Incoterms Explained

If you import or export products, you'll eventually deal with inco terms - officially incoterms (International Commercial Terms). These standardized delivery terms determine who's responsible for transportation, insurance, costs, and risks in international trade agreements. Whether you're buying products from a supplier in China to sell via bol.com or exporting goods from the Netherlands, choosing the right incoterm can save you thousands of euros.

What are inco terms exactly?

Inco terms (incoterms) are international commercial terms established by the International Chamber of Commerce (ICC) in 1936. The latest version - Incoterms® 2020 - contains eleven standardized delivery terms used worldwide. Each incoterm consists of three letters and defines precisely:

• Risk transfer - When the risk of damage or loss is transferred from the seller to the buyer
• Cost distribution - Who pays for transportation, insurance, customs clearance, and import duties
• Obligations - Which documents and formalities each party must handle

The incoterms are always listed on the commercial invoice and are part of the purchase contract. They're not legally required, but are recognized worldwide as the standard in international trade.

The 11 inco terms at a glance

The eleven incoterms are divided into four groups (E, F, C, and D), based on the level of responsibility of the seller. Below, you'll find a complete overview with the most important features:

Incoterm	Full name	Group	Transport	Risk transfer	Seller's costs
EXW	Ex Works	E	All modes	At the seller's premises	Minimal - only making available
FCA	Free Carrier	F	All modes	When handed over to the carrier	Up to the carrier + export clearance
FAS	Free Alongside Ship	F	Sea freight	Alongside the ship	Up to alongside the ship + export clearance
FOB	Free on Board	F	Sea freight	On board the ship	Up to on board the ship + export clearance
CPT	Carriage Paid To	C	All modes	When handed over to the first carrier	Transport to the destination
CIP	Carriage and Insurance Paid To	C	All modes	When handed over to the first carrier	Transport + insurance to the destination
CFR	Cost and Freight	C	Sea freight	On board the ship	Transport to the destination port
CIF	Cost, Insurance and Freight	C	Sea freight	On board the ship	Transport + insurance to the destination port
DAP	Delivered at Place	D	All modes	At the destination (not unloaded)	Everything except import duties and unloading
DPU	Delivered at Place Unloaded	D	All modes	At the destination (unloaded)	Everything except import duties
DDP	Delivered Duty Paid	D	All modes	At the destination	All costs, including import duties

Group E - Minimum seller obligation

EXW (Ex Works)

With EXW, the seller makes the goods available at an agreed location (usually the factory or warehouse). From that moment on, the buyer bears all costs and risks, including loading, transportation, export clearance, import duties, and insurance. This is the incoterm with the least obligation for the seller.

Be aware: EXW is popular among Chinese suppliers, but as a Dutch importer, this means you're responsible for the entire logistics chain. For beginners who start selling on bol.com, this can be overwhelming. Make sure you have a reliable freight forwarder - read more about forwarding and what it means.

Group F - Main transport not paid by seller

FCA (Free Carrier)

The seller delivers the goods to a carrier designated by the buyer and handles the export clearance. The risk passes to the buyer upon transfer to the carrier. FCA is the most flexible F-term and suitable for all modes of transport.

Practical tip: FCA is ideal when you have your own freight forwarder who picks up the goods from the supplier. You have more control over transportation costs and can negotiate better rates.

FAS (Free Alongside Ship)

The seller delivers the goods alongside the ship in the agreed loading port. From that point on, the buyer bears the costs and risks. FAS is used exclusively for sea freight and is relatively rare among e-commerce importers.

FOB (Free on Board)

One of the most commonly used incoterms for sea freight. The seller loads the goods on board the ship and handles the export clearance. The risk passes to the buyer once the goods are on board. FOB is popular for imports from China because the cost distribution is clear: the supplier handles everything up to the ship, and you handle the rest.

FOB vs. EXW: With FOB, the seller pays for domestic transport in China plus loading costs. This often saves you €200-€500 per container compared to EXW.

