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Incoterms are a shorthand for who pays for what, and more importantly, at which point risk passes from seller to buyer. They are not optional detail. A quote without an Incoterm is not comparable to anything.
EXW, ex works
The seller makes the goods available at their location and everything after that is yours: export handling, freight, insurance, import, duties, delivery. It produces the lowest headline price and the highest number of things you have to arrange yourself. Sensible if you already have freight relationships, painful if you do not.
FOB, free on board
The seller handles export and gets the goods onto the vessel. From that point the shipment is yours. Common in sea freight and a reasonable middle ground for buyers with a forwarder but no export capability at origin.
CIF, cost insurance and freight
The seller pays freight and insurance to the destination port. Import clearance, duties and inland delivery remain yours. The headline price looks close to landed cost but is not: the customs bill still arrives separately.
DAP, delivered at place
The seller carries the goods to your door and pays freight and insurance, but you are the importer of record: import clearance, duties and import VAT are yours. For a company that reclaims import VAT anyway, this is often the cleaner term, because a seller who pays that VAT under DDP cannot pass the credit on to you. The price is predictable for everything up to the border, and your broker handles the rest.
DDP, delivered duty paid
The seller carries everything to your door, including import duty and taxes. The price you accept is the price you pay, which is why it is the most requested term from operators importing for the first time. It is also the term where a seller most needs to actually know your jurisdiction, because they are pricing its duties into the quote.
Comparing two quotes fairly
- Convert both to the same basis before comparing. An EXW price and a DDP price are not the same kind of number.
- Ask which side files the import declaration. Some jurisdictions require a local entity, which quietly makes DDP impossible.
- Check whether insurance covers the goods to your door or only to the port.
- Confirm who pays demurrage and storage if clearance is delayed.
Run this against your own numbers
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