The Digital Wealth Makers foreign trade guide
FOB vs CIF vs EXW vs FCA: The Common Language of Global Trade
Incoterms are standard rules defined by the International Chamber of Commerce to specify who bears transport, insurance, clearance and risk in each deal. Knowing the four most used — EXW, FCA, FOB and CIF — saves you from ambiguous contracts and costly disputes.
- Risk transfer point
- Cost split
- 11 official rules
- Common language
Seller
Risk point
Buyer
Transfer
Every international deal is like a relay race: responsibility must pass from seller to buyer at a defined point. Incoterms define that point — who pays freight, who buys insurance and where risk changes hands.
In the 2020 edition there are eleven Incoterms rules. Four are the most widely used; learning these four covers 80% of your needs.
From least to most seller responsibility; know where each term stands.
EXWEx Works
FCAFree Carrier
FOBFree On Board
CIFCost, Insurance & Freight
The Digital Wealth Makers foreign trade guide
The four most-used terms
From least to most seller responsibility; know where each term stands.
EXW
Ex Works
Minimum obligation: goods are handed over at the factory and all costs and risk pass to the buyer from that moment.
- Risk point
- At seller's door
- Costs
- All with buyer
- Best for
- Experienced buyers with strong logistics
FCA
Free Carrier
The seller delivers the goods to a carrier nominated by the buyer. Export clearance is the seller's duty and risk passes once the carrier takes over.
- Risk point
- Handover to carrier
- Costs
- Main carriage with buyer
- Best for
- All transport modes, especially containers
FOB
Free On Board
Sea freight only: the seller loads the goods onto the vessel at the origin port and risk passes from that moment.
- Risk point
- When passing ship's rail
- Costs
- Sea freight with buyer
- Best for
- Bulk and container sea cargo
CIF
Cost, Insurance & Freight
Sea only: the seller also buys cargo insurance up to the destination port. Risk, however, passes at the origin port — subtle but important.
- Risk point
- Origin port (not destination)
- Costs
- Freight + insurance with seller
- Best for
- Buyers unfamiliar with insurance
The Digital Wealth Makers foreign trade guide
Four terms side by side
Seller responsibility rises from EXW to CIF; experienced buyers usually prefer EXW or FCA.
EXW
FCA
FOB
CIF
Minimum seller duty
✓
✓
✓
✓
Export clearance by seller
✗
✓
✓
✓
Main carriage by seller
✗
✗
✗
✓
Insurance by seller
✗
✗
✗
✓
Non-sea transport
✓
✓
✗
✗
Best for new buyers
✗
✗
✗
✓
The Digital Wealth Makers foreign trade guide
How to choose the right Incoterm?
01Assess your control
Want full control over freight and timing? Take EXW or FCA. Prefer handing everything to the seller? Choose CIF.
02Add up the costs
Under CIF freight and insurance are hidden in the goods price. Compare offers only under the same Incoterm.
03Know the risk point
Remember: under CIF risk still passes at the origin port even though insurance runs to destination. Write the risk point into the contract.
04Match the transport mode
FOB and CIF are sea-only. For air, road and rail use EXW or FCA.
Key numbers
- official Incoterms 2020 rules
- 0
- terms cover 80% of needs
- 0
- first Incoterms edition
- 0
- latest official edition
- 0
official Incoterms 2020 rules
terms cover 80% of needs
first Incoterms edition
latest official edition
Frequently asked questions
Do FOB and CIF apply to air freight?
No. Officially they apply only to sea and inland waterway transport. For air use FCA.
Which Incoterm is best for the seller?
EXW is safest because responsibility ends at the factory door, but many buyers distrust it; FCA is a better balance.
What's the main difference between CIF and FOB?
Under CIF the seller also pays freight and insurance. The risk point is the origin port in both — only costs shift.
Can I use an older Incoterms edition in a contract?
Yes, but always write the edition year next to the code, e.g. FOB Incoterms 2010. Otherwise the latest edition is assumed.
Not sure which Incoterm fits your shipment?
Our logistics experts will review your goods, origin and destination for free and recommend the right term.