Logistics & Trade · Definition

Incoterms

Standard trade terms defining who pays for and risks each leg of a shipment.

Incoterms are a published set of three-letter rules — EXW, FOB, CIF, DAP, DDP and others — that state exactly where the seller stops being responsible and the buyer takes over, for both cost and risk.

They are the single most important line in an import contract, because they determine what the quoted price actually includes. The same unit price under EXW and DDP can differ by a fifth once freight, duty and clearance are added.

Cost and risk do not always transfer at the same moment, which is the detail that catches buyers out. Under CIF the seller pays freight, but the goods are the buyer’s risk from the moment they cross the ship’s rail.

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