Behind every price you quote there is a trade term. The same product can cost 20% more quoted DDP Hamburg than FOB Shanghai. Incoterms 2026 define who pays, who transports, and where risk transfers. This guide explains the 7 most-used terms in plain English with quoting advice.
What Incoterms actually are
Incoterms (International Commercial Terms) are published by the International Chamber of Commerce (ICC) and revised roughly every decade. The 2026 edition keeps the 11-term framework of Incoterms 2020. They answer three questions: where does the goods handover happen, who arranges transport and insurance, and where does risk transfer? Always quote a term plus a location, e.g. “FOB Shanghai”.
The 7 most common terms in one table
| Term | Seller’s duty | Risk transfer | Buyer’s duty |
|---|---|---|---|
| EXW | Deliver at factory | Factory gate | All transport, customs |
| FOB | Load onto vessel | On board at port | Ocean freight, insurance |
| CFR | Load + ocean freight | On board at port | Insurance |
| CIF | Load + freight + insurance | On board at port | Import clearance |
| DAP | Deliver to destination | At destination (before unload) | Clearance, duties |
| DDP | Deliver + clear + pay duty | At destination | Receive goods |
How to choose a term when quoting
Rule 1: The closer to the buyer’s door, the higher the price — and the stronger your offer
US/EU buyers love DDP because it is effortless. But DDP requires you to master the destination country’s clearance and taxes. New exporters should start with FOB / CIF.
Rule 2: Large buyers + FCL sea freight → FOB
Big buyers have their own forwarders. FOB gives the lowest price and clearest responsibilities — the standard for large B2B deals.
Rule 3: Samples and air parcels → DAP/DDP
Light, low-value samples quoted DDP let the buyer pay one total price, closing deals faster.
3 term traps that cost exporters money
- Trap 1: CIF only covers minimum insurance. Default CIF insurance is ICC(C) — the lowest level. Add all-risk cover for valuable cargo.
- Trap 2: Under FOB, the buyer’s forwarder controls the ship. Schedule delays and destination charges can spiral. Agree on a loading schedule in the contract.
- Trap 3: DDP duty estimates are wrong. Tariff policy varies by country and declared value. Check landed cost with a duty calculator before quoting DDP.
Terms agreed — now save on shipping
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FAQ: Incoterms
Q1: How much more expensive is EXW than FOB?
With EXW the buyer arranges pickup, domestic transport, customs and port fees — landed cost can be 3-8% higher than FOB depending on destination. Factor domestic legs into your quote.
Q2: Who buys insurance under CIF vs DDP?
Seller under CIF (minimum cover); under DDP the seller clears and pays duties but insurance is negotiable. If unsure, add all-risk cover with a named beneficiary.
Q3: What changed in Incoterms 2026 vs 2020?
The 2026 edition keeps the 11-term structure and mainly updates digital transport documents and insurance wording. Follow the official ICC text for contracts.
Next, cut your freight costs with our shipping savings guide, or use AI tools to automate quotes and documents.
