What are Incoterms?
Incoterms define who pays for what and where risk transfers in a shipment. The common ones, and the mistake that costs importers the most.
Incoterms are standard three-letter terms published by the International Chamber of Commerce. They answer two questions precisely: who arranges and pays for each leg of transport, and at exactly which point risk passes from seller to buyer.
They do not transfer ownership. Title passes according to the contract, not the Incoterm.
The ones you meet most
| Term | Seller delivers at | Who pays main carriage | Risk passes at |
|---|---|---|---|
| EXW | Seller's premises | Buyer | Seller's premises |
| FOB | On board vessel | Buyer | On board vessel |
| CIF | On board, insured to destination port | Seller | On board vessel |
| DAP | Named destination, not unloaded | Seller | Named destination |
| DDP | Named destination, duties paid | Seller | Named destination |
The trap in CIF
Under CIF the seller pays for carriage and insurance to the destination port, but risk passes when the goods are loaded at origin. Buyers routinely read "the seller insured it to my port" as "the seller carries the risk to my port". They do not. If the cargo is lost mid-voyage it is the buyer's loss, claimed against a policy the seller arranged.
What people get wrong
Writing an Incoterm without a named place. "FOB" alone is incomplete; it is "FOB Nhava Sheva". The place is part of the term.
Using maritime terms for containers or air freight. FOB and CIF are for sea and inland waterway. FCA and CIP are the container-appropriate equivalents.
Agreeing DDP without checking who can be importer of record. A foreign seller may not be able to clear goods into India in their own name.
Not stating the Incoterms version. They are revised; the contract should say which edition applies.
On Bidancer
Delivery terms are part of what a structured product enquiry captures, so they are agreed in the engagement rather than discovered at the port.
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