Incoterms are the standard three-letter trade terms that define where responsibility passes from seller to buyer. Three come up constantly in factory quotes: EXW, FOB, and CIF.
EXW (Ex Works)
The seller makes the goods available at their factory and does nothing else. You arrange pickup, export clearance, freight, insurance, and import — and you carry the risk from the factory gate. EXW gives you total control but also total responsibility, including export customs in a country where you may have no agent.
FOB (Free On Board)
The seller delivers the goods onto the vessel at their port and handles export clearance. You take over cost and risk once the goods are on board — you book and pay the main sea freight and insurance. FOB is the usual sweet spot: the factory handles the messy origin-side logistics in its own country, and you control the freight leg where the money is.
CIF (Cost, Insurance and Freight)
The seller also pays the sea freight to your destination port and buys minimum insurance. Convenient, but you lose visibility and control of the freight — and the risk still passes to you when the goods are loaded, so a mid-ocean loss is your problem despite the seller arranging the cover. CIF prices also tend to hide a freight margin.
Which to use
- First orders / no freight forwarder yet: FOB. Let the factory get goods to the port; get quotes from forwarders for the rest.
- You have a forwarder and want control: FOB, and compare it against the CIF price to see the freight margin.
- You have an agent in the origin country: EXW can work and may be cheapest.
- Small parcel / air freight: DAP or DDP is often simpler than FOB.