Incoterms Explained

Incoterms define exactly where responsibility, cost and risk shift from seller to buyer during shipping — and getting them wrong is one of the most common (and expensive) sourcing mistakes.

EXW (Ex Works) means the manufacturer's responsibility ends at their factory door — you arrange and pay for everything from pickup onward, including export clearance. It looks cheapest on the quote but often costs more once you account for everything you now have to coordinate yourself.

FOB (Free on Board) shifts responsibility to the buyer once goods are loaded onto the shipping vessel at the origin port — a common middle ground that keeps export logistics with the seller while giving the buyer control over international freight.

DDP (Delivered Duty Paid) puts almost everything on the seller, including import duties at destination — the highest quoted price, but the simplest for a buyer who wants a single number and no logistics coordination.

The right choice depends on whether you have existing freight relationships and customs expertise, or would rather pay a supplier (or sourcing partner) to absorb that complexity.