What Are Incoterms? EXW, FOB, & DDP Explained

What is Incoterms?
International Commercial Terms, often referred to as "Incoterms" are pre-defined commercial terms that the International Chamber of Commerce (ICC) has put together to facilitate global commerce.
What are EXW Incoterms?
EXW Incoterms mean you, the Buyer, are paying for the goods to be picked up at the suppliers warehouse/facility. You are then responsible for transporting them to the final destination and paying for all costs associated. This includes domestic transport to the port, customs & clearance costs/duties as well as all export/import logistical costs.
What are FOB Incoterms?
FOB Incoterms mean you, the Buyer, are paying for the goods to be loaded onto the vessel at a specific port. Often times you'll see "FOB" followed by the name of a port (i.e. $1 FOB Shanghai) which means the Seller, often the manufacturer, is responsible for getting the cargo to the port and transferring ownership/responsibilities to the Buyer. From there, the Buyer is responsible for all customs & clearance costs/duties as well as all export/import logistical costs.
What are DDP Incoterms?
DDP Incoterms are terms in which the Seller, often your manufacturer or supplier, agrees to pay all costs associated with getting the products to the agreed upon final destination.
Which incoterms is the most customer-friendly?
If you have a lot of time on your hands, well experienced in logistics for your particular product, and have a great freight forwarding partner, then you can often save some money by going with the EXW Incoterm.
If you're looking to scale your business quickly and don't mind paying a little extra, the DDP Incoterm is the pricing you're looking for.
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In this video we explain what incoterms are, break down what ExWorks (EXW), Free on Board (FOB), Delivered Duty Paid (DDP) incoterms are, give an example of FOB pricing, & provide an example of DDP pricing.

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Excellent vid, thank you

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[@ubaidurrehmanafzal9998]

small and simple , well exaplained

[@novilandinc.6938]

Thank you, Malik! We're glad you enjoyed it.

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thanks you this is really useful

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You're welcome! We're glad you found it useful.

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[@aimee1928]

any chance of you doing a video with what all the intocoms mean? FCA, CPT, CIP, DAT, DAP, FAS, CFR, CIF etc?

[@novilandinc.6938]

Hi Aimee - thanks for the request! We'll add that into our queue of future videos :) If there's a specific one you're confused about, please feel free to shoot our team a DM at instagram.com/novilandinc/

[@ames4064]

wat if the incoterm is FCA but its under courier service (Fedex, DHL and TNT), who will bear for the freight charges (transport chatges)

[@novilandinc.6938]

FCA terms are very similar to FOB terms, but they are not tied to just a vessel. FCA actually applies to all modes of transportation and the Seller's responsibility ends once it's put onto whichever carrier you choose (FexEx, DHL, TNT, etc.), but you bear the cost for all freight, insurance, and import duties just like you would if they were FOB incoterms.
I hope this helped!

[@ames4064]

@@novilandinc.6938 does it mean seller bears the freight charges, while duty and taxes are borne by customer. Correct me if im wrong

[@novilandinc.6938]

@@ames4064 No, the Buyer bears the freight charges from that carrier, but the Seller bears the cost of transporting the goods to that carrier. So the Seller is responsible for the charges until it gets to the plane, but you're responsible for all charges after that (including the cost of freight).

[@ames4064]

@@novilandinc.6938 I understand but for courier is different..they will collect from my warehouse and deliver to customer premises...door to door. In this case shipper still bear freight charges?

[@novilandinc.6938]

@@ames4064 It's important to note that the Supplier is NOT the Shipper in this case. The Buyer is the Shipper. So to make a quick example.
Bobby Buyer is buying 1,000 units of phone cases from Sally Seller for $1,000 FCA FedEx Shanghai. Bobby Buyer needs the goods transported from Shanghai to California and FedEx quotes that at $2,000 for the lot and there's a 25% import duty.
Sally Seller is only responsible for getting the goods to FedEx and all export clearance documentation which is all included in that $1/unit cost. Bobby Buyer is responsible for paying the FedEx freight costs ($2,000) as well as handling all import customs documentation and associated import duties to US customs ($250 + additional fees).
Bobby Buyer is the Shipper.

[@trudeldelancis9212]

Too fast