Payment
Incoterms and Payment Terms
Incoterms define delivery and cost — payment terms define when money moves. Keep them consistent.
FOB/CIF describe risk and freight; L/C/T/T describe settlement timing — mismatches cause disputes.
Two Different Clauses
Incoterms® 2020 rules allocate transport, risk, and export/import clearance — not payment timing.
Payment terms are a separate contract clause: method, schedule, currency.
FOB + Payment Examples
FOB + 30% T/T deposit + 70% against copy B/L is common. FOB + LC at sight: seller must produce on-board B/L matching L/C.
CIF + Payment
CIF seller pays freight/insurance — L/C still requires seller docs including insurance policy. Payment may still be LC or T/T after docs.
DDP + Payment
DDP seller pays duty — buyer may still pay seller via T/T before or after arrival per contract; do not assume DDP means credit terms.
Fixing Conflicts
If L/C requires freight prepaid B/L but Incoterm is FOB Collect — discrepancy. Align before opening LC.
Examples
Mismatch
FOB contract but L/C asks seller for insurance certificate — should be CIF/CIP or amend LC.
Aligned
CIF Shanghai + usance LC 60 days from B/L — seller finances via bank discount.
FAQ
- Does CIF mean buyer pays later?
- No — CIF is cost allocation, not credit period.
- EXW and payment?
- EXW buyer collects at seller premises — payment terms independent.
- Who opens LC under FOB?
- Usually buyer/applicant — must match seller doc capability.
- Incoterm in L/C field 45A?
- Yes — must match contract Incoterm and freight terms on B/L.
- 2020 vs 2010 payment?
- Incoterms version affects delivery — not payment mechanics.
Conclusion
Draft sales contract with both clauses reviewed together. See Day 1 Incoterms 2020 Overview.