Ever been surprised by a hidden freight cost or a customs delay that turned a profitable shipment into a loss? The root of the problem often lies in a misunderstood three-letter code: the Incoterms.

Incoterms® (International Commercial Terms) are globally recognized trade terms published by the International Chamber of Commerce (ICC). They are the rulebook for every international shipment, clearly defining the roles, costs, and risks for buyers and sellers. Choosing the right one is your first and most critical step in protecting your margin and ensuring a smooth transaction.

Here’s a clear breakdown of the most common Incoterms and what they mean for you as the seller, focusing on your obligations and risks.

Key Incoterms for Sellers, from Least to Most Responsibility

EXW (Ex Works)

• Your Responsibility: You make the goods available at your own premises (factory or warehouse).

• Your Costs: None beyond production. You are not responsible for loading the goods or any logistics costs.

• Risk Transfer: The moment the buyer arrives to pick up the goods.

• Bottom Line: This term offers you the maximum protection and minimum hassle, as the buyer bears the entire burden and cost of the logistics chain.

FCA (Free Carrier)

• Your Responsibility: You deliver the goods, cleared for export, to a carrier nominated by the buyer at a named place (e.g., your warehouse or a local port).

• Your Costs: Export packing, pre-carriage to the named point, and export customs formalities.

• Risk Transfer: When the goods are handed over to the buyer’s chosen carrier.

• Note: FCA is often a more modern and efficient alternative to FOB for containerized shipments.

FOB (Free On Board)

• Your Responsibility: You deliver the goods over the ship’s rail at the named port of shipment.

• Your Costs: All costs up to the point the goods are on the vessel (inland freight to port, export duties, port fees).

• Risk Transfer: Once the goods are on the ship at the port of loading.

CIF (Cost, Insurance and Freight)

• Your Responsibility: You cover the cost and freight to bring the goods to the named port of destination, and you must also procure marine insurance against the buyer’s risk of loss or damage during carriage.

• Your Costs: All FOB costs, plus the main ocean freight and minimum insurance.

• Risk Transfer: Similar to FOB, risk passes when the goods are on board the ship at the origin port.

DDU (Delivered Duty Unpaid) / DAP (Delivered At Place)

• Your Responsibility: You bear all costs and risks involved in bringing the goods to a named place in the buyer’s country (e.g., their warehouse), excluding the payment of import duties and taxes.

• Your Costs: All transportation, insurance, and origin costs. You are responsible for the goods through the often complex final leg in the destination country.

• Risk Transfer: When the goods are available to the buyer, cleared for import, at the named place of destination.

DDP (Delivered Duty Paid)

• Your Responsibility: The maximum obligation. You deliver the goods to the buyer’s named place, ready for unloading, with all import duties and taxes paid.

• Your Costs & Risk: You are responsible for the entire journey, from your factory floor to the buyer’s door, including all customs clearance and import formalities in the buyer’s country.

Strategic Choice for Global Growth

While EXW and FOB are common for their lower seller risk, today’s competitive landscape demands a more strategic approach. Offering CIF, DAP, or even DDP can be a powerful differentiator, providing a seamless “hassle-free” experience for your international buyers, especially in B2C or B2B markets where the importer lacks logistics expertise.

Don’t Let a Three-Letter Code Sink Your Profitability.

Choosing the wrong Incoterm can lead to unexpected costs, blurred responsibilities, and shipment delays. Partner with a logistics expert who can guide you to the right decision for every market and protect your bottom line.

>> Secure Your Supply Chain. Get a Free Incoterms & Shipping Strategy Consultation Now!