Understand Incoterms and choose the right one for your business.
Incoterms (International Commercial Terms) are standardized trade terms that define buyer and seller responsibilities in international trade.
They determine: who pays for transport, who arranges insurance, who handles customs, and where risk transfers. Choosing the right Incoterm can save you money and headaches.
Guidance based on your situation: • NEW EXPORTER → DDP or DAP - Let buyer handle logistics • IMPORTER → EXW or FCA - Control your own transport • SEA FREIGHT → FOB or CIF - Traditional maritime terms • EXPERIENCED → Optimize based on negotiating power and costs
Avoid these errors: • EXW for exports - Problematic for export customs (seller isn't exporter) • FOB for containers - Technically incorrect, use FCA instead • CIF assuming full insurance - Minimum coverage only (110%) • Missing location - Always specify place (e.g., FOB Shanghai)
Minimum seller obligation. Buyer picks up at seller's premises and handles everything.
Seller delivers to ship. Buyer takes risk once goods are on board.
Seller pays transport and insurance to destination port. Risk transfers at loading.
Maximum seller obligation. Seller delivers to buyer's door, duties paid.
Incoterms are not legally required but are internationally recognized standards. Using them clearly defines responsibilities and prevents disputes.
FOB is for sea transport (risk transfers when goods are on board ship). FCA is universal and better for containers (risk transfers when goods are handed to carrier).
Under DDP, the seller pays everything including import duties in the destination country. Seller needs import capability (EORI, etc.) in buyer's country.