Incoterms (International Commercial Terms) are a standardised set of three-letter trade terms published by the International Chamber of Commerce. The current set is Incoterms 2020. Each term specifies which party (buyer or seller) is responsible for transport, insurance, export and import clearance, and at what point risk passes from seller to buyer.
The most common Incoterms in wholesale electronics:
- EXW (Ex Works): buyer collects from the seller's warehouse. Lowest seller risk, lowest seller responsibility.
- FOB (Free on Board): seller delivers to the port of origin and loads the vessel. Buyer takes risk from the ship's rail onward. Very common on Asia-to-Western shipments.
- CIF (Cost, Insurance, Freight): seller arranges main carriage and insurance to the destination port. Buyer takes risk at the destination port and handles unloading and inland transport.
- DAP (Delivered at Place): seller delivers to a named destination, buyer handles import clearance. Common on inland deliveries within trade blocs.
- DDP (Delivered Duty Paid): seller handles everything including import duties. Highest seller responsibility, often the most expensive for the buyer in total.
For wholesale electronics, the Incoterm choice meaningfully affects landed cost and risk allocation. Always specify the Incoterm explicitly on every purchase order; ambiguity about who pays for what during transit is the single most common source of post-shipment disputes.
Incoterms: common questions
What are Incoterms?
Incoterms (International Commercial Terms) are a standardised set of three-letter trade terms published by the International Chamber of Commerce, currently Incoterms 2020. Each specifies which party is responsible for transport, insurance, and clearance, and where risk passes from seller to buyer.
Which Incoterms are most common in wholesale electronics?
EXW (buyer collects from the seller's warehouse), FOB (seller loads the vessel at origin, common on Asia-to-Western shipments), CIF (seller arranges carriage and insurance to the destination port), DAP (delivered to a named place, buyer clears import), and DDP (seller handles everything including import duties).
What is the difference between FOB and DDP?
FOB places the most responsibility on the buyer, who takes risk once goods are loaded at origin, while DDP places the most on the seller, who handles all transport and import duties to the destination.