What Are Incoterms?
Incoterms, short for International Commercial Terms, are a set of standardized trade terms published by the International Chamber of Commerce (ICC). These terms define the responsibilities of buyers and sellers in global trade, including who pays for shipping, insurance, duties, and who assumes the risk at each point of the journey.
Incoterms help avoid misunderstandings and disputes by providing a clear framework for international transactions.
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Common Incoterms Explained
1. EXW – Ex Works
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Seller’s Responsibility: Minimum. Seller makes the goods available at their premises.
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Buyer’s Responsibility: All transport, export duties, customs clearance, insurance, etc.
- Best for: Buyers who have strong logistics capabilities or use their own freight forwarders.
- Example: A buyer in Germany arranges pickup from a supplier’s factory in Shenzhen.
2. FOB – Free on Board
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Seller’s Responsibility: Delivery to port, export customs clearance, loading onto the ship.
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Buyer’s Responsibility: Freight, insurance, unloading, import duties.
- Best for: Sea freight shipments when the buyer wants control from the port of departure.
- Example: Seller ships goods from Shanghai to Hamburg. Risk transfers once goods are loaded.
4. DAP – Delivered at Place
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Seller’s Responsibility: Delivers goods to a named place in the buyer’s country.
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Buyer’s Responsibility: Import duties and customs clearance.
Best for: Buyers who want hassle-free delivery to their door but prefer to handle customs themselves.
5. DDP – Delivered Duty Paid
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Seller’s Responsibility: All shipping costs, duties, taxes, and delivery to buyer’s location.
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Buyer’s Responsibility: Receive the goods.
Best for: Buyers who want a fully hands-off experience.
Need help with international shipping?
Our logistics experts can guide you through choosing the right Incoterm and provide tailored freight solutions.