EXW, FOB, CIF, DDP and the rest — what each Incoterm means for your cost, risk and paperwork.
Incoterms are the standardised trade terms that define who pays for and who bears the risk of goods at each stage of shipping. Getting them right prevents disputes and hidden costs.
The terms buyers meet most
- EXW (Ex Works) — you collect from the factory door and handle everything after. Cheapest quote, most work.
- FOB (Free On Board) — supplier loads the vessel; you own freight and risk from there.
- CIF (Cost, Insurance, Freight) — supplier pays freight and basic insurance to destination port.
- DAP (Delivered At Place) — supplier delivers to your address; you clear customs.
- DDP (Delivered Duty Paid) — supplier handles everything including duties. Simplest, priciest.
Where risk transfers
The Incoterm sets the exact point where responsibility passes from seller to buyer. That matters for insurance: if the goods are damaged before that point it's the seller's problem, after it, yours.
Choosing the right one
New importers often start with DAP or DDP for simplicity, then move to FOB for control and cost as they build a forwarder relationship. Always compare total landed cost across terms.
Frequently asked questions
- What are Incoterms?
- Incoterms are internationally recognised trade terms, published by the ICC, that define the responsibilities of buyers and sellers for delivery, cost and risk at each stage of an international shipment.
- What is the difference between DAP and DDP?
- Under DAP the seller delivers to your address but you clear customs and pay duties; under DDP the seller handles customs and duties too, delivering fully cleared goods. DDP is simplest but usually most expensive.
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