Every lot of green coffee that crosses a border moves under a contract, and buried in that contract are usually three innocent-looking letters — FOB, FCA or CIF — that decide far more than they first appear to. They set out who arranges the ship, who pays the freight, who insures the cargo, and, most importantly, the exact point on the journey where responsibility for the coffee passes from the seller to the buyer. Get them wrong and a damaged container can leave both sides arguing over cargo that nobody clearly owned at the moment the loss occurred.
These three-letter codes are Incoterms, and they are one of the quiet load-bearing structures of the global coffee supply chain. This guide explains what they are, which ones dominate the green trade, and the subtleties that trip up newcomers — above all the difference between where costs stop and where risk actually transfers.
What Incoterms are — and what they are not
Incoterms — short for International Commercial Terms — are a set of standardized rules published by the International Chamber of Commerce (ICC) in Paris. First issued in 1936 and refreshed roughly every decade, the current edition is Incoterms 2020. Each rule is a three-letter abbreviation that allocates, between seller and buyer, three things: which tasks each party performs, which costs each party pays, and — the point that matters most in a dispute — where the risk of loss or damage transfers from one to the other.
The 2020 edition contains eleven rules split into two families. Seven work for any mode of transport, including multimodal container journeys: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four are reserved for sea and inland-waterway transport, where goods are handed over at or alongside a vessel: FAS, FOB, CFR and CIF. Coffee, an ocean-freighted commodity, has historically leaned on that maritime family, though the container revolution is steadily pulling it toward the any-mode rules.
It is just as important to know what Incoterms do not do. They are not the whole contract. They say nothing about the price of the coffee, when payment falls due, whether title (legal ownership) has passed, or what happens if the goods are defective or a party defaults. Those belong to the sales contract itself. Incoterms slot into that contract as shorthand for logistics and risk allocation; everything else sits alongside them. This is why an Incoterm always travels with a named place, such as "FOB Santos" or "FCA Buenaventura": the rule is meaningless without the geography.
The Incoterms that dominate the green coffee trade
In practice only a handful of the eleven rules appear on most green coffee contracts. The workhorses are FOB, FCA and CIF, with CFR (still often written the old way as C&F) close behind, and EXW, FAS and the delivered "D-terms" turning up at the edges.
| Term | Full name | Seller pays cost to | Risk passes to buyer at |
|---|---|---|---|
| EXW | Ex Works | seller's own premises | seller's premises (buyer collects) |
| FCA | Free Carrier | named handover point at origin | when handed to the carrier there |
| FAS | Free Alongside Ship | alongside the vessel | alongside the vessel |
| FOB | Free On Board | loaded on board at origin port | when loaded on board |
| CFR | Cost and Freight | destination port | on board at origin port |
| CIF | Cost, Insurance and Freight | destination port (incl. insurance) | on board at origin port |
| DAP / DDP | Delivered at Place / Duty Paid | named destination | at that destination |
Read down the table and a pattern appears: the seller's burden grows heavier from EXW toward DDP, and the point of risk transfer marches from the origin gate toward the buyer's door — except for the "C" rules, where something unusual happens that we return to below.
FOB, FCA and the container problem
FOB (Free On Board) is the traditional reference point of the coffee trade. For generations, export prices have been quoted "FOB origin port" — FOB Santos, FOB Buenaventura, FOB Mombasa — and the FOB price remains the number most people mean when they talk about what a coffee "costs" at origin. Under FOB the seller clears the coffee for export and delivers it loaded on board the vessel the buyer has nominated; from the moment it is on board, the buyer carries the risk and pays ocean freight, marine insurance and every onward cost. Because so much of the trade's price discourse is built on it, FOB became the natural benchmark to which origin premiums and discounts are applied.
There is a technical catch, though. FOB was written for cargo loaded directly onto a ship — bulk grain, steel, break-bulk sacks swung aboard by crane. Modern coffee mostly moves in sealed containers delivered to a terminal days before the vessel arrives and loaded by the port, not the shipper. During those days in the stack, a strict reading of FOB leaves a grey zone: the coffee has left the seller's hands but is not yet "on board," so responsibility for a loss is unclear. For exactly this reason the ICC explicitly recommends FCA (Free Carrier) for containerized cargo.
Under FCA the seller's risk ends earlier and more cleanly — when the loaded container is handed to the carrier at the agreed point, whether that is the seller's warehouse, an inland depot or the container terminal. That matches how coffee actually moves today and closes the terminal grey zone. Adoption has been gradual because FOB is so deeply embedded in pricing habits, but many exporters and importers now write FCA while continuing to think and quote in FOB-equivalent terms.
Where cost and risk part ways — the "C" terms
The single most misunderstood feature of Incoterms is that the cost-transfer point and the risk-transfer point are not always the same place. Nowhere is this clearer than in CIF (Cost, Insurance and Freight). Under CIF the seller pays for ocean freight and marine insurance all the way to the named destination port, so the cost of carriage stays with the seller until the coffee reaches, say, Hamburg or New York. Yet the risk still passes to the buyer at origin, the moment the coffee is loaded on board the export vessel. If the ship founders mid-ocean, it is legally the buyer's coffee that went down, even though the seller was still footing the freight bill.