Group C - Main transport paid by seller

CPT (Carriage Paid To)

The seller pays for transportation to the agreed destination, but the risk passes to the buyer upon transfer to the first carrier. This means that as the buyer, you bear the risk during transport, even though the seller pays for it. Therefore, always consider purchasing your own transport insurance.

CIP (Carriage and Insurance Paid To)

Similar to CPT, but the seller also takes out transport insurance. Since Incoterms 2020, this must be an all-risks insurance (ICC clause A). CIP provides more security for the buyer than CPT.

CFR (Cost and Freight)

The seller pays the freight costs to the destination port, but the risk passes to the buyer upon loading on board in the loading port. Exclusively for sea freight. Similar to FOB in terms of risk transfer, but the seller arranges and pays for sea freight.

CIF (Cost, Insurance and Freight)

As CFR, but including transport insurance taken out by the seller. With CIF, a minimum insurance (ICC clause C) is sufficient, unless otherwise agreed. CIF is particularly popular for bulk transport by sea.

Group D - Maximum obligation of the seller

DAP (Delivered at Place)

The seller delivers the goods to the agreed destination, ready for unloading. All transportation costs and risks up to the destination are borne by the seller. The buyer pays for unloading, import duties, and local taxes. DAP is popular in European trade and provides comfort for the buyer.

DPU (Delivered at Place Unloaded)

Previously known as DAT (Delivered at Terminal). The seller delivers the goods unloaded at the agreed destination. This is the only incoterm where the seller is responsible for unloading. Suitable for deliveries to terminals, ports, or warehouses.

DDP (Delivered Duty Paid)

The most comprehensive incoterm for the buyer. The seller bears all costs and risks, including import duties, VAT, and customs clearance in the country of destination. As a buyer, you only need to receive the goods. DDP is ideal if your supplier has experience exporting to Europe and you want to be maximally relieved of responsibilities.

Which incoterm do you choose? A practical decision guide

The choice of the right incoterm depends on several factors. Use the table below as a guide:

Situation	Recommended incoterm	Why
First import from China, little experience	DDP or CIP	Supplier handles transport and insurance - less risk for you
Experienced importer with own freight forwarder	FOB or FCA	More control and often lower total costs
Large volumes via sea freight	FOB or CIF	Standard for full-container-load (FCL) shipments
Small shipments via air freight	FCA or CPT	Flexible and suitable for all modes of transport
European supplier	DAP or DDP	Short distances, supplier is familiar with EU regulations
Products requiring CE marking	DDP	Supplier is responsible until delivery, including compliance
Maximum cost savings desired	EXW	Lowest purchase price, but highest own logistical effort

Common mistakes when choosing incoterms

When working with incoterms, many sellers and importers make the same mistakes. Avoid these pitfalls:

• Choosing EXW without logistical experience - The lowest product price doesn't mean the lowest total costs. Without a good freight forwarder, unexpected costs for documentation, domestic transport, and export clearance can negate the savings.
• No own insurance with C-terms - With CPT and CFR, the seller pays for transport, but you bear the risk. Always take out your own transport insurance, even if the seller claims that "everything is arranged".
• Incoterm and transport mode mismatch - FAS, FOB, CFR, and CIF are exclusively intended for sea freight. Do not use them for air freight or road transport - choose FCA, CPT, or CIP instead.
• No clear agreements on the destination - With DAP and DDP, you must specify an exact location (e.g., your warehouse address), not just a city or country.
• Forgetting that incoterms do not regulate transfer of ownership - Incoterms determine risk and costs, not when ownership is transferred. That is arranged separately in the purchase contract.
• Using outdated incoterms - Always use Incoterms 2020. Older versions (2010, 2000) are sometimes still mentioned but can cause confusion.

Cost structure per incoterm: what do you pay as a buyer?

