Incoterms 2020 define who pays freight, who insures the cargo, and exactly when risk transfers from seller to buyer — four terms cover the overwhelming majority of Pakistan textile contracts: EXW, FOB, CFR and CIF. FOB (Free On Board) Karachi or Port Qasim is the industry standard: the seller handles export customs and loads the goods on board the vessel, and the buyer controls the freight contract and insurance from that point. Under CFR and CIF, the risk still transfers to the buyer when goods board the ship in Pakistan — meaning a mid-ocean loss is the buyer's problem even though the seller paid the freight.
The Four Terms Side by Side
| Term | Seller pays up to | Risk transfers to buyer | Who books freight | Who insures |
|---|---|---|---|---|
| EXW (Ex Works) | Goods ready at factory gate | At the factory gate | Buyer | Buyer |
| FOB (Free On Board) | Loaded on vessel at origin port | On board the vessel | Buyer | Buyer |
| CFR (Cost & Freight) | Ocean freight to destination port | On board at ORIGIN | Seller | Buyer |
| CIF (Cost, Insurance & Freight) | Freight + minimum insurance to destination | On board at ORIGIN | Seller | Seller (min. cover, buyer is beneficiary) |
The trap in CFR and CIF: the seller pays the freight, but the RISK still transfers to you when the goods go on board at Karachi — not when they arrive. If the vessel has a problem mid-ocean under CFR, it is your loss and you have no insurance unless you bought it.
Why FOB Is the Textile Default
- You (or your forwarder) control the ocean freight contract — carrier choice, routing, transit time and cost transparency.
- The supplier handles what they do best: export customs, port handling and loading at their own port.
- Price comparison between suppliers is clean — FOB Karachi vs FOB Chittagong vs FOB Shanghai compares like with like.
- Letters of credit work smoothly: the on-board bill of lading is the trigger document.
When the Other Terms Make Sense
- EXW — almost never for international textile buyers. You become responsible for export clearance in a country where you have no entity. If a supplier insists on EXW, ask for FCA (factory) instead.
- CFR — acceptable for experienced buyers who carry open marine insurance policies and just want the supplier to arrange freight.
- CIF — useful for first-time importers who want one invoice covering goods, freight and insurance; just understand the insurance is minimum cover (Institute Cargo Clauses C) unless you specify Clauses A.
Common First-Time Errors
- 1Comparing one supplier's FOB price against another's CIF price — always normalise to the same term before deciding.
- 2Accepting CIF without naming the destination port precisely ("CIF UK" is not a term; "CIF Felixstowe" is).
- 3Forgetting destination charges — under every term above, destination THC, customs clearance, duty and inland delivery are yours.
- 4Not insuring under FOB/CFR — a $50,000 order travelling uninsured for 30 days at sea is an unpriced risk on your balance sheet.
- 5Using FOB for air freight — for air shipments the correct equivalent is FCA (named airport).
MZ Global Trading quotes FOB Karachi / Port Qasim as standard and can quote CFR or CIF to any named port on request — with the cost difference shown transparently so you can compare against your own freight rates.
Under FOB, pre-shipment inspection is completed before loading at origin — see how we coordinate third-party inspection on our inspection process page. Specify your preferred Incoterm and destination port in the sourcing quote form.
Related Products & Pages
Disclaimer: This content is provided for general information only and does not constitute legal, customs or compliance advice. Always verify requirements against your buyer specification, applicable regulations and your destination market before making commercial decisions.