EXW, FOB, CIF and DDP are often placed on a simple spectrum of how little or how much the seller does. That is not enough for a safe sales contract. The decisive questions are the place of delivery, the point of risk transfer, who pays each logistics cost, who performs export and import clearance, and whether insurance is required. CIF is the classic trap: the seller pays freight and insurance to the destination port, yet risk passes when the goods are on board the vessel at the port of shipment. This guide compares the four Incoterms® 2020 rules and provides an operational matrix for separating paid costs from retained risk.

Operational compilation | Updated: 20 July 2026 | Scope: sales contracts using Incoterms® 2020

QUICK FACTS

EXW

Delivery at seller’s premises

The buyer assumes most transport, risk and formalities from the point the goods are placed at its disposal.

FOB

Risk passes on board

The seller clears export; the buyer arranges the main sea carriage. Maritime and inland-waterway use only.

CIF

Seller pays freight and insurance

Costs run to the destination port, while risk passes at origin once the goods are on board.

DDP

Maximum seller obligation

The seller bears transport, risk, import clearance and duties to the named destination; the buyer bears unloading risk, while unloading cost depends on the carriage contract.

Illustration for How Do EXW, FOB, CIF and DDP Differ? — Illustration of the logistics topic, document or operation discussed in the article.

SCOPE

This article applies where the sales contract expressly incorporates Incoterms® 2020. EXW and DDP may be used with any mode; FOB and CIF are restricted to sea or inland-waterway transport. The article does not replace country-specific customs, tax, licensing, foreign-exchange or import-regulatory review.

Incoterms do not determine: title transfer, payment terms, product quality, contractual remedies, force majeure, governing law, dispute resolution or sanctions compliance. These must be addressed separately.

KEY TERMS

Term	Meaning	Operational role
Delivery	The point at which the seller completes delivery under the selected rule.	Main reference for risk transfer; it may differ from the quoted destination.
Risk transfer	The moment loss or damage risk passes to the buyer.	Determines who bears cargo loss even where the other party pays freight.
Named place/port	The location stated after the three-letter rule.	Must be precise enough to identify warehouse, terminal or port boundaries.
Export clearance	Export declaration, licences and departure-country formalities.	Normally on the buyer under EXW and on the seller under FOB, CIF and DDP.
Import clearance	Import declaration, licences, duties and destination-country formalities.	On the seller under DDP; normally on the buyer under the other three rules.
Contract of carriage	The transport contract with a carrier or forwarder.	Identifies who books, pays and controls the main carriage.

HOW RESPONSIBILITY IS ALLOCATED

Each rule must be read through four separate layers:

Delivery point: where the seller completes delivery.
Risk: where loss or damage risk changes hands.
Cost: who contracts and pays transport, insurance, handling and taxes.
Formalities: who handles export, import, licensing and data submission.

Paying freight does not automatically mean retaining risk. Under CIF, the seller pays carriage and insurance to the destination port while risk transfers at the port of shipment.

RULE-BY-RULE ANALYSIS

EXW – EX WORKS

The seller places the goods at the buyer’s disposal at the named premises or place, not loaded on the collecting vehicle. The buyer carries most costs and risks, including pickup, inland transport, export formalities, main carriage and import clearance.

Control point: a foreign buyer may be unable to act as exporter in the seller’s country. Where the seller actually loads the goods or clears export, FCA at the seller’s premises is often more workable.

FOB – FREE ON BOARD

The seller delivers when the goods are on board the vessel nominated by the buyer at the named port of shipment. The seller bears cost and risk up to that point and clears export. The buyer arranges the main sea carriage and import formalities.

Control point: FOB is for sea or inland-waterway transport only. For container cargo delivered to a terminal before loading, ICC guidance commonly points to FCA as the better fit.

CIF – COST, INSURANCE AND FREIGHT

The seller delivers and transfers risk when the goods are on board at origin, but contracts and pays freight to the destination port and procures cargo insurance for the buyer’s risk at the minimum CIF level unless broader cover is agreed.

Control point: the destination port is a cost destination, not the risk-transfer point. Destination unloading, THC, D/O, storage and other local charges depend on the carriage contract and commercial agreement.

DDP – DELIVERED DUTY PAID

The seller bears cost and risk to the named destination, completes export, transit and import formalities, and pays import duties, taxes and official import-related charges under applicable law. Delivery occurs on the arriving vehicle, ready for the buyer to unload. Unloading risk lies with the buyer; the seller pays unloading cost only where it is included in the seller’s carriage contract, otherwise the buyer pays it.

Control point: The seller must be legally able to act as importer, obtain licences, pay taxes and manage VAT. Where local rules require a resident importer or special registration, DAP may be more workable.