To understand the financial impact, it's essential to know which costs are your responsibility with each incoterm. Below is an overview for a typical import from China to the Netherlands:

Cost Item	EXW	FOB	CIF	DAP	DDP
Production Costs	Seller	Seller	Seller	Seller	Seller
Domestic Transport China	Buyer	Seller	Seller	Seller	Seller
Export Clearance China	Buyer	Seller	Seller	Seller	Seller
Loading on Ship	Buyer	Seller	Seller	Seller	Seller
Sea Freight	Buyer	Buyer	Seller	Seller	Seller
Transport Insurance	Buyer	Buyer	Seller	Buyer	Seller
Unloading in NL Port	Buyer	Buyer	Buyer	Seller	Seller
Import Duties & VAT	Buyer	Buyer	Buyer	Buyer	Seller
Transport to NL Warehouse	Buyer	Buyer	Buyer	Seller	Seller

Use the Boloo Profit Calculator to calculate the total landed costs per incoterm and determine which option yields the best margin when selling on bol.com.

Incoterms and CE Marking for Imports from China

If you import products that fall under European directives, you need to consider CE marking and the difference with China Export. With incoterms like EXW, FOB, and CIF, you as the importer are responsible for the product's conformity upon entry into the EU. Only with DDP can the seller be co-responsible, but even then, you remain liable for CE compliance as the importer.

Always ensure that your supplier can provide the correct test results, certificates, and a Declaration of Conformity (DoC) - regardless of the incoterm you use. A product without a valid CE marking cannot be sold on bol.com or elsewhere in the EU.

Tips for bol.com Sellers Who Import

If you import products to sell on bol.com, there are specific points to consider regarding incoterms:

• Calculate your total landed cost - Add product costs, transport costs (depending on the incoterm), import duties, VAT, and domestic transport. Use the Profit Calculator to calculate your margin.
• Consider delivery times - With EXW and FOB, you arrange the transport yourself, which can take longer. Factor this into your inventory management and bol.com shipping planning.
• Choose the right LVB packaging - If you use Logistics via bol.com (LVB), you must package your products according to their size requirements. Discuss this with your supplier so that the original packaging meets LVB requirements.
• Conduct product research beforehand - Before importing large quantities, use the Product Tracker and Product Database to analyze market demand and competition.
• Optimize your listing - A good product is nothing without a strong product page. Use the Listing Generator AI to optimize your titles and descriptions for more visibility.

What Incoterms Do NOT Regulate

It's essential to understand what falls outside the scope of incoterms:

• Transfer of ownership - When ownership is transferred legally, it's regulated in the purchase contract, not by the incoterm
• Payment terms - Whether you pay in advance, use a letter of credit, or pay afterwards is separate from the incoterm
• Intellectual property - Trademark rights, patents, and licenses are arranged separately
• Sanctions and trade embargoes - Compliance with international sanctions is a separate responsibility
• Product liability - In case of complaints or damage to end-users, local consumer protection rules apply

Frequently asked questions about incoterms

What's the difference between FOB and CIF?

With FOB (Free on Board), the seller pays until the goods are loaded onto the ship. With CIF (Cost, Insurance and Freight), the seller also pays for sea freight and transportation insurance to the port of destination. The risk is transferred on board in both cases, but the cost distribution differs significantly.

Which incoterm is the safest for beginners?

DDP (Delivered Duty Paid) is the safest when you're starting to import. The supplier arranges everything, including transport, insurance, and customs duties. The downside is that the product price is higher, as the supplier calculates their costs and risks into the price.

Can I change the incoterm later?

The incoterm is recorded in the purchase contract and the commercial invoice. Changes can only be made in consultation with your supplier before shipping. After shipping, changes are almost impossible because the documents have already been prepared.

Are incoterms mandatory?

Incoterms are not legally required, but they're used as a standard by almost all international trade parties and banks. Without incoterms on your invoice, you risk unclear agreements and conflicts over cost distribution.

Which incoterms are used the most?

The three most commonly used incoterms are EXW (Ex Works), FOB (Free on Board), and DDP (Delivered Duty Paid). When importing from China for sale on platforms like bol.com, FOB is the most common for sea freight, while DDP is popular for smaller shipments via air freight or courier.