Incoterms are the eleven trade terms published by the International Chamber of Commerce that buyers and sellers put on a purchase order to split transport costs, risk and tasks. They do not transfer title to the goods, set payment terms or replace a contract; they only say who does what between the factory and the destination.
Seven terms for any mode, four for sea
| Term | Mode | Seller does | Buyer does | Typical use |
|---|---|---|---|---|
| EXW Ex Works | Any | Makes goods available at its premises. | Collects, exports, ships, clears and delivers. | Buyer with its own forwarder at origin; not ideal for first-time buyers because export formalities fall on them. |
| FCA Free Carrier | Any | Clears export and hands goods to the buyer's carrier at a named place. | Main carriage, import clearance, delivery. | The right choice for air and for containers delivered to a terminal; what people often mean when they say “FOB” for air. |
| CPT Carriage Paid To | Any | Pays carriage to the named destination; risk passes at first carrier. | Insurance, import clearance, delivery. | Seller-arranged freight with buyer bearing transit risk. |
| CIP Carriage and Insurance Paid To | Any | As CPT plus all-risk insurance. | Import clearance, delivery. | When the buyer wants the seller to arrange cover. |
| DAP Delivered at Place | Any | Delivers to the named U.S. place, not unloaded; buyer clears import. | Import clearance, duties, unloading. | Seller controls freight; buyer must still be the importer of record. |
| DPU Delivered at Place Unloaded | Any | As DAP, and unloads. | Import clearance, duties. | Project cargo and exhibitions. |
| DDP Delivered Duty Paid | Any | Delivers cleared and duty-paid. | Unloading only. | Only works when the seller is set up as a U.S. importer with a bond and broker. |
| FAS Free Alongside Ship | Sea | Places goods alongside the vessel at the origin port. | Loading, carriage, insurance, import. | Break-bulk and project cargo. |
| FOB Free on Board | Sea | Clears export and loads the goods on board at the origin port. | Ocean freight, insurance, import clearance, delivery. | The most common term for container imports; gives the buyer the choice of forwarder. |
| CFR Cost and Freight | Sea | Pays ocean freight to the U.S. port; risk passes at loading. | Insurance, arrival charges, import clearance, delivery. | Seller picks the carrier; buyer handles arrival. Watch for high destination charges. |
| CIF Cost, Insurance and Freight | Sea | As CFR plus minimum-cover insurance. | Arrival charges, import clearance, delivery. | Common from Asia; check the insurance is adequate for the goods. |
Practical advice
- FOB or FCA give you control. The supplier handles export formalities and delivers to the port or carrier; you choose the forwarder, the routing and the insurance, and you see every charge.
- CIF and CFR mean the seller picks the forwarder. The ocean freight may look cheap because the money is made on destination charges. Ask for the arrival charges in writing before you agree.
- DDP shifts customs onto the seller. That only works if the seller holds a U.S. importer number, a bond and a broker. If not, the shipment stalls at arrival.
- Use FCA, not FOB, for air and for containers delivered to a terminal. FOB is a sea term; using it for air leaves the risk hand-over undefined.
- Name the place precisely. “FOB Shanghai” is clear; “FOB China” is not.
Which to pick in our quote form
Choose FOB when your supplier quotes FOB a named port (most Asian suppliers do). Choose EXW when the supplier quotes a factory price and you want us to collect. Choose FCA for air freight or when the supplier delivers to a terminal. Choose CFR/CIF when the seller has already booked the vessel and you need us from arrival onward. Choose DAP/DDP only when the seller delivers in the U.S. and you need customs and the last leg handled.
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