Incoterms are standard trade terms published by the International Chamber of Commerce. The current edition, Incoterms 2020, defines who arranges and pays for each stage of transport, and the point at which risk passes from seller to buyer. Agreeing the term clearly avoids disputes over freight, insurance and customs.
The terms you will see most often
EXW: Ex Works
The seller makes the goods available at their own premises. The buyer arranges everything else, including loading, export clearance and transport. It places the most work and risk on the buyer.
FCA: Free Carrier
The seller hands the goods, cleared for export, to the carrier nominated by the buyer at an agreed place. It is well suited to containerised cargo.
FOB: Free On Board
The seller clears the goods for export and loads them on board the vessel nominated by the buyer at the named port of shipment. Risk passes once the goods are on board; the buyer pays sea freight and insurance. FOB applies to sea and inland waterway transport.
CFR: Cost and Freight
As FOB, but the seller also pays sea freight to the named destination port. Risk still passes to the buyer when the goods are loaded at origin.
CIF: Cost, Insurance and Freight
As CFR, but the seller also buys insurance cover for the buyer's benefit during the voyage. Under Incoterms 2020, CIF requires only minimum cover, so check whether you need more.
A note on containers
The ICC recommends FCA, CPT or CIP rather than FOB, CFR or CIF for goods shipped in containers, because containers are usually handed over at a terminal before loading. Many traders still use FOB and CIF for containers, so make sure both sides understand where responsibility changes.
How to choose
- If you have a freight forwarder with good rates, FOB or FCA gives you control of shipping.
- If you want a single landed-port price, CFR or CIF is simpler.
- Always name the exact port or place, for example "FOB [port of loading]" or "CIF [destination port]".
You can state your preferred term when you request a quote.