The Incoterms Cheat Sheet: A Short Guide

"If you don't know where you are going, any road will get you there." - Lewis Carroll

Let’s Be Honest: Incoterms Sound Like Legal Jargon… Because They Are.

But you don't need a law degree to understand them.

You just need this cheat sheet—and 5 minutes. Incoterms (short for International Commercial Terms) are global trade's rulebook. They tell buyers and sellers who handles what: shipping, insurance, customs, and risk.

Think of them as the prenup of every international order.

Ignore them, and you'll end up footing bills you never saw coming.

Let’s break down the most common ones, Redmarble-style: no fluff, just facts—with examples.

🚪 EXW (Ex Works) — "You Pick It Up, You Own It"

Factory's job ends at their loading dock.

Layman's Version:

You (the buyer) send a truck, arrange the export license, pay the freight, cover the customs, and deal with any delivery issues.

All. Of. It.

Example:

You're buying mugs from a factory in Shenzhen. With EXW, you’re arranging pickup at their facility, booking the ocean freight, and hiring a customs broker in LA. The factory shrugs and says, "Your truck, your problem."

Best for: Experienced buyers who want full control—and have boots on the ground.

🚛 FCA (Free Carrier) — "We’ll Get It to the Truck, You Handle the Rest"

The seller gets it to your nominated carrier. That’s it.

Example:

You’re importing planners from a factory in Seoul.

They deliver it to your freight forwarder’s warehouse nearby.

From there, it’s your rodeo.

Best for: Buyers who want a tiny bit of help, but still run the show.

🚢 FOB (Free On Board) — "We’ll Get It on the Boat, Then It’s Yours"

Seller clears customs and loads it onto the vessel. Risk transfers the second it’s onboard.

Example:

Buying fitness gear from Ningbo? The factory gets it to the port and loads it onto the ship. As soon as it’s floating, it’s your responsibility.

Best for: Buyers who want sellers to handle the local logistics

—but control the international ride.

💰 CFR (Cost and Freight) — "We’ll Pay for Shipping, You Eat the Risk"

Seller pays to get it to the destination port, but risk transfers when it leaves their country.

Example:

Buying ceramic dishes from Jingdezhen, China (FYI, it's the Ceramics capital of the world).

Seller pays to ship it to Long Beach. Box gets crushed in-transit? Your problem.

Best for: Buyers who want budget predictability—but will insure shipments themselves.

🛡️ CIF (Cost, Insurance, Freight) — "CFR + We’ll Insure It (Sorta)"

Seller covers the freight and basic insurance. Risk still transfers at origin.

Example:

You’re sourcing glassware from India. The seller ships to New York and insures the cargo. But read the fine print—it’s usually basic coverage (think: peanuts).

Best for: Buyers who want peace of mind—but should still get their own insurance.

🏗️ DPU (Delivered at Place Unloaded) (formerly DAT) 

— "We Drop It at the Terminal, You Deal From There"

Seller handles everything up to delivery at a terminal (e.g., port or warehouse). You unload and clear customs.

Example:

You're importing gym equipment. Seller delivers it to a bonded warehouse in Miami. You're on the hook to clear it and transport it home.

Best for: Buyers who want heavy lifting done—but want to handle customs personally.

📍 DAP (Delivered at Place) — "All the Way To You (But You Clear Customs)"

Seller ships goods to your named location. You pay duties + unload.

Example:

Ordering packaging from Ho Chi Minh, Vietnam.

They deliver it right to your LA warehouse door. You clear customs and unload the truck.

Best for: Buyers who want shipping handled

—but keep control of duties and import formalities.

✅ DDP (Delivered Duty Paid) — "Full Service. No Surprises."

Seller handles EVERYTHING. Shipping, customs, duties. It’s on your doorstep.

Example:

You’re launching a skincare line and don’t want to touch logistics. The factory ships your goods to your Chicago 3PL with all taxes and duties pre-paid.

Best for: Startups and first-timers who want zero guesswork.

Quick Recap: Who Does What?

Term	Shipping	Risk	Duties	Insurance
EXW	Buyer	Buyer	Buyer	Buyer
FCA	Buyer	Buyer	Buyer	Buyer
FOB	Buyer	Buyer	Buyer	Buyer
CFR	Seller	Buyer	Buyer	Buyer
CIF	Seller	Buyer	Buyer	Seller (basic)
DPU	Seller	Buyer	Buyer	Buyer
DAP	Seller	Buyer	Buyer	Seller
DDP	Seller	Seller	Seller	Seller

Final Word

Don’t just pick a term because your factory told you to.

Know what you're signing up for. Picking the right Incoterm isn’t just cost

—it’s about control, accountability, and managing risk.

This cheat sheet is yours to use, abuse, and drop casually in your next factory call like you actually get global trade.

Because now you do.