In international trade, one of the most frequently overlooked yet critical questions is: Who pays for packaging and export crating? The answer is not always straightforward. It depends on the agreed Incoterms rule, the nature of the product, and the specific contract between buyer and seller. Misunderstanding this can lead to disputes, unexpected costs, and even damaged goods. Let’s clarify the responsibility.

First, we must distinguish between two types of packaging: inner packaging (also called sales packaging) and outer packaging or export crating. Inner packaging protects the product for retail display and consumer use. This is almost always the seller's responsibility. Export crating, however, refers to the heavy-duty wooden crates, pallets, or reinforced boxes used to protect goods during ocean or air freight. This is where confusion arises.

Under standard commercial terms, the seller is responsible for packaging the goods in a manner that is adequate for the intended transport. But the cost timing shifts based on the Incoterms rule selected. For example, under EXW (Ex Works), the buyer bears all costs and risks from the moment goods are made available at the seller’s premises. That means the buyer is responsible for organizing and paying for export crating. The seller only needs to provide basic packaging to prevent damage during handling at the factory. In contrast, under FOB (Free on Board), the seller must deliver goods to the port and load them onto the vessel. Here, the seller must provide export-worthy crating and bear that cost. The crating must meet shipping line standards, often requiring heat-treated wood, fumigation certification, or special bracing.

Similarly, under CIF (Cost, Insurance, and Freight), the seller pays for transport and insurance to the destination port. This includes proper export crating as part of the “cost” element. The seller must ensure the crating is robust enough for the entire sea journey. If they use flimsy packaging, liability for damage may fall on them. On the other hand, under DDP (Delivered Duty Paid), the seller bears almost all costs, including packaging, export crating, freight, insurance, duties, and even final delivery. The buyer simply receives the goods at their doorstep. In this scenario, the seller must absorb the full crating and packaging expense.

However, there is a gray area: “standard” vs. “special” packaging. Standard packaging means the seller uses their normal commercial packaging, which may not be suitable for overseas shipping. Many buyers assume the seller will automatically provide export crating, but this is not always true unless the contract explicitly states “export-worthy packaging.” A common mistake is a buyer ordering goods under FOB terms but expecting the seller to arrange and pay for complex custom crating for fragile machinery. The seller may refuse, arguing that FOB only requires them to deliver to the port, not to engineer special crates. The buyer then faces unexpected crating fees at the freight forwarder’s warehouse.

To avoid confusion, the best practice is to specify packaging terms in the sales contract. Clearly state: “Seller shall provide wooden export crating meeting ISPM-15 standards and bear all costs for crating.” Alternatively, if the buyer wants control, they can use EXW and hire their own crating company. Another solution is to use a fixed packaging cost line item. For example, the buyer agrees to pay the seller a flat fee of USD 500 per crate, which covers labor and materials.

In summary, the general rule is: the seller bears cost for packaging up to the point of delivery as defined by the chosen Incoterm. After that, the buyer pays for onward packaging adjustments. Export crating is almost always the seller’s responsibility in FOB, CIF, and DDP scenarios, but must be explicitly agreed for EXW. To prevent disputes, always put crating specifications and cost allocation in writing before the order is placed. By doing so, both parties can budget accurately and ensure goods arrive safely at their final destination without financial surprises.