Incoterms (short for International Commercial Terms) are standardized terms used in global trade to define the responsibilities of buyers and sellers during a shipment. Incoterms clarify who is responsible for costs, insurance, customs clearance, and risks at each stage of the shipping process.
The right Incoterm for your business depends on how much control and responsibility you want to take on during transit.
For example:
FOB (Free on Board): You, as the buyer, take responsibility once goods are loaded onto the ship.
CIF (Cost, Insurance, and Freight): The seller covers shipping and insurance until the goods reach your destination port.
There are more than a dozen official Incoterms, each suited to different business needs and shipping scenarios. To avoid misunderstandings or added costs, it’s best to:
Talk with your freight forwarder or customs broker
Clearly document Incoterms on your invoices and shipping contracts
You can explore the full list of Incoterms on the International Chamber of Commerce website.
Note: Answers reflect the current status as of April 18th, 2025.