Transcript for Episode 2 - What are incoterms

Incoterms are internationally recognised, 3-letter terms, applied to exported goods. They make it clear what a buyer and seller’s responsibilities are. It’s really important to get familiar with them, so you’re clear about what you’re signing up for.

They cover elements of a contract such as where the goods will be delivered, who will arrange transport or who will handle and pay for insurance.

There are 11 incoterms in total. 7 cover all forms of transport and 4 are for ocean freight. So let’s look at some commonly used ones.

Ex Works (EXW)

This applies to all forms of transport, and it basically means the buyer arranges and pays for it.

Delivered at Place Unloaded (DPU)

This applies to all forms of transport and means that the seller will arrange the shipment and delivery of goods to the buyer including how the goods are unloaded. But the customs clearance will be completed by the buyer.

Finally, let’s look at cost and freight (CFR)

This applies to ocean freight and it states that the seller will have to pay the costs of freight to bring the goods to the overseas destination. The buyer will then pay the onward costs and associated risk from there.


There are pros and cons to each incoterm. Including pros, like being in control of the transport process to ensure a high level of care is taken. To cons, like having to deal with customs checks and paperwork. And there are costs and risks associated with each one.