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Reading an Incoterm in 60 seconds

By 1 min read

Incoterms look like an alphabet soup of three-letter codes, but each one answers exactly two questions: who pays, and who carries the risk.

Where the risk transfers

The whole framework hinges on one moment — the point where responsibility for the goods passes from seller to buyer. EXW pushes that moment to the seller’s door; DDP carries it all the way to the buyer’s.

  • EXW — the buyer takes over at the seller’s premises
  • FOB — risk passes once the goods are on board the vessel
  • CIF — the seller covers cost, insurance and freight to the destination port
  • DDP — the seller delivers, duties paid, to the buyer’s place

Read the code, find the transfer point, and you have read the contract. Everything else is detail.