An incoterm is not contract fine print — it is the line that defines who pays for what, who carries each risk and at which exact point the cargo changes hands. In commodities, three terms cover most operations.
EXW — Ex Works
The buyer picks up at origin and takes over everything from there: inland transport, export clearance, international freight and insurance. It makes sense for buyers with their own logistics structure in the origin country — and it requires that structure to actually exist.
FOB — Free On Board
The seller delivers the cargo loaded on the vessel, at the agreed port, export-cleared. From the ship's rail onward, cost and risk belong to the buyer. It is the most common term when the buyer holds its own freight contracts.
CIF — Cost, Insurance and Freight
The seller pays freight and insurance to the destination port — but risk transfers at loading, not at arrival. This distinction between cost and risk is the most common source of misunderstanding in international trade.
Under CIF, the seller pays for the voyage; the buyer carries the voyage's risk. Properly contracted insurance is not optional.
How to choose
- Logistics structure in the origin country → EXW can capture margin.
- Own freight contracts and recurring volume → FOB gives control.
- Simplified end-to-end operation → CIF concentrates execution on the seller.
Under any of the three, independent inspection at origin and documentation aligned with the financial instrument close the operation's safety loop.