Incoterms (International Commercial Terms) are standard rules that define who is responsible for shipping, insurance and customs at each stage of a transaction. Understanding them helps you avoid expensive mistakes.
1. Why Incoterms matter
They clarify:
- Who arranges freight
- Who pays for insurance
- Who handles customs
- Where risk transfers from seller to buyer
2. The most common terms
- EXW (Ex Works) — buyer handles everything from the factory gate. Lowest seller responsibility.
- FOB (Free On Board) — seller delivers to the ship at the named port. Buyer arranges freight.
- CIF (Cost, Insurance, Freight) — seller arranges freight and insurance to buyer's port.
- CFR (Cost and Freight) — like CIF but buyer arranges insurance.
- DAP (Delivered At Place) — seller delivers to a named place, buyer handles duties.
- DDP (Delivered Duty Paid) — seller delivers to buyer's door, pays all duties. Highest seller responsibility.
3. Which one is best?
- Experienced importer with a freight forwarder — FOB is most economical
- First-time importer — DDP is simplest
- Want control over customs — CIF or FOB
- Amazon FBA sellers — DDP to Amazon warehouse
4. Common confusion
- FOB does not include freight — many people assume it does
- CIF does not include import duties
- DDP is not always the most expensive — sometimes suppliers get better rates
- DAP and DDP differ only by duties
5. What to write in your order
Always specify:
- The exact term — for example "FOB Shenzhen" or "DDP Los Angeles"
- Incoterms version — usually Incoterms 2020
- Named place or port
We quote in EXW, FOB, CIF and DDP. Contact us with your destination and we will recommend the best option.