Incoterms (International Commercial Terms) are 3-letter codes that define responsibilities between buyer and seller. Get them wrong and you might accidentally agree to pay for shipping, insurance, and customs duties you didn't budget for.

The Four Most Common Incoterms

EXW โ€” Ex Works
You pick up from the factory. You handle everything after โ€” loading, export customs, freight, insurance, import customs, delivery. Cheapest price, most work.

FOB โ€” Free on Board
Supplier delivers to your named port and clears export customs. You handle sea freight, insurance, import customs. Most common for sea freight sourcing. Good balance of cost and control.

CIF โ€” Cost, Insurance, Freight
Supplier arranges and pays for shipping and insurance to your port. You handle import customs and inland delivery. Convenient but you lose control over shipping choices.

DDP โ€” Delivered Duty Paid
Supplier does everything door-to-door including duties. Most expensive but zero hassle. Good for first orders or when you don't have a customs broker.

Which to Choose

  • First order under $5,000: DDP or CIF โ€” learn the process before taking control
  • Regular orders: FOB โ€” you control freight and insurance, usually cheaper long-term
  • Very large orders: EXW + your own freight forwarder โ€” maximum control, minimum cost