🚢 Incoterms 2025 Explained — FOB, CIF, EXW & More (Beginner-Friendly Export Guide)

Keyword Focus: Incoterms 2025 explained

If you are starting an export business, understanding Incoterms is absolutely essential. Incoterms define buyer and seller responsibilities during international trade — including shipping, insurance, delivery, customs clearance, and risk transfer.

In this guide, we will explain the most commonly used Incoterms like FOB, CIF, EXW, FCA, DDP in clear language so you can confidently quote prices, negotiate contracts, and avoid costly mistakes.

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📌 What Are Incoterms?

Incoterms (International Commercial Terms) are standardized trade rules published by the International Chamber of Commerce (ICC). They define:

• ✔ Who pays for shipping?
• ✔ Who pays for insurance?
• ✔ When does risk transfer from seller to buyer?
• ✔ Which party handles export/import customs?

Incoterms are used in quotations, proforma invoices, purchase orders, and shipping documents.

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📌 Why Incoterms Matter for Exporters

• ✔ Prevents disputes
• ✔ Defines responsibilities clearly
• ✔ Helps calculate accurate pricing
• ✔ Protects against risks and losses
• ✔ Required by banks and customs

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📌 Most Common Incoterms Used in India (2025)

1️⃣ EXW – Ex Works

Seller responsibility: Very low (makes goods available at seller’s premises)

Buyer pays for: All transportation + customs + insurance

Best for: Buyer wants full control

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2️⃣ FOB – Free On Board

Seller delivers: Goods loaded on vessel at Indian port

Buyer pays: Freight + insurance + destination charges

Most used term by Indian exporters

Example: FOB Mumbai

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3️⃣ CIF – Cost, Insurance & Freight

Seller pays: Freight + insurance to destination port

Risk transfers after goods are loaded on vessel

Example: CIF Dubai

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4️⃣ FCA – Free Carrier

Seller delivers goods to buyer’s nominated carrier in seller’s country.

FCA is replacing EXW & FOB due to better clarity.

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5️⃣ DDP – Delivered Duty Paid

Seller pays EVERYTHING including customs and delivery to buyer’s location.

High risk for seller, but attractive for buyer.

Example: DDP New York Warehouse

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📊 Comparison Table — FOB vs CIF vs EXW

Term	Who Pays Freight?	Risk Transfers At
EXW	Buyer	Seller warehouse
FOB	Buyer	Indian port (loading)
CIF	Seller	Indian port (loading)

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📌 Which Incoterm Should You Use?

• 🟢 FOB → Best for new exporters
• 🟢 CIF → Good if you have freight advantage
• 🟡 EXW → Lowest responsibility but buyer may reject
• 🟡 DDP → Only for experienced exporters
• 🟢 FCA → Good alternative to FOB for container shipping

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📘 Example: How Incoterms Change Export Price

Let’s assume your FOB price = ₹100

• FOB price: ₹100
• + Freight: ₹15
• + Insurance: ₹2

CIF price = ₹117

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📌 Important Tips for Exporters

• ✔ Always write Incoterms + city/port (e.g., FOB Chennai)
• ✔ Confirm in Proforma Invoice & Contract
• ✔ Don’t agree to DDP if you lack global compliance
• ✔ Compare freight before offering CIF
• ✔ Use written agreements only

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📘 Related Articles

👉 How to Price Export Products

👉 Export Documentation in India

👉 How to Find International Buyers

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❓ FAQs — Incoterms for Exporters

1. Which Incoterm is best for beginners?

FOB is considered safest for new exporters.

2. Do I need to use Incoterms in invoice?

Yes. It must appear in Proforma Invoice, Commercial Invoice & Contract.

3. Is CIF more profitable?

Yes, if you get cheaper freight than the buyer.

4. Can Incoterms be used for air shipments?

Yes. Terms like FCA, CPT, CIP apply to air shipments.

5. Do Incoterms include payment terms?

No. Payment terms (LC, TT, DP) are separate.

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