Understanding Incoterms: A Practical Overview

Incoterms (International Commercial Terms) define exactly where responsibility for goods, costs, and risk transfers from seller to buyer during a shipment. Getting them wrong is one of the most common — and costly — mistakes in international trade.

A few of the most commonly used terms:

• EXW (Ex Works): Buyer takes on responsibility from the seller’s premises onward — maximum responsibility for the buyer.
• FOB (Free on Board): Seller is responsible until goods are loaded onto the shipping vessel; buyer takes over from there.
• CIF (Cost, Insurance, and Freight): Seller arranges and pays for shipping and insurance to the destination port.
• DDP (Delivered Duty Paid): Seller handles everything, including import duties, until goods reach the buyer’s door.

Choosing the right term affects your costs, your risk exposure, and how much control you have over the shipping process — it’s always worth confirming which term applies before finalising an order.