Introduction

If you’re just starting your export journey, you’ve probably come across the term Incoterms and felt a bit confused. Don’t worry, you’re not alone. Incoterms (short for International Commercial Terms) are globally accepted shipping terms published by the International Chamber of Commerce (ICC). They help exporters and importers clearly define who is responsible for what during the shipping process.

In this blog, we’ll simplify the concept and show you how Incoterms can save you from costly misunderstandings in international trade.

What are Incoterms?

Incoterms are three-letter trade terms like FOB, CIF, or EXW that define the responsibilities of buyers and sellers. They outline who handles freight, insurance, customs duties, and risk at different stages of shipping.

For example:

  • FOB (Free On Board): Seller delivers goods on board a ship. Buyer takes over from there.

  • CIF (Cost, Insurance, Freight): Seller pays for transport and insurance to the port.

  • EXW (Ex Works): Buyer handles almost everything from the seller’s door.

Why Incoterms Matter for New Exporters

Understanding Incoterms:

  • Prevents disputes over delays, damages, or unexpected charges.

  • Clarifies responsibilities and cost distribution.

  • Helps in pricing your product better, knowing what costs you’ll bear.

If you don’t pick the right Incoterm, you could end up paying for more than you should or risk your cargo.

Common Incoterms Every Exporter Should Know

  • FOB: Best when you’re shipping by sea and your buyer is confident about handling the rest.

  • CIF: Great for offering full service especially to new buyers.

  • DAP (Delivered at Place): You ship it all the way to the buyer’s doorstep.

  • EXW: Least responsibility for seller; good when buyer arranges the whole export process.

How to Choose the Right Incoterm

Think about:

  • Mode of transport (air, sea, land)

  • Buyer’s experience

  • Your shipping capabilities

  • Legal obligations in destination country

For beginners, CIF and DAP are usually safer to avoid hassles.

Tips for New Exporters Using Incoterms

  • Always mention the chosen Incoterm in your invoice and sales contract.

  • Include place of delivery (e.g., “FOB Mumbai Port” or “CIF Hamburg”).

  • Consult your freight forwarder for logistics advice.

  • Stay updated: The latest version is Incoterms 2020.

Conclusion

Incoterms are like a user manual for exporting helping you and your buyers avoid confusion, save money, and build trust. As a new exporter, learning the basics of these terms can give you the confidence to grow globally and protect your profits.