Delivery terms and Incoterms in international trade
EXW, FOB, CIF, and DAP—who bears the risk and pays what
If you work with purchasing, sales or logistics in a company that trades across borders, you will quickly encounter Incoterms. It is a set of standardized delivery clauses developed by the International Chamber of Commerce (ICC), which is used worldwide to establish who bears the risk of goods in transit, who pays for transport and insurance, and who handles customs clearance.
§EXW—Ex Works
With EXW, the seller's obligation is minimal: the goods need only be made available at the seller's own warehouse or factory ready for pickup. Everything after that — loading transport export clearance and insurance — is the buyer's responsibility and risk. It is the clause that places the most work and risk on the buyer.
§FOB — Free On Board
FOB is used for sea freight and means the seller must ensure that the goods board the ship the buyer has designated in the agreed port. The risk passes from seller to buyer the moment the goods are loaded on board the designated ship. From here the buyer takes responsibility for sea freight insurance and further transport.
§CIF — Cost, Insurance and Freight
CIF resembles FOB but here the seller has an extra responsibility: the seller must also pay for the freight itself and take out transport insurance until the port of destination. The risk for the goods passes to the buyer however as soon as the goods are loaded on board — so the seller pays for something they no longer bear the risk for along the way which often surprises new buyers.
§DAP — Delivered At Place
DAP places most of the responsibility with the seller. The seller delivers the goods — and bears the risk all the way — to the named destination, ready for unloading, but without having cleared the goods for import. The buyer typically only covers customs and any unloading at the site.
| Clause | Risk transition | Who pays for the transport |
|---|---|---|
| EXW | At pickup at the seller's address | Buyer pays all transport |
| FOB | When the goods are loaded aboard the ship | Seller to ship, buyer the rest of the way |
| CIF | When the goods are loaded aboard the ship | Seller pays freight and insurance to port |
| DAP | Upon arrival at the named destination | Seller pays transport to the location |
For you working as a purchasing assistant or logistics assistant knowledge of Incoterms is not academic — it directly determines who should pay if a container is delayed damaged or goes missing along the way. An incorrect or unclear clause in an order confirmation can cost the company dearly if a dispute ends up with an insurance company or a court.