Place Unloaded): Like DAP, but the seller also unloads.

●       DDP (Delivered Duty Paid): Seller handles everything to the buyer's door, including import duties and clearance. Maximum convenience, minimum control, but high price.

The most common ones: FOB and CIF

When olive oil crosses oceans, the most common terms of sale are Free on Board (FOB) and Cost, Insurance, and Freight (CIF).

The main difference is that under FOB, you arrange and pay the ocean freight, whereas under CIF, the seller pays the freight and adds basic insurance. 

In both cases, risk passes to the buyer when the oil is loaded onto the vessel at the port of origin, not when it arrives, so any shipment lost in transit is the buyer's responsibility.

Even under CIF, where the seller has paid the freight and bought insurance, the buyer bears the risk of any loss during transit, and the insurance policy names the buyer as the beneficiary. CIF buys convenience, not protection at the destination.

The CIF contract obliges the seller to buy only the minimum cover (Institute Cargo Clauses C). For a premium extra-virgin oil, that basic level may not be enough, requiring a top-up with your own policy or by using CIP instead.

The container risk

Olive oil is normally transported in containers such as flexitanks, IBCs, drums, or ISO tanks inside a standard box, yet FOB, CFR, and CIF incoterms were designed for goods loaded directly onto a ship, such as grain or ore.

This leaves a risk gap, so the ICC explicitly recommends the "any mode" equivalents for containers: FCA in place of FOB, CPT in place of CFR, and CIP in place of CIF.

A container may sit in the terminal yard for several days waiting for its vessel. Under FOB, the seller technically remains at risk until the oil is "on board," but in reality has no control over the yard, so anything that happens there, like a fire, a crush, or a theft during that wait, falls into a gap in responsibility. FCA does not have that gap because risk passes when the container is handed to the carrier at the terminal.

Olive oil is still quoted FOB and CIF because banks financing deals with letters of credit want an "on board" bill of lading, which the sea terms produce naturally. Incoterms 2020 addressed this by letting the buyer instruct the carrier to issue an on-board bill of lading to the seller under FCA.

FOB and CIF remain common in containerized olive oil trade despite the ICC's recommendation to use FCA and CIP. If used, buyers need to understand where risk transfers and have adequate insurance.

Which term should you choose?

The right incoterm for you depends on your experience and the amount of logistics you want to handle:

New to importing or no forwarder relationship: CIF or DDP puts most of the work on the seller. CIF gets the oil to your port. DDP gets it to your door, duties paid. You pay a high price and give up control over freight costs.

Experienced with your own freight forwarder: FCA or FOB usually costs less because the buyer controls the main carriage and can shop for the freight rate. For containers, FCA makes more sense.

Quality-grade insurance: CIP (all-risks cover) instead of CIF (minimum cover), or arrange your own policy, especially if it's high-value extra-virgin oil, where oxidation or heat damage in transit can destroy the grade.

For olive oil contracts, always write the full Incoterms term with a named location, and the edition year ("CIF Rotterdam, Incoterms 2020"), so there is no ambiguity about which port or rules apply. Confirm exactly what a quoted price includes before comparing offers, since different Incoterms prices do not cover the same scope.

Then, in the contract, clearly specify the oil-specific logistics that are not covered by Incoterms. This includes who supplies and fits the flexitank, whether temperature protection is included on the route, and who bears any demurrage if an ISO tank is held up.