EXW, FOB, CIF, DDP — incoterms look like alphabet soup, but they decide who pays for what and who carries the risk at every stage of a shipment. Choose the wrong one and you can quietly hand away your margin or take on risk you didn't price for. Here's how to think about them without a law degree.

What incoterms actually decide

Every incoterm answers three questions: who arranges and pays for transport, who carries the risk if goods are damaged in transit, and where responsibility passes from seller to buyer. That’s it. Everything else is detail.

The four you’ll meet most often

EXW (Ex Works)

You make the goods available at your door; the buyer handles everything after that. Lowest effort for you, but buyers often dislike it because they take on all the risk and paperwork.

FOB (Free On Board)

You get the goods onto the ship; risk passes to the buyer once they’re aboard. A common, balanced choice for sea freight.

CIF (Cost, Insurance & Freight)

You pay for shipping and insurance to the destination port. More work for you, but more attractive to buyers who want a landed price.

DDP (Delivered Duty Paid)

You handle everything — shipping, duties, customs — right to the buyer’s door. Maximum convenience for the buyer, maximum responsibility (and cost) for you.

How to choose

  • New to exporting? FOB or CIF keep things manageable while still appealing to buyers.
  • Buyer is experienced and price-sensitive? They may prefer EXW or FOB to control their own logistics.
  • Selling premium / want to remove friction? DDP makes buying effortless — just be sure you’ve priced in every cost.

The “best” incoterm is the one that matches the deal — not a default you use for everyone.

The mistake that costs the most

Quoting a price without stating the incoterm. “$10 per unit” means nothing until the buyer knows whether that includes shipping, insurance, and duties. Always quote a price and the incoterm together, so both sides know exactly what’s covered.

The bottom line

Incoterms aren’t bureaucracy — they’re the rules that protect your margin. Learn the four common ones, match them to each deal and buyer, and never quote a price without naming the term.