Incoterms 2020 for South African Importers

What are Incoterms — and why do they matter in South Africa?

Incoterms (International Commercial Terms) are a set of internationally recognised rules published by the International Chamber of Commerce (ICC). The current version, Incoterms 2020, came into effect on 1 January 2020 and contains 11 terms. They are not law — they only have legal force when you write them into your purchase contract — but virtually every supplier invoice and letter of credit in global trade references them.

For a South African importer, choosing the wrong Incoterm has real money consequences. The term you agree with your supplier determines your SARS customs value (which duty and VAT are calculated on), who bears the cost of a delayed or damaged shipment, and who pays demurrage if a container sits on the Durban quay while paperwork is sorted out. With the Port of Durban ranked 403rd out of 403 ports in the World Bank Container Port Performance Index 2024, those demurrage conversations happen more often here than almost anywhere else in the world.

Incoterms do not cover: transfer of ownership (title), payment terms, or what happens if goods are defective. Those are separate contract matters.

The two groups: sea-only vs all modes

Incoterms 2020 splits into two sets. Four terms are sea and inland waterway only — they name a specific port as the delivery point and are the ones most South African importers encounter when buying from China, India or the UAE. The remaining seven work for any mode of transport including air, road, rail, or multimodal (container on a ship, then truck to Johannesburg).

All 11 Incoterms 2020 — who pays what

The table below uses a standard import into South Africa. "Buyer" is you, the South African importer. "Seller" is your overseas supplier. Risk transfer point is where liability for loss or damage shifts from seller to buyer.

Note on CIF insurance: Under CIF, the seller only needs to buy minimum insurance cover (Institute Cargo Clauses C — the cheapest, covering only major catastrophes). For valuable cargo, South African importers should buy their own top-up cover regardless of Incoterm.

CIP vs CIF: CIP (any mode) requires the seller to provide full "all-risks" insurance cover (Institute Cargo Clauses A). It is the better term if you want the seller to hold comprehensive cover — useful when importing high-value electronics or pharmaceuticals.

Term-by-term guide for ZA importers

EXW — Ex Works

The seller does nothing beyond making the goods available at their factory or warehouse. You (the buyer) arrange everything: collecting from the supplier's premises, export customs in the origin country, loading onto a vessel, ocean freight, and import clearance at Durban. This gives you maximum control and often the lowest invoice price — but it requires a trusted freight forwarder with a presence in the origin country. Rarely practical for first-time importers. Also note: because SA values on an FOB basis, SARS customs value under EXW is adjusted upward only to the FOB level — your clearing agent adds the origin inland transport and export/loading charges, but not the ocean freight or insurance.

FCA — Free Carrier

The seller delivers the goods to a named carrier or location. This is the ICC's recommended replacement for FOB when you are using containerised shipping — because technically, under FOB, risk passes when goods are "on board the vessel", but in container trade the goods are handed to the shipping line at the container terminal days before loading. FCA fixes that gap. A 2020 update lets buyer and seller agree that the seller will obtain a bill of lading with an on-board notation, which banks need for letters of credit. Good for experienced importers and air-freight shipments.

FAS — Free Alongside Ship

Rarely used in practice. Risk passes when goods are placed on the quay alongside the vessel at the origin port. Useful for bulk commodities (grain, coal, ore) where the buyer charters the vessel. Not relevant to most South African commercial importers.

FOB — Free On Board

The seller loads the goods on board the named vessel at the origin port. Risk and cost transfer at that point. You pay the ocean freight from, for example, Shanghai to Durban. Because you're booking the shipping, you can negotiate rates directly with a freight forwarder and often get better rates than a supplier would charge. Your SARS customs value is the FOB price itself — South Africa values on an FOB basis, so ocean freight and insurance are excluded from the customs value (see the separate guide on customs valuation). Most South African SME importers who are comfortable with the import process prefer FOB once they have an established freight forwarder relationship.

CFR — Cost and Freight

The seller pays ocean freight to the destination port (e.g. Durban), but risk still passes when goods are loaded at origin. This means the seller bears the freight cost but you bear the risk of damage or loss during the voyage — even though you didn't book the shipping. This is a somewhat awkward risk split and the reason most buyers either choose FOB (you control both cost and risk of freight) or CIF (seller controls both). CFR is common in bulk commodity trades.

CIF — Cost, Insurance and Freight

The seller pays ocean freight and minimum insurance to the destination port. Risk still passes at origin (when goods are loaded). CIF Durban is the most common Incoterm quoted by Chinese, Indian and UAE suppliers to South African buyers. It gives you a landed-to-port price, reduces your upfront logistics complexity, and the seller takes care of shipping. Downside: you don't control the carrier choice or schedule. If Durban is congested and demurrage clocks are running, your container is already your problem once it's on the ship — even under CIF.

CPT and CIP — Carriage Paid To / Carriage and Insurance Paid To

The "any mode" equivalents of CFR and CIF. Use CPT or CIP when shipping by air, road or multimodal (e.g. rail from Johannesburg back from Durban). CIP requires the seller to provide full all-risks cover — a meaningful upgrade over CIF's minimum cover. Increasingly popular for high-value air-freight imports.

