Incoterms are the shorthand that says where your responsibility ends and the buyer's begins. Three letters in a contract decide who pays for what, who insures it, and who carries the loss if it is damaged in transit.

Agreeing a price without agreeing the term is agreeing half a deal.

What they actually settle

  • Who arranges and pays for the main carriage.
  • Where risk passes from seller to buyer.
  • Who handles export and import clearance.
  • Who is responsible for insurance.

Note that risk and cost are separate questions and do not always transfer at the same point. That distinction is where disputes come from.

The ones a small exporter meets

Ex works. The buyer collects from your premises and everything after that is theirs. Simplest for you and often unattractive to a buyer who does not want to organise export from a country they are not in.

Free carrier. You deliver to a carrier the buyer nominates, cleared for export. A common middle ground and usually a better default than ex works.

Cost, insurance and freight / cost and freight. You arrange and pay for carriage to the destination port, and with the first of these, insurance too. Note that risk still passes earlier than the cost does, which routinely surprises people.

Delivered duty paid. You deliver to the buyer's door with everything paid, including import duties. Attractive to buyers, and it means taking on obligations in a country whose rules you may not know. Be careful before agreeing to it.

Name the version and the place

The rules are revised periodically, so state which version applies. And always name the specific place — a term without a named point is ambiguous exactly where clarity matters.

Insure the gap

Work out where risk passes and make sure the goods are insured across the whole journey, by one side or the other. Carrier liability is limited and low, and it is not insurance.

The most common error is assuming the freight forwarder's cover protects the value of your consignment. It does not.

Choose the term deliberately

Taking on more of the journey gives you control and makes you easier to buy from; it also gives you cost and risk you may not be equipped to manage. Taking on less is safer and can lose you the order.

For a first export, less responsibility is usually the right answer while you learn how the process actually behaves.

General guidance, not trade or legal advice. Incoterms are revised periodically; confirm the current definitions and take advice on contracts.