Incoterms® 2020: what FOB, CIF, EXW and DDP actually mean

01What Incoterms settle, and what they don't

Incoterms® are delivery rules published by the International Chamber of Commerce (ICC). One abbreviation fixes who pays transport and customs and at which point the risk of loss or damage moves from seller to buyer.

Incoterms do not decide when ownership passes, how payment is made or what happens on breach. Those belong in the sales contract, which is why MİTA's two-party contract keeps payment and delivery clauses separate.

02The rules you will meet most

Below is the core logic of each rule; the full obligations are in the ICC text.

• EXW (Ex Works): the seller makes the goods available at its premises. Loading, export clearance and carriage are on the buyer. The heaviest rule for the buyer.
• FCA (Free Carrier): the seller clears export and hands the goods to the carrier named by the buyer. Recommended over FOB for containers.
• FOB (Free On Board): the seller loads the goods on the buyer's vessel at the port of shipment; risk passes once they are on board. Sea and inland waterway only.
• CFR (Cost and Freight): the seller pays freight to the destination port, but risk passes when the goods are loaded at the port of shipment.
• CIF (Cost, Insurance and Freight): as CFR, plus the seller buys minimum-cover marine insurance (Institute Cargo Clauses C). Risk still passes at loading.
• DAP (Delivered At Place): the seller delivers at the named destination, ready for unloading; import clearance is on the buyer.
• DDP (Delivered Duty Paid): the seller carries everything including import clearance and duties. The heaviest rule for the seller.

03Comparing prices

FOB $1,000 and CIF $1,080 are not like for like: the CIF price includes freight and insurance. MİTA's quote comparison flags quotes made on different Incoterms; add your freight before you decide.

Always name the place: "FOB Mersin", "CIF Jebel Ali". A rule without a place is the most common source of disputes.

04How MİTA uses it

Listings, needs and quotes all require an Incoterms field. The accepted quote's rule is copied into the sales contract, which states that risk passes under that rule.