All four "C" rules — CFR, CIF, CPT and CIP — share this split personality: the seller carries the cost forward to destination while the risk transfers back at origin. CFR (Cost and Freight, the old C&F) is simply CIF without the insurance; the seller pays freight but the buyer arranges cover. CIF's insurance obligation is also deliberately thin — the ICC only requires the seller to buy minimum cover (Institute Cargo Clauses C), which protects against a short list of named perils and excludes a great deal, so buyers who want fuller protection top up their own policy. CPT and CIP are the container-friendly, any-mode equivalents of CFR and CIF; notably, Incoterms 2020 raised CIP's required insurance to the broadest "all risks" level (Clauses A) while leaving CIF at the minimum — another reason the container terms are quietly superseding the maritime ones.
The ends of the ladder — EXW, FAS and the D-terms
At the seller-light end sits EXW (Ex Works): the seller merely makes the coffee available at its own mill or warehouse, and the buyer handles everything after that, including export clearance. It gives the exporter minimal obligation but is awkward in practice, since a foreign buyer rarely wants to manage customs at origin. FAS (Free Alongside Ship) is a maritime step up — the seller delivers the coffee alongside the nominated vessel on the quay, with risk passing there — and is more common in true bulk trades than in bagged specialty coffee.
At the buyer-light end are the delivered rules. DAP (Delivered at Place) and DDP (Delivered Duty Paid) push the seller's responsibility all the way to a point in the importing country, with DDP also making the seller responsible for import duties and clearance. (DPU, Delivered at Place Unloaded — which replaced the old DAT in 2020 — is the one that also includes unloading.) These D-terms are relatively rare in origin-to-importer coffee contracts, where neither side usually wants the exporter carrying risk and cost across an entire ocean and a foreign border. They surface more often in later, domestic legs of the chain — a roaster buying spot lots from an importer's local warehouse, for instance.
How Incoterms fit the contract, the differential and financing
Incoterms never operate alone. In the green trade they are wrapped inside standardized industry contracts — most commonly the Green Coffee Association (GCA) contracts in the United States and the European Coffee Federation's European Standard Contract for Coffee (ESCC) in Europe. These templates fix the many things Incoterms leave open: quality and description, weights and packaging, sampling and arbitration, allowances for defects, and remedies on default. Many lots are also committed months ahead of shipment on forward contracts, into which the chosen Incoterm plugs to settle delivery and risk while the contract governs the wider commercial relationship.
Pricing rides on top of all this. Most exchange-traded arabica is priced as a differential — a premium or discount — to the ICE "C" futures market, and that differential is almost always quoted on an FOB basis, which is precisely why FOB endures as the trade's reference point even as FCA gains ground. Changing the Incoterm shifts who pays freight and insurance, so a CIF number and an FOB number for the same coffee are not directly comparable; the carriage and cover have to be stripped out to compare like with like.
Finally, Incoterms shape financing. Trade banks lend against shipping documents, and the bill of lading generated under an FOB or CIF shipment is a key piece of collateral in a letter of credit or a pre-shipment loan. The point at which risk transfers also determines whose insurance responds to a loss, which lenders care about deeply. For the wider machinery of how these deals are funded and secured, see the guides on coffee trade finance and warehouse receipts.
Frequently asked questions
What are Incoterms in the coffee trade?
Incoterms are standardized three-letter rules published by the International Chamber of Commerce that define, between a coffee seller and buyer, who performs which tasks, who pays which costs, and — most importantly — where the risk of loss or damage transfers along the shipment. In green coffee, terms such as FOB, FCA and CIF do this work.
Why is FOB the benchmark price in coffee?
Coffee export prices have traditionally been quoted "FOB origin port," meaning the coffee delivered loaded on board the ship at the country of origin. Because the trade's pricing language grew up around that point, the FOB price is the number differentials are added to and the figure most people mean by what a coffee costs at origin — even as FCA is increasingly recommended for containers.
What is the difference between FOB and FCA for coffee?
Under FOB the seller's risk ends only when the coffee is loaded on board the vessel, which was written for cargo craned directly aboard. Under FCA risk ends earlier, when the loaded container is handed to the carrier at an agreed point. Because modern coffee sits in containers at a terminal for days before loading, the ICC recommends FCA for containerized shipments.
Under CIF, does the seller or the buyer bear the risk at sea?
The buyer does. CIF is the classic case where cost and risk split: the seller pays freight and marine insurance all the way to the destination port, but the risk passes to the buyer at origin, the moment the coffee is loaded on board. If the ship is lost mid-ocean, it is legally the buyer's coffee, even though the seller was still paying for carriage.
Do Incoterms decide the price of the coffee?
No. Incoterms only allocate delivery, costs and risk; they say nothing about the price, payment timing, quality or ownership. Those live in the sales contract — commonly a GCA or European Standard Contract for Coffee template — while the price itself is usually set as a differential to the ICE "C" market on an FOB basis.