Incoterms define who is responsible for various parts of the international shipping process, including costs, risk, and customs-related responsibilities. They’re essential for avoiding confusion between buyers and sellers in cross-border transactions.
Here are two common examples:
FOB (Free on Board):
The seller’s responsibility ends once the goods are loaded onto the ship. From that point forward, the buyer assumes responsibility for shipping, insurance, and all import-related duties and tariffs.CIF (Cost, Insurance, and Freight):
The seller covers the cost of shipping and insurance to the destination port. However, the buyer is still responsible for paying import duties, tariffs, and handling customs clearance once the goods arrive.
Each Incoterm defines a clear point at which responsibility shifts from the seller to the buyer. Choosing the right term helps ensure that there are no unexpected costs or delays.
To review all official Incoterms and how they apply to your trade terms, visit the International Chamber of Commerce guide, or talk with your customs broker or freight forwarder.
Note: Answers reflect the current status as of April 18th, 2025.