Understanding Incoterms in International Shipping

Incoterms (International Commercial Terms) are standard rules published by the ICC that define who pays for transport, insurance, and customs — and where risk passes from seller to buyer. Using the right term avoids disputes and clarifies responsibilities.

EXW (Ex Works)

The seller makes goods available at their premises. The buyer arranges and pays for everything: collection, export clearance, freight, insurance, and import. Maximum responsibility on the buyer.

FCA (Free Carrier)

The seller delivers goods, cleared for export, to a carrier or place nominated by the buyer. Risk passes when the seller hands over to the carrier. Works for any mode (air, sea, road).

FOB (Free on Board)

Used for sea freight. Seller delivers goods on board the vessel at the port of shipment. The buyer bears cost and risk from that point — ocean freight, insurance, and import. Very common in containerised trade.

CIF (Cost, Insurance and Freight)

Seller pays freight and marine insurance to the destination port. Risk still passes when goods are on board at origin. Buyer handles import clearance and onward delivery.

DAP (Delivered at Place)

Seller delivers to a named place (e.g. buyer’s warehouse). Seller pays all transport and risk until arrival; buyer handles import clearance, duties, and unloading.

DDP (Delivered Duty Paid)

Seller delivers to the buyer’s door with all duties and taxes paid. Maximum responsibility on the seller; buyer only unloads. Opposite of EXW.

Why it matters

Choosing the wrong Incoterm can mean unexpected costs (e.g. you thought the seller was paying ocean freight, but you’re on FOB). Always agree the term in the contract and ensure your freight forwarder and customs agent are aligned. At Globe Hauler we handle export and import documentation and movement regardless of the Incoterm — get a quote and we’ll work to your chosen terms.