When trading goods internationally, you’ll see terms like FOB, CIF, or EXW. These are Incoterms — the heart of any sale agreement.
What Are Incoterms?
Incoterms (International Commercial Terms) are a set of standard rules defined by the International Chamber of Commerce (ICC). They clarify the responsibilities between buyer and seller — who bears the cost and risk at each stage of transport.
Common Terms
- EXW (Ex Works) — the seller makes goods available at their premises; the buyer handles everything from there
- FOB (Free On Board) — the seller is responsible until goods are loaded onto the vessel
- CIF (Cost, Insurance and Freight) — the seller covers freight and insurance to the destination port
- DDP (Delivered Duty Paid) — the seller handles everything, including duties, to the buyer’s door
Why Incoterms Matter
- Calculate the true landed cost accurately
- Know when to buy insurance
- Reduce disputes over responsibility
- Compare quotes from different suppliers fairly
Choosing the Right Term
New importers often prefer CIF or DDP for simplicity, while those who want tighter cost control may choose FOB or EXW and use a full-service logistics provider for transport and clearance.
Summary
Incoterms make international trade clear and fair. Understanding them helps you make better decisions. For advice on delivery terms and shipping plans, the JP Shipping team is ready to help.