FOB Lagos, CFR and CIF: Incoterms for sesame buyers.

What does FOB Lagos actually mean?

FOB Lagos means the seller delivers the goods on board a vessel nominated by the buyer at the Port of Lagos, and bears every cost and risk up to that point. From the moment the goods are on board, freight, insurance, destination charges and import clearance are the buyer's. The buyer books the vessel; the seller loads it.

That single sentence covers the whole allocation, and it is worth reading twice because two of its consequences surprise first-time buyers. The seller's obligation ends at the ship's rail in Lagos, not at your warehouse and not at your port. And because you are contracting the carriage, the choice of carrier, the sailing schedule and the freight rate are yours to negotiate and yours to get wrong.

Which Incoterms rules apply to sesame shipped in containers?

The Incoterms 2020 rules published by the International Chamber of Commerce contain eleven terms. Seven work for any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU and DDP) and four are written specifically for sea and inland waterway transport: FAS, FOB, CFR and CIF. Nigerian sesame is quoted almost exclusively out of the second group.

There is a wrinkle here that the trade lives with rather than solves. The four maritime rules were designed around goods physically placed on board a vessel — the bulk-cargo world of grabs and holds. Bagged sesame does not move that way. It moves in a sealed container that you hand to the carrier at a terminal days before the ship sails, which means the seller loses control of the cargo well before the point at which FOB says risk transfers. ICC's own guidance for containerised cargo points to FCA rather than FOB for exactly this reason.

In practice, FOB Lagos remains the market convention for Nigerian sesame and asking for FCA will mostly earn you a puzzled reply. The useful response is not to fight the convention but to know where the gap sits, and to make sure the contract says who carries the risk between terminal gate-in and vessel loading rather than leaving it to be discovered after a stack collapse.

What is the difference between FOB, CFR and CIF?

All three deliver on board at the port of shipment. What changes between them is how much of the onward journey the seller has agreed to arrange and pay for — and, importantly, nothing else.

If the seller pays the freight, who carries the risk?

You do. This is the single most expensive misunderstanding in the whole subject, so it is worth stating without hedging: under CFR and CIF the seller pays for carriage to the destination port, but risk still transfers when the goods are on board at the port of shipment. The cost point and the risk point are in different places.

So if a CIF container is lost, wetted or crushed somewhere in the Atlantic, the goods were at your risk when it happened, notwithstanding that the seller's name is on the freight bill and the vessel is one the seller chose. Your recovery runs through the insurance policy, not back up the contract to the seller.

This is the reason experienced commodity buyers are relaxed about paying freight themselves. Taking FOB and arranging your own carriage does not add risk you did not already carry from Lagos. It just puts the carrier selection, the rate and the claims relationship in the hands of the party who is bearing the consequences anyway.

How much insurance does CIF actually give you?

Less than most buyers assume. CIF obliges the seller to insure, but only at the minimum level of cover — the restricted, named-perils basis, not an all-risks policy. It is the level the rule considers appropriate for bulk commodities, and it will not answer for a good deal of what actually happens to a container of bagged foodstuff in transit.

Incoterms 2020 raised the insurance requirement for CIP to the comprehensive level while deliberately leaving CIF on the minimum. That asymmetry is a drafting choice, not an oversight, and it means the word "insurance" in CIF and the word "insurance" in CIP describe materially different products.

Two practical consequences. If you want all-risks cover on a CIF purchase, say so in the contract and name the clause set and the cover level you require — the default will not give it to you. And check the insured amount and currency: the customary basis is the invoice value plus ten per cent in the currency of the contract, which is a floor rather than a valuation of your actual exposure if you have already on-sold the cargo.

Why the Incoterm is not the contract

ICC describes the Incoterms rules as clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers. That is the whole remit, and it is narrower than the use most people put it to. The rules are a delivery standard. They do not fix the quality basis, they do not say what happens when a parcel arrives short of specification, and they do not set a deadline for claiming.

Those questions live in the trade contract. Sesame trades on FOSFA forms — the Federation of Oils, Seeds and Fats Associations — and two of the things buyers most commonly believe about those forms are wrong in ways that cost money.

