When you agree an import or export deal, you need to set out who pays for what, and when responsibility passes from the seller to the buyer. That is what the International Chamber of Commerce’s Incoterms rules do. The current edition is Incoterms 2020.
Why Incoterms matter
- They decide who pays for freight, insurance and customs clearance.
- They set the point where the risk of loss or damage passes to the buyer.
- They affect the customs value used to calculate duty in the destination country.
The most common terms
| Term | In short | Who pays main freight? |
|---|---|---|
| EXW — Ex Works | The seller makes the goods available at its premises; the buyer handles everything after that | Buyer |
| FCA — Free Carrier | The seller delivers the goods, cleared for export, to a carrier named by the buyer | Buyer |
| FOB — Free On Board | The seller loads the goods on the vessel at the port of shipment (sea freight only) | Buyer |
| CFR — Cost and Freight | The seller pays freight to the destination port, but risk passes to the buyer at loading | Seller |
| CIF — Cost, Insurance and Freight | Like CFR, plus the seller must insure the goods | Seller |
| DAP — Delivered at Place | The seller delivers to the agreed place; the buyer handles import clearance and duties | Seller |
| DDP — Delivered Duty Paid | The seller handles everything, including import duties at destination | Seller |
Practical tips for importers
- Always state the term with a precise place, e.g. “FOB Shanghai” or “CIF Port Said”.
- Choose a term that matches how much control you want. If you have a forwarder you trust, terms such as FOB or FCA give you more control over price and schedule.
- Be careful with CIF for container shipments: the risk passes to you when the goods are loaded at origin, not when they arrive.
- Check the documents before shipping: the commercial invoice and bill of lading should show the same term and value.
Need help?
If you’re not sure which term suits your shipment, or how it affects customs clearance, contact us and we’ll review the details with you before you ship.