COMPARISON TABLE

Criterion	EXW	FOB	CIF	DDP
Modes	Any mode	Sea/inland waterway	Sea/inland waterway	Any mode
Delivery	Seller’s premises/place, not loaded	On board at shipment port	On board at shipment port	Named destination, on arriving vehicle, ready for unloading
Risk transfer	At EXW delivery point	On board	On board, not at destination	At named destination
Main carriage	Buyer	Buyer	Seller pays	Seller
Export	Buyer	Seller	Seller	Seller
Import and duties	Buyer	Buyer	Buyer	Seller
Mandatory insurance	No	No	Yes, minimum cover unless otherwise agreed	No
Destination unloading	Buyer	Buyer	Risk on buyer; cost depends on carriage contract	Risk on buyer; seller pays if included in carriage contract, otherwise buyer pays

COST AND DOCUMENT CONTROL MATRIX

Item	What to state in the contract/RFQ	Risk if omitted
Named place/port	Full warehouse, terminal or port plus “Incoterms® 2020”.	Unclear delivery point, risk and freight scope.
Origin loading	Who loads, bears damage and pays vehicle waiting.	Frequent EXW dispute.
Terminal/local charges	THC, CFS, D/O, handling, lifts and documentation.	FOB/CIF incorrectly treated as all-inclusive.
Insurance	ICC(A/B/C), insured value, currency, beneficiary and exclusions.	CIF defaults to minimum cover under Institute Cargo Clauses (C) or similar cover and may be inadequate for high-value, fragile or higher-risk cargo.
Customs roles	Importer/exporter of record, broker, licences, HS, origin and value data.	EXW or DDP may be legally unworkable.
Taxes and VAT	Duties, VAT/GST, trade-remedy duties and recoverability.	DDP price gap or trapped VAT.
Demurrage/Detention/Storage	Cause, control, free time and allocation.	Unallocated post-arrival cost.
Delivery documents	B/L, Sea Waybill, C/O, insurance certificate, POD and deadlines.	Release, preference or payment delay.

HOW TO SELECT THE RIGHT RULE

Map the actual mode and handover

Use FCA rather than FOB where container cargo is handed to a terminal before loading; CIF remains maritime-only.

Verify customs capability

Avoid EXW where the buyer cannot export and DDP where the seller cannot import.

Assess freight control

The party with carrier contracts, volume leverage and disruption capability may be better placed to control main carriage.

Match risk and insurance

Define risk transfer, cover level and claim owner.

Compare landed cost

Include freight, insurance, local charges, tax, compliance cost, finance cost and delay risk.

Write the full clause

Example: “FOB Hai Phong Port, Vietnam – Incoterms® 2020”.

COMMON RISKS AND ERRORS

Three letters without a named place: delivery and cost boundaries remain unclear.
Treating CIF as destination risk: confuses freight destination with risk transfer.
Using FOB for containers: seller loses control before the FOB delivery point.
Using EXW where the buyer cannot export: actual operations contradict the contract.
Using DDP as a marketing “all-in” label: ignores importer status, tax and licensing.
Assuming CIF is all-risk insurance: default CIF cover is limited.
Leaving local charges undefined: creates THC, D/O, storage and inspection disputes.
Using Incoterms as the whole contract: leaves payment, title, quality and remedies uncovered.

SOURCES

Source	Reference	Operational use
ICC – Incoterms® 2020	Official overview of the 11 rules, cost presentation and insurance levels; full obligations are contained in ICC Publication No. 723E.	Primary source hierarchy for obligations, costs, risk and interpretation.
ICC Academy – FCA or FOB	FOB/FCA differences and container guidance.	Align contractual delivery with terminal handover.
ICC Academy – CIP or CIF	Maritime scope and CIF insurance level.	Avoid assuming comprehensive cover.
ICC Academy – EXW or DDP	Lowest and highest seller obligations.	Test customs capability before selection.
ICC Academy – DAP or DDP	Import-clearance distinction.	Consider DAP when DDP is legally impractical.
ICC – Checklist & Flowcharts 2024 update	Decision tool covering mode, delivery, customs capacity and risk appetite.	Quick check for FCA with containers, FOB for direct onboard delivery and the caution that EXW is primarily suited to domestic trade.

ICC Incoterms® 2020 ICC: FCA or FOB ICC: CIP or CIF ICC: EXW or DDP ICC: DAP or DDP ICC Checklist & Flowcharts

Source hierarchy: The full Incoterms® 2020 rules (ICC Publication No. 723E) are controlling. ICC Academy articles are operational explanations by their authors and state that the views may not reflect official ICC policy; they should not replace the rulebook.

FAQ

1. Which rule gives the seller the lowest obligation?

EXW, but it may be unsuitable where the foreign buyer cannot complete export clearance.

2. Do FOB and CIF transfer risk at different points?

Generally no: both transfer risk once the goods are on board at the shipment port. CIF additionally requires the seller to pay freight and insurance to destination.

3. Does CIF include all destination charges?

Not automatically. Unloading and local charges depend on the carriage contract and quotation scope.

4. Must the seller unload under DDP?

No. Delivery is normally on the arriving vehicle, ready for unloading by the buyer.

5. Should FOB be used for container cargo?

FCA is often more appropriate because the container is handed to the carrier at a terminal before vessel loading.

6. Do Incoterms determine title transfer?

No. Title must be governed by the sales contract and applicable law.

7. Which rule is best for the buyer?

There is no universally best rule. Compare landed cost, freight control, customs capability, insurance, cash flow and transparency.

APPLICATION NOTE: Always state the precise named place/port and “Incoterms® 2020”. Verify export/import legal capacity before agreeing EXW or DDP, and review mode, container handover and local-charge scope before using FOB or CIF.

TGIMEX IMPLEMENTATION SUPPORT

TGIMEX helps businesses turn the article into a shipment-ready checklist, covering input-data review, dossier preparation, milestone control, and coordination with the relevant parties.

Convert guidance into checks

Assign an owner and deadline to every operational control point.

Reconcile shipment data

Compare booking, transport, commercial, customs, and delivery evidence.

Manage operational risk

Record discrepancies, actions, and decision evidence to prevent recurrence.

Discuss your shipment dossier

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