Every export quotation carries a three-letter term such as EXW, FOB, CIF, or DDP. These are Incoterms, the trade rules published by the International Chamber of Commerce. They decide who pays for transport, who arranges it, and the exact point at which risk passes from seller to buyer. Two quotations for the same towel can differ widely in price simply because they are on different terms.
What an Incoterm settles
- Which costs the seller pays and which the buyer pays.
- Who arranges transport and insurance.
- Who handles export and import clearance.
- Where the risk of loss or damage transfers.
An Incoterm does not set the price, the payment terms, or when ownership passes. Those belong in the sales contract.
The four terms towel buyers meet most
EXW: Ex Works
The seller makes the goods available at its own premises. The buyer arranges and pays for everything from that point: collection, export clearance, freight, insurance, import clearance, and delivery. EXW gives the lowest quoted price and the most work for the buyer. It suits buyers who already have a forwarder operating in the seller's country.
FOB: Free On Board
The seller delivers the goods on board the vessel at the named port of shipment and clears them for export. Risk passes to the buyer once the goods are on board. The buyer arranges and pays the ocean freight, insurance, and everything at destination. FOB is widely used for sea freight because it lets the buyer control freight cost while the seller handles the local side.
CIF: Cost, Insurance and Freight
The seller pays for freight and insurance to the named destination port. Risk still passes to the buyer when the goods are loaded on board at origin, even though the seller has paid for the voyage. The buyer handles import clearance, duties, and onward delivery. CIF suits buyers who want one price to their port without arranging freight themselves.
DDP: Delivered Duty Paid
The seller delivers the goods to the named place in the buyer's country, cleared for import, with duties paid. The seller carries the cost and risk the whole way. DDP is the simplest for the buyer and the most demanding for the seller, and it is not always practical, because the seller must be able to clear goods in the buyer's country.
A note on sea and other transport
FOB and CIF are designed for sea and inland waterway transport. For air freight or mixed transport, the equivalent terms are FCA (Free Carrier) and CIP (Carriage and Insurance Paid To). If your towels are travelling by air, ask for the quotation on one of those.
Comparing quotations fairly
To compare an FOB price with a CIF price, add your own freight and insurance cost to the FOB figure. To compare with EXW, add inland transport to the port and export clearance as well. Only then are you comparing like with like.
Which should you choose?
- You have a freight forwarder and ship regularly: FOB usually gives you the best control of cost.
- You are placing a first order and want simplicity: CIF gives a single price to your port.
- You want goods delivered to your door with nothing to arrange: ask whether DDP is available for your country.
- You consolidate goods from several suppliers in India: EXW or FCA may suit your forwarder.
Write it precisely
An Incoterm needs a named place and the edition of the rules, for example "FOB Nhava Sheva, Incoterms 2020" or "CIF Jebel Ali, Incoterms 2020". Put it in the quotation, the proforma invoice, and the purchase order, so there is no doubt later.
Mansa Exim International quotes on the term you prefer. Our Request a Quote form lets you choose EXW, FOB, CIF, or DDP, or you can contact us with your destination and we will advise.
