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Company blog about Guide to Key Incoterms EXW FOB CIF and DDP Explained

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Guide to Key Incoterms EXW FOB CIF and DDP Explained

2026-04-19

In international trade, precise calculation of export prices is critical. The choice of trade terms directly impacts the responsibilities and costs borne by buyers and sellers. Common export pricing terms include EXW (Ex Works), FOB (Free On Board), CIF (Cost, Insurance and Freight), and DDP (Delivered Duty Paid).

EXW (Ex Works)

Under EXW terms, the seller makes goods available at their premises (such as a factory or warehouse), with the buyer assuming all transportation risks and costs from that point onward. This term places maximum responsibility on the buyer.

FOB (Free On Board)

FOB requires the seller to deliver goods onto the vessel at the specified port of shipment, covering associated costs and risks until that point. Once loaded, risk transfers to the buyer, who then handles main carriage and destination costs.

CIF (Cost, Insurance and Freight)

With CIF, the seller pays for transportation and insurance to the named destination port, though risk transfers to the buyer once goods are loaded at the origin port. This term provides buyers with cost certainty for basic shipping coverage.

DDP (Delivered Duty Paid)

The most seller-responsible term, DDP requires the seller to cover all costs and risks until goods reach the buyer's specified location in the importing country, including payment of duties and taxes. This offers buyers maximum convenience but comes at a premium.

When calculating export prices, businesses must carefully account for all relevant costs—production, transportation, insurance, tariffs—based on their chosen trade term. Proper understanding and application of these terms enables competitive pricing while mitigating trade risks in global markets.

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Blog Details
Home > Blog >

Company blog about-Guide to Key Incoterms EXW FOB CIF and DDP Explained

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News

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Blog

Guide to Key Incoterms EXW FOB CIF and DDP Explained

2026-04-19

In international trade, precise calculation of export prices is critical. The choice of trade terms directly impacts the responsibilities and costs borne by buyers and sellers. Common export pricing terms include EXW (Ex Works), FOB (Free On Board), CIF (Cost, Insurance and Freight), and DDP (Delivered Duty Paid).

EXW (Ex Works)

Under EXW terms, the seller makes goods available at their premises (such as a factory or warehouse), with the buyer assuming all transportation risks and costs from that point onward. This term places maximum responsibility on the buyer.

FOB (Free On Board)

FOB requires the seller to deliver goods onto the vessel at the specified port of shipment, covering associated costs and risks until that point. Once loaded, risk transfers to the buyer, who then handles main carriage and destination costs.

CIF (Cost, Insurance and Freight)

With CIF, the seller pays for transportation and insurance to the named destination port, though risk transfers to the buyer once goods are loaded at the origin port. This term provides buyers with cost certainty for basic shipping coverage.

DDP (Delivered Duty Paid)

The most seller-responsible term, DDP requires the seller to cover all costs and risks until goods reach the buyer's specified location in the importing country, including payment of duties and taxes. This offers buyers maximum convenience but comes at a premium.

When calculating export prices, businesses must carefully account for all relevant costs—production, transportation, insurance, tariffs—based on their chosen trade term. Proper understanding and application of these terms enables competitive pricing while mitigating trade risks in global markets.

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