Also called FOB, EXW, DDP, DAP, CIF, shipping terms
What are Incoterms?
The three-letter shipping terms that decide who pays for what, and where the risk changes hands.
What else it is called
- Other names
- FOB, EXW, DDP, DAP, CIF, shipping terms
- In French
- Incoterms
Related entries
Understanding incoterms
The standard three-letter terms that allocate responsibility between seller and buyer in an international sale: who arranges carriage, who bears the cost, where the risk of loss transfers, and who handles export and import clearance. They are published by the International Chamber of Commerce and revised about once a decade, which is why a term without a version reference is ambiguous.
Two cause most of the trouble in Canadian export quotes. Delivered duty paid sounds like good service and makes you the importer of record in the customer’s country, responsible for their import clearance, their duty, and often a tax registration you do not have. Ex works looks like the simplest and cheapest option and leaves your buyer trying to arrange an export clearance from a country they are not in, which tends to come back to you anyway with a delay attached.
Write the term, the named place and the version every time. "FOB our dock" is not enough.
In practice
"DDP" on a quote to a United States customer without having costed the customs entry, the duty and the brokerage is how a profitable order becomes an unprofitable one.
Frequently asked
Which Incoterm should we quote for United States customers?
Delivered at place is usually the sensible middle: you arrange carriage to their site and carry the risk, while they remain the importer of record and handle their own customs entry and duty. Delivered duty paid shifts their import obligations onto you and should be priced accordingly if you offer it at all.
Is "FOB" the same in a domestic Canadian sale?
Not reliably. North American domestic usage of free on board as shorthand for who pays freight predates and differs from the Incoterms definition, which is strictly a sea and inland waterway term. In a domestic contract, say plainly where title and risk transfer rather than relying on the initials.