Most importers treat the Incoterm as a box the supplier fills in. It is actually one of the few levers you control that affects cost on every single shipment, and the wrong choice is expensive in ways that are hard to see afterwards.
EXW — the trap that looks like a bargain
Under Ex Works the seller makes goods available at their premises and nothing more. You are responsible for loading, inland transport within the origin country, export clearance and everything after.
The unit price under EXW looks the lowest of any term, which is exactly why it is quoted. But you are now buying origin-country trucking and export clearance as a foreign buyer with no local presence and no leverage — often at rates well above what the supplier would have paid. Many buyers find the total lands higher than an FOB quote would have been.
When EXW works: when you or your agent have a genuine, established presence at origin. For most Kenyan importers buying from China, that means working through a freight forwarder who does — which is a service, not a saving.
FOB — usually the right default
Free On Board puts the seller's local costs and export clearance on the seller, and hands you control at the port of loading. You choose the carrier and you see the ocean freight rate directly.
That visibility is the point. Under FOB you can compare freight quotes, negotiate, and consolidate cargo from several suppliers. It is the term most experienced importers default to, and for good reason.
CIF — convenient, and you pay for the convenience
Under Cost, Insurance and Freight the seller arranges and pays for carriage and insurance to the destination port. Simple, and one invoice.
The catch is that you have no visibility of what the freight actually cost. The seller books with their preferred agent, and any margin on that booking is buried in your unit price. You also inherit a destination agent you did not choose, which occasionally produces destination charges that were not in your calculation.
The other catch: risk transfers to you when goods are loaded at origin, even though the seller pays the freight. The insurance the seller is obliged to arrange is minimum cover, which may be well short of what you would want.
When CIF works: small or occasional shipments where simplicity is worth more than the margin, or where you genuinely lack an agent.
DDP — attractive, and worth reading carefully
Delivered Duty Paid means the seller handles everything including import duty and delivery to your door. One price, no surprises — in theory.
In practice, a foreign seller is quoting you a duty figure for a jurisdiction they do not operate in, based on a tariff classification they have chosen. If they classify optimistically and KRA disagrees, the resulting assessment, penalty and delay land with you as the importer of record, whatever the contract says. Some DDP offers on this route are priced on assumptions that do not survive contact with Kenyan customs.
When DDP works: with a supplier who has demonstrable, current experience shipping into Kenya specifically — not merely experience shipping internationally.
Practical guidance
- Default to FOB unless you have a specific reason not to. It gives visibility and control without demanding a presence at origin.
- Always name the port. "FOB Shanghai", not "FOB". An unnamed port is an argument waiting to happen.
- Ask for the FOB equivalent whenever you are quoted CIF or DDP. The gap tells you what the convenience is costing.
- Arrange your own insurance to full CIF value plus a margin, rather than relying on minimum cover.
- State the Incoterms version — Incoterms 2020 — in the contract.
If you would like us to look at the terms you currently buy on and tell you honestly whether they are serving you, send them over. It is a short conversation and it often pays for itself on the next shipment.