The first is that CIF means quality is judged on arrival. It does not. The sesame form warrants quality at the time and place of shipment, exactly as the FOB oilseeds form does. What CIF actually changes is the remedy: where the seed arrives below warranty, the contract is not void and the buyer cannot simply reject — the goods are taken against a price allowance, agreed between the parties or fixed by arbitration. An arrival quality basis is something the parties write into the specification, not a default that CIF hands you.

The second is that a shipment-side analysis is automatically final and binding. It is not. The FOB oilseeds form offers alternative sampling and analysis provisions and the parties have to choose one; the alternative that makes analysis in the country of shipment final has to be actively selected. Note also the division of labour that the forms assume, because quotations routinely blur it: superintendents draw and seal the samples, and FOSFA member analysts perform the analysis. A superintendent's attendance is not itself the binding certificate.

Claim windows deserve the same scepticism. The time limits for quality and other claims sit in the FOSFA Rules of Arbitration and Appeal, which the contracts incorporate by reference but do not reproduce, so the numbers quoted around the trade are not readable from the contract you were sent. Obtain the Rules and confirm the windows before you need them — a claim filed a week late can be worth nothing at all.

How do I read the contract form myself?

Download it. FOSFA allows non-members to download up to five contracts free of charge from its own contracts page, which makes reading the actual form the cheapest hour of due diligence available to a sesame buyer. Everything in the section above is checkable in the text, and you should check it rather than take our word for it.

Read three clauses in particular before your first contract: the quality clause, to see at what point quality is warranted; the sampling and analysis clause, to see which alternatives exist and which one your draft has selected; and the arbitration clause, which for these forms means London arbitration under FOSFA rules, obtained as a precondition to any court proceedings. If your intended contract does not sit squarely on a standard form — and for bagged sesame on FOB terms that is a real possibility, because the commodity-specific form is a CIF form — that is a question for a commodity trade lawyer or a broker, not something to settle by analogy.

What is not included in an FOB Lagos price?

Everything after the ship's rail, and it is a longer list than buyers new to the route expect. Budget for it before you compare an FOB Lagos number against a CIF number from another origin, because the two are not comparable figures.

• —Ocean freight from Lagos to your discharge port, and any bunker or congestion surcharges the carrier applies
• —Marine cargo insurance for the voyage, at whatever level of cover you actually want
• —Destination terminal handling, demurrage and detention — the clock on the latter starts on arrival, not on your convenience
• —Import duty, VAT and any destination food-safety inspection or testing fees
• —Customs clearance and onward inland delivery

Which term should you ask for on a first shipment?

Ask for FOB Lagos, and arrange your own carriage. On a first trade with a new counterparty it keeps the two relationships separate: the seed is the seller's performance, the voyage is your carrier's, and neither can be used to explain away a failure in the other. It also lets you insure the cargo at the level you want rather than the minimum a CIF seller owes you.

Ask for CFR or CIF when you have no freight desk, when your buying volume gives the seller better rates than you can source, or when your internal approval process needs one landed number rather than a price plus an estimate. Those are good reasons. "CIF is safer" is not one, because it is not.

Whichever you choose, write the term with a named port and the year of the rules — "FOB Lagos, Nigeria, Incoterms 2020" — rather than a bare "FOB". A term without a named place is an argument waiting to happen, and a term without an edition is an argument about which edition.

Send us the specification you buy against with your destination port, and we will quote FOB Lagos and, where you want it, CFR or CIF to your discharge port, with the term written the way it should appear in the contract.

How current is this page?

The Incoterms position on this page is written against the Incoterms 2020 rules, which are the edition in force and are published by the International Chamber of Commerce; both ICC pages we rely on are linked below. Incoterms editions change roughly once a decade, so the thing to check is not this page but the term written into your own contract, which should name its edition.

The contract-law section reflects FOSFA's 2024 contract texts as read by us, and it deliberately paraphrases rather than reproduces them: the forms are FOSFA's own copyrighted documents, and the point of the section is to send you to the source rather than to substitute for it. We have not named which form governs our own contracts, because for bagged sesame on FOB terms that question is genuinely unsettled and we would rather say so than publish a tidy answer.

Two things here are deliberately not given as numbers. The FOSFA claim windows are in the Rules of Arbitration and Appeal rather than the contracts, and we have not read those rules directly. The exact insurance cover level and percentage under CIF should be confirmed in the rule text rather than taken from any guide, this one included. Where we could not verify something to our own satisfaction we have said what to check instead of filling the gap.