DAP — Delivered at Place

The seller delivers to your named destination (e.g. your Johannesburg warehouse), ready for you to unload. The seller pays all freight and inland transport but not South African import duty or VAT. You still handle customs clearance. A practical term when you have a supplier capable of managing cross-border logistics but don't want to pay DDP prices. More common from EU or US suppliers than from China.

DPU — Delivered at Place Unloaded

New in Incoterms 2020 (replaced DAT). Same as DAP but the seller must also unload the goods at the named destination. Rarely seen in South African import contracts — most sellers outside Africa are reluctant to take unloading liability at a foreign site. Customs duty is still buyer's responsibility.

DDP — Delivered Duty Paid

The maximum obligation for the seller. They deliver to your door with everything paid: freight, insurance, South African customs duty, and import VAT. Your invoice price is truly all-in. Small importers and retailers sometimes prefer DDP because there are no surprise charges on arrival. The catch: few Chinese manufacturers offer genuine DDP; those that do typically add a 12–18% mark-up to cover the risk and admin of navigating SARS. If the DDP supplier under-declares the customs value to reduce their duty cost (common with some grey-market DDP routes), you as the importer can still be held liable by SARS in certain circumstances. Use DDP only with vetted, reputable logistics providers.

Which Incoterm suits South African importers?

How Incoterms affect your SARS customs value

SARS uses a transaction-value method to determine the customs value on which duty and VAT are calculated. South Africa expresses that customs value on an FOB basis — the goods plus the cost of loading them at the export port. It does not add the ocean freight and insurance to the customs value; the statutory 10% ATV uplift stands in for them when working out VAT.

In plain terms: if you buy on FOB terms and the invoice shows R100,000 FOB, that R100,000 is the customs value SARS uses. If you buy on CIF terms and the invoice shows R124,000 (goods + freight + insurance bundled), your clearing agent must strip out the freight and insurance to get back to the FOB customs value — roughly R100,000. Either way SARS wants the same FOB number; the Incoterm just determines what your invoice shows and which costs you must document separately for the agent.

See the companion guide on how Incoterms affect your SARS customs value and VAT for a detailed worked example.

Incoterms and the Durban congestion factor

No guide for South African importers can ignore the Port of Durban. The 2024 World Bank Container Port Performance Index ranked Durban 403rd out of 403 ports globally — last place. Vessel berth delays, equipment failures, and labour stoppages are routine. Under FOB or CIF terms, the risk of loss or damage in transit shifts to the buyer once goods are loaded at origin — meaning a damaged container that sat on Durban quay for three weeks is your problem, not the seller's. This is why top-up marine cargo insurance is non-negotiable for ZA importers regardless of Incoterm.

Demurrage (the daily rental fee for keeping a container beyond the free period) accumulates once the container arrives at Durban and you have not picked it up. Under any Incoterm, once the goods arrive at the destination port, the cost clock is running against the buyer. Get your clearing agent to monitor ETAs closely.

Frequently asked questions

Are Incoterms 2020 legally binding in South Africa?

Only when they are incorporated into your contract. They are not South African law. Write the full term and year into your purchase order and proforma invoice — for example "CIF Durban, Incoterms 2020" — and they become contractually enforceable between you and the seller.

Which Incoterm gives me the lowest customs value at SARS?

In theory, none — SARS adjusts every term to the same FOB customs value. An EXW invoice is adjusted up to the FOB level (origin inland + export charges); a CIF invoice has its freight and insurance stripped back out. The Incoterm on the invoice is a starting point for the valuation, not the final word. See the customs value guide for details.

Can I use FOB for air freight?

Technically no — FOB is a sea-only term. For air freight, use FCA (Free Carrier) with the named airport as the delivery point. Using FOB on an air waybill creates ambiguity and can cause problems with insurance claims and letters of credit.

What is DPU and how does it differ from DAP?

DPU (Delivered at Place Unloaded) was introduced in Incoterms 2020 to replace DAT (Delivered at Terminal). Under DAP the seller delivers goods ready to be unloaded; under DPU the seller must also complete the unloading. In practice both terms shift import duty to the buyer and are rarely used for South African commercial imports.

My Chinese supplier always quotes CIF. Should I accept that?

CIF is fine for most South African importers, especially when starting out. The main limitation is that you don't choose the carrier or the schedule, and the insurance cover is minimum only. As your volumes grow, switching to FOB with your own freight forwarder typically saves 5–15% on total landed cost because you can negotiate competitive freight rates directly.

Does the Incoterm affect who pays SARS VAT at import?

Under all terms except DDP, the South African importer pays SARS import VAT (currently 15%) at the border. Under DDP the seller is supposed to pay it — but this is administratively complex in South Africa and most DDP quotes from Chinese sellers add the VAT estimate into the DDP price rather than paying SARS directly. Always confirm with your clearing agent how VAT will be handled under DDP arrangements.

Related guides

• FOB vs CIF for Durban Imports: Which Should You Choose?
• How Incoterms Affect Your SARS Customs Value (and VAT)
• All Incoterms guides →