What Are Incoterms? EXW, FOB, & DDP Explained

What is Incoterms?

International Commercial Terms, often referred to as "Incoterms" are pre-defined commercial terms that the International Chamber of Commerce (ICC) has put together to facilitate global commerce.

What are EXW Incoterms?

EXW Incoterms mean you, the Buyer, are paying for the goods to be picked up at the suppliers warehouse/facility. You are then responsible for transporting them to the final destination and paying for all costs associated. This includes domestic transport to the port, customs & clearance costs/duties as well as all export/import logistical costs.

What are FOB Incoterms?

FOB Incoterms mean you, the Buyer, are paying for the goods to be loaded onto the vessel at a specific port. Often times you'll see "FOB" followed by the name of a port (i.e. $1 FOB Shanghai) which means the Seller, often the manufacturer, is responsible for getting the cargo to the port and transferring ownership/responsibilities to the Buyer. From there, the Buyer is responsible for all customs & clearance costs/duties as well as all export/import logistical costs.

What are DDP Incoterms?

DDP Incoterms are terms in which the Seller, often your manufacturer or supplier, agrees to pay all costs associated with getting the products to the agreed upon final destination.

Which incoterms is the most customer-friendly?

If you have a lot of time on your hands, well experienced in logistics for your particular product, and have a great freight forwarding partner, then you can often save some money by going with the EXW Incoterm.

If you're looking to scale your business quickly and don't mind paying a little extra, the DDP Incoterm is the pricing you're looking for.

--

In this video we explain what incoterms are, break down what ExWorks (EXW), Free on Board (FOB), Delivered Duty Paid (DDP) incoterms are, give an example of FOB pricing, & provide an example of DDP pricing.