Incoterms 2020 for Wood Pellet Export: FOB vs CIF vs EXW

Incoterms 2020: The Current Edition for Biomass Exports in 2026

If you're buying or selling wood pellets, wood chips, or cocopeat internationally, one detail matters more than most contracts give it credit for: who bears the loss if the cargo is damaged in transit. That's what Incoterms decide — and as of 2026, the rulebook in force is still Incoterms® 2020, published by the International Chamber of Commerce. No newer edition exists yet, so any contract dated 2026 should reference "Incoterms® 2020" explicitly, not a later year.

This guide walks through the three terms most commonly used in bulk biomass trade — EXW, FOB, and CIF — and how each one allocates freight cost, insurance, and risk for wood pellet, wood chip, and cocopeat shipments specifically.

Why the Right Incoterm Matters for Moisture-Sensitive Cargo

Wood pellets, wood chips, and cocopeat all share one vulnerability: they're highly sensitive to moisture. Pellets typically need to stay below roughly 10 percent moisture for efficient combustion, and cocopeat can lose grading value if it absorbs seawater during a long voyage. If a storm floods the cargo hold, the Incoterm in your contract decides who eats that loss — not just who technically "owns" the goods at that moment.

Delivery duties matter just as much as risk. Importing palm kernel shells or bulk wood chips involves inland trucking from a rural mill, port storage, and vessel chartering. The Incoterm you choose determines whether your supplier handles inland transport to the port, or whether that falls on you.

EXW: Maximum Buyer Control, Maximum Buyer Responsibility

Ex Works (EXW) places the minimum responsibility on the seller — they simply make the wood pellets or cocopeat available at their mill or warehouse. As the buyer, this gives you full control over the freight process, letting you negotiate directly with shipping lines and inland truckers. Buyers consolidating shipments across multiple wood chip or cocopeat suppliers can sometimes reduce overall freight cost this way, though actual savings depend heavily on route, volume, and market conditions.

That control comes with real work. If your supplier is located inland, you must coordinate trucking to the port and make sure moisture-proof tarping is maintained the entire way — a single gap in coverage can push a cocopeat shipment out of moisture spec before it even reaches the vessel.

Under EXW, the buyer also handles export customs clearance — phytosanitary certificates, export licenses, and fumigation documents required by the origin country, a process that generally takes at least several business days. EXW is generally only advisable if you have an experienced local forwarding agent in the exporting country who can manage this on your behalf.

FOB: The Standard for Bulk Wood Pellet and Wood Chip Exports

Free on Board (FOB) is the most commonly used term for bulk wood pellet and wood chip shipments because it draws a clear line: the seller is responsible for all costs and risk until the cargo is loaded on board the vessel at the named port of shipment. Once loaded, risk passes to the buyer.

If wood pellets are damaged on the dock while waiting to be loaded, that's the seller's loss. If they're damaged after loading — say, by seawater ingress mid-voyage — the buyer files a claim through their own marine cargo insurance.

After loading, the buyer takes on ocean freight and insurance for the voyage, typically two to six weeks depending on the route. Because wood chips and bagasse-type biomass can be prone to spontaneous heating if internal temperatures climb during storage, comprehensive marine insurance covering fire, water damage, and contamination is essential — without it, a mid-voyage fire could mean total loss with no recourse against the supplier.

FOB is popular precisely because it splits responsibility cleanly: sellers are insulated from ocean freight volatility, and buyers who ship regular volumes can lock in their own freight contracts and manage vessel scheduling directly.

CIF: Simplicity for Smaller or Less Frequent Buyers

Cost, Insurance, and Freight (CIF) requires the seller to pay freight to the named destination port and procure minimum insurance. When evaluating a CIF quote for wood pellets or cocopeat, calculate the total landed cost carefully — freight and insurance built into the price aren't always transparent, so compare it against your own FOB-plus-freight estimate as a sanity check.

One detail buyers often miss: the insurance required under CIF only needs to meet the minimum cover under Institute Cargo Clauses (C), which may not fully protect against moisture damage or spontaneous heating — real risks for wood chips and cocopeat. For higher-value or higher-risk cargo, it's worth requesting the seller upgrade to Institute Cargo Clauses (A).

A common misconception is that the seller bears transit risk under CIF. They don't — risk transfers to the buyer the moment goods are loaded at the origin port, even though the seller pays for freight to the destination. If a storm floods the hold, that loss falls to the buyer, who then files a claim using the insurance policy the seller is required to provide.

Comparing EXW, FOB, and CIF for Wood Pellet, Wood Chip & Cocopeat Contracts

Which Term Fits Container vs. Bulk Shipments

Smaller or irregular buyers often find CIF or DAP more practical — consolidating less-than-container loads independently is complex to manage. Buyers moving large bulk volumes through major deep-water ports usually get more value from FOB, since it lets them control vessel chartering and negotiate laytime directly, protecting against demurrage charges when a vessel is delayed beyond agreed loading time.

Avoiding Common Contract Pitfalls

Two mistakes come up repeatedly in biomass purchase agreements:

• Not specifying the Incoterms edition. Always write "Incoterms® 2020" explicitly — never "Incoterms 2026" or "Incoterms 2025," since no such edition exists, and referencing one creates exactly the ambiguity Incoterms are meant to prevent. Older editions like 2010 also handle insurance requirements differently, so the year matters.
• Vague delivery points. Writing "FOB Rotterdam" is insufficient — Rotterdam has multiple terminals. Name the exact terminal, and make sure the contract states which party's insurance covers moisture-related quality loss if ventilation is inadequate during transit.

FAQ

This guide covers the export terms behind "wood pellet, wood chip, and cocopeat" shipments for buyers and sellers moving biomass internationally. Understanding how EXW, FOB, and CIF allocate risk and delivery duties helps avoid costly disputes and supply chain bottlenecks.