Incoterms define exactly where responsibility, cost, and risk shift from seller to buyer during international shipping — and misunderstanding them is one of the most common (and expensive) mistakes in global trade.
Under FOB (Free on Board), the seller’s responsibility ends once cargo passes the ship’s rail at the origin port; the buyer arranges and pays for international freight from that point forward. Under CIF (Cost, Insurance & Freight), the seller pays for ocean freight and marine insurance all the way to the destination port, but the buyer still handles import clearance and delivery from the port onward. Under DDP (Delivered Duty Paid), the seller takes on everything — freight, insurance, destination customs duties, and final delivery to the buyer’s door — making it the lowest-effort option for the buyer, but the highest-responsibility one for the seller.
Choosing the right term affects your landed cost calculations, insurance coverage, and who absorbs the risk if something goes wrong mid-transit — always confirm the agreed Incoterm in writing before your shipment is booked.