Incoterms — International Commercial Terms — define exactly where a seller’s responsibility ends and a buyer’s begins. Choosing the right one protects you from surprise costs and unclear risk. Here’s a plain-English guide, and you can explore each term in our interactive Incoterms guide.
What Incoterms actually decide
- Who arranges and pays for the main carriage.
- Who handles export and import customs clearance.
- Who buys insurance.
- The exact point where risk passes from seller to buyer.
The four you’ll see most
- EXW (Ex Works) — buyer does almost everything from the seller’s door. Cheapest for the seller, most work for the buyer.
- FOB (Free On Board) — seller loads the goods on the vessel; risk passes once on board. Common for ocean freight.
- CIF (Cost, Insurance & Freight) — seller pays freight and minimum insurance to the destination port, but risk still passes at origin.
- DDP (Delivered Duty Paid) — seller delivers cleared and duty-paid to your door. Most convenient for the buyer.
How to choose
If you want control and lower cost, terms like FOB let you manage the main freight leg. If you want simplicity, DDP hands almost everything to the seller. The key is that both sides agree on the same term — and understand where risk transfers.
Not sure which term fits your shipment? Prime Cargo People can advise and quote on any Incoterm across sea and air.