What Are Incoterms?
Incoterms (International Commercial Terms) are a set of 11 standardised trade terms published by the International Chamber of Commerce (ICC). They define exactly where responsibility, cost and risk transfer from the seller to the buyer in an international shipment. The current edition — Incoterms 2020 — came into effect on 1 January 2020.
Misunderstanding Incoterms is one of the most common and costly mistakes in Sri Lanka's import and export trade. Using the wrong term can leave you liable for freight costs or cargo losses you did not expect.
The 11 Incoterms 2020 at a Glance
Rules for any mode of transport:
Rules for sea and inland waterway only:
Which Incoterm Should Sri Lanka Importers Use?
FOB is the most commonly recommended term for Sri Lanka importers. Under FOB, you control the freight from origin port onwards — you choose your own freight forwarder (such as Freight Express Logistics), negotiate your own rates, and have full visibility of the shipment.
Under CIF, your supplier chooses the carrier. This often means higher freight costs and lower insurance cover than you would negotiate yourself, with less transparency.
Avoid EXW unless you have a trusted agent at origin. EXW puts all responsibility — including export customs at the origin country — on the buyer. Without a local agent, this can be complicated.
FAQ: Incoterms for Sri Lanka
Does the Incoterm affect customs duty in Sri Lanka?
Yes, indirectly. Sri Lanka calculates import duty on the CIF value (Cost + Insurance + Freight). If you import on FOB terms, your freight forwarder will add the freight and insurance costs to determine the dutiable CIF value.
Can I use DDP for Sri Lanka imports?
DDP is possible but unusual for Sri Lanka imports. The overseas seller would need to arrange customs clearance in Sri Lanka, which requires a licensed customs broker. Most sellers decline DDP for Sri Lanka.
What is the best Incoterm for exporting from Sri Lanka?
For Ceylon tea and bottled water exports, FOB is the standard. The Sri Lanka exporter loads the cargo onto the vessel at Colombo Port, and the overseas buyer arranges freight and insurance from that point. CIF is also used where buyers prefer an all-in price.
How Freight Express Logistics Can Help
Our team advises on the right Incoterm for every shipment and handles documentation accordingly — whether you are importing on CIF from China or exporting FOB to the UAE. Contact us before finalising your purchase or sales contract to ensure the terms work in your favour.