Cost structure / standard tiers
Each Incoterm shifts a different bundle of costs to the buyer, which affects the buyer's total landed cost calculation and exposure to freight rate volatility.
| Incoterm | Seller Responsible For | Buyer Responsible For |
|---|---|---|
| EXW (Ex Works) | Making goods available at seller's premises | Export clearance, all freight, insurance, import clearance, duties |
| FOB (Free on Board) | Export clearance, delivery to origin port, loading on vessel | Ocean freight, insurance, import clearance, duties, destination handling |
| CIF (Cost, Insurance, Freight) | Export clearance, ocean freight, insurance to destination port | Import clearance, duties, destination handling, inland delivery |
| DDP (Delivered Duty Paid) | Everything including import duties and final delivery | Unloading at final destination only |
Under CIF and DDP, the buyer has less direct control over carrier selection and freight cost, which can limit ability to negotiate rates or choose preferred service lanes.
Risk mitigation / operational guidance
For importers who want visibility and control over ocean freight booking, vessel selection, and free-time negotiation, FOB terms are generally preferable to CIF, since the buyer's own forwarder controls the booking and receives direct carrier communications. Under EXW terms, confirm the seller will actually make goods available at the stated location and time — EXW shifts export clearance responsibility to the buyer, which can create compliance gaps if the buyer's forwarder isn't equipped to handle origin-country export documentation. For DDP shipments, verify which entity is listed as the importer of record on the customs entry, since DDP terms commonly create confusion about who holds compliance responsibility even though the seller pays duties. Regardless of Incoterm, confirm in writing which party is responsible for free-time, demurrage, and detention charges if delays occur at the discharge port — Incoterms address cost transfer for goods and freight, but port-side accessorial charges are typically handled separately by contract.