Global trade · 5 min read
Incoterms 2020 Explained: EXW vs FOB vs CIF vs DDP
A plain-language comparison of four widely discussed trade terms—and the cost, risk and customs questions every buyer and seller should settle.
HTM Global Tech Editorial Team · Updated 2026-08-09
The short answer: EXW, FOB, CIF and DDP divide delivery tasks, costs and risk differently. EXW gives the buyer extensive responsibility from the seller’s premises; FOB transfers risk when goods are on board a vessel at the named port; CIF adds seller-arranged freight and minimum insurance to the destination port while risk still transfers at origin; DDP places almost every delivery and customs obligation on the seller. Always name the exact place and write “Incoterms 2020.”
What do Incoterms rules actually decide?
The ICC Incoterms rules describe delivery obligations in a business-to-business sale: who arranges carriage, where delivery and risk transfer occur, which party handles export or import formalities, and how specified costs are allocated. They give contracts a common vocabulary across borders.
They do not determine ownership, price, payment timing, product quality, sanctions compliance, breach remedies or dispute law. Those belong elsewhere in the sales contract. An Incoterm without a precise named place is incomplete because a few kilometres can change cost, control and risk.
EXW vs FOB vs CIF vs DDP at a glance
This simplified comparison is an orientation, not a substitute for the official ICC rules or route-specific advice. FOB and CIF are intended for sea or inland-waterway transport; containerised shipments are often better matched to FCA or CIP because the carrier normally receives the container before it is placed on board.
| Term | Seller delivers / risk transfers | Main carriage | Import clearance |
|---|---|---|---|
| EXW | Goods placed at buyer’s disposal at named premises | Buyer | Buyer |
| FOB | Goods on board vessel at named shipment port | Buyer | Buyer |
| CIF | Risk transfers on board at origin; seller pays to named destination port | Seller | Buyer |
| DDP | Goods ready for unloading at named destination | Seller | Seller |
When does EXW create problems?
EXW gives the seller a limited delivery obligation, but “buyer collects everything” can be awkward across borders. A foreign buyer may be unable to complete export formalities in the seller’s country, and the seller may struggle to obtain export evidence needed for tax purposes. Loading responsibility also needs attention.
FCA at the seller’s premises often gives a clearer export structure: the seller loads the collecting vehicle and clears goods for export, while the buyer controls main carriage. Compare the official rules and local legal requirements before defaulting to EXW merely because the factory quotation uses it.
What is the real difference between FOB and CIF?
Under FOB, the seller clears goods for export and delivers them on board the buyer-nominated vessel at the named port. Risk transfers there, and the buyer arranges main carriage. Under CIF, risk transfers at the same origin point, but the seller contracts and pays for carriage and the specified minimum insurance to the named destination port.
That separation of cost and risk surprises many buyers: CIF does not mean the seller bears transit risk until arrival. It also does not normally include destination clearance, duty, tax or inland delivery. Buyers should examine insurance coverage, freight control and destination charges rather than comparing only the headline CIF price.
Is DDP always easiest for the buyer?
DDP appears simple because the seller carries the broadest obligation, including import clearance and duties. But the seller must be legally and operationally able to act in the destination country. Registration, importer-of-record, indirect-tax recovery, product compliance and customs valuation can make an informal DDP promise unworkable.
Buyers should confirm who will appear on the declaration, who owns compliance records and whether taxes can be recovered. DAP may be more appropriate where the seller can deliver to destination but the buyer should control import clearance. The simplest quotation is not necessarily the safest structure.
How should parties choose and write an Incoterm?
Map the physical route and ask who can best control each leg, insure the risk, complete customs formalities and manage disruptions. Consider mode, container handoff, bargaining power, local presence and the need for freight visibility. Then price alternative terms on the same scope.
Write the rule, exact named place or port, and version: “FCA [full address], Incoterms 2020.” Align the purchase order, commercial invoice, freight booking, insurance and operating instructions. HTM Global Tech helps importers and exporters connect the chosen term to real documentation, customs and logistics execution.
Frequently asked questions
Do Incoterms decide who owns the goods?
No. They address delivery, risk, tasks and specified costs; transfer of title must be covered by the sales contract and applicable law.
Does CIF include customs duty?
CIF normally includes cost, freight and specified insurance to the destination port, but import clearance, duty and tax remain with the buyer.
Which Incoterm is best for container shipping?
There is no universal best term. FCA, CPT or CIP may better reflect container handoff than FOB or CIF, depending on who controls carriage and insurance.
Sources and further reading
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