Resources/Glossary/Incoterms (EXW, FOB, CIF, DDP)

Incoterms (EXW, FOB, CIF, DDP)

Transport & Modalities

Incoterms (EXW, FOB, CIF, DDP)

Incoterms (International Commercial Terms) are standardized trade rules published by the International Chamber of Commerce (ICC) that define responsibilities for the delivery of goods in international trade. The current Incoterms 2020 set includes 11 rules in total, but in freight procurement the most relevant are:

  • EXW (Ex Works): the buyer assumes nearly all costs and risks from the seller's premises.
  • FOB (Free On Board): the seller delivers goods on board the vessel, after which the buyer takes responsibility.
  • CIF (Cost, Insurance, and Freight): the seller pays for transport and insurance to the port of destination.
  • DDP (Delivered Duty Paid): the seller covers all costs and risks until final delivery at the buyer's site.

Why It Matters

Incoterms clarify who pays for freight, insurance, customs, and where risk transfers. For procurement, choosing the right Incoterm is essential to avoid hidden costs, budget accurately, and negotiate fair international contracts.

Related Terms & Resources

This term connects most directly to:

  • Freight Audit & Pay — getting the Incoterm wrong is a common source of invoice disputes that audit has to catch.
  • Rate Card — responsibility for freight cost under a given Incoterm often needs to be reflected in the rate card.
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