Incoterms Explained Simply: EXW, FOB, CIF, DDP for Small Exporters
Incoterms are three-letter answers to two questions: who pays each leg of the journey, and where does risk switch from seller to buyer.
The seller-light terms: EXW & FOB
EXW: buyer collects at your door and handles everything — simplest for you, hardest for them. FOB (sea freight): you get goods onto the vessel; buyer owns the ocean leg. Most small-exporter relationships start FOB.
The seller-heavy terms: CIF & DDP
CIF: you pay freight and minimum insurance to the destination port; risk still transfers at loading. DDP: you deliver duty-paid to their door — maximum service, and you'd better know their country's import fees before quoting it.
On the invoice
State the term plus the named place — "FOB Shanghai", "DDP Chicago". Customs reads the declared value in light of the term; your buyer reads their obligations from it. Ambiguity here becomes a dispute later.
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