Incoterms 2020 practical guide — which term to use and when, with real examples

Incoterms define who pays for what in an international shipment and where risk transfers from seller to buyer. Getting this wrong costs money. Here's a practical breakdown of the terms we use most in MENA import operations:

FOB (Free On Board)
Seller loads and clears export at origin port. Buyer arranges and pays for freight, insurance, and import clearance. Best when you have strong freight forwarder relationships and want control over freight cost. Most common for sea shipments from Asia.

When to use: You have volume that justifies negotiating your own freight rates. You trust your forwarder.

CIF (Cost, Insurance, Freight)
Seller pays freight and insurance to destination port. Buyer handles import clearance and inland delivery. Simpler for the buyer but you lose visibility into freight cost — the seller builds their margin into the freight rate.

When to use: Low-volume orders where the administrative overhead of managing freight isn't worth it.

DDP (Delivered Duty Paid)
Seller handles everything including import duties and delivers to your door. Highest landed cost but zero buyer involvement until the goods arrive.

When to use: E-commerce, small parcels, or when you're entering a new market and don't yet have clearance infrastructure.

EXW (Ex Works)
Buyer handles everything from the seller's factory gate. Maximum control and maximum responsibility. Requires a strong freight forwarder who can manage export clearance in the origin country.

When to use: You have operations or a trusted agent in the origin country.

CPT (Carriage Paid To)
Seller pays freight to named destination. Risk transfers to buyer when goods are handed to first carrier. Similar to CIF but without insurance requirement — useful for air freight.

Post your Incoterm questions below — happy to work through specific scenarios.