Export guide

What is Incoterms?

1. Incoterms (Price conditions)

There are many issues that need to be negotiated between exporters and importers before initiating a trade transaction. If such matters needed to be addressed for every transaction, the process would be cumbersome and complex. In order to standardize trade transactions, trade terms established by the International Chamber of Commerce (ICC) are referred to as fixed transaction conditions dubbed “Incoterms”.


  • Issues that need to be negotiated between exporters and importers before initiating a trade transaction
    1. How far should products be transported?
    2. Who shall be responsible for tax-related expenses such as customs duties?
    3. In case of damage during transportation, who should bear the cost?

  • Intercoms refers to the various trade terms outlined above: 1) How far products should be transported, 2) Who shall pay customs duties, 3) Who shall be responsible for damages incurred during transportation.
  • The possibility of bearing any damage incurred during transportation is referred to as “risk”.  The time at which liability for damages is transferred from an exporter to an importer is the “Transfer of Risk”.


The most frequently used terms in Intercoms are FOB, CFR, and CIF.

  • To explain FOB, CFR, CIF terms, we will further clarify EXW terms in detail. The price under EXW terms can be said to be similar to “ex-factory price” as an importer takes over products at the exporter’s factory. The term FOB means that the exporter loads the goods on an anchored vessel in the port of the export export location. Therefore, the ex-factory price includes shipping and incidental costs to the port of export.
  • The CFR term includes the FOB price plus the shipping fee to the port of import. The CIF term includes insurance costs (shipping) and the price of the CFR term. In other words, the price may vary even for the same product depending on which Intercoms (price) terms are applied.
  • Incoterms offers 11 terms as of 2020.

2. Details of EXW, FOB, CFR, and CIF terms

Ex works (EXW)

  1. The place of transportation is the exporter's factory.
  2. The time of the transfer of risk is at the exporter's factory
  3. Export customs clearance, import customs clearance, and transportation are managed by the importer, and related costs are also borne by importer.
  4. Details: In simple terms, EXW is similar to “ex-factory price.” In other words, you can set EXW price term at the ex-works price and forward a quotation to the importer.


Free on board (FOB)

  1. The place of transport is the ship, the place of loading is determined by the importer.
  2. The time of transfer of risk is when products are loaded onto the ship at the export destination.
  3. Exporter carries out export customs clearance, and transportation, and import customs clearance is carried out by importer, and transport and import customs fees are borne by the importer.
  4. Details: FOB terms are applied to shipping transportation. The EXW term price includes cost of shipping to the ship, the cost of loading products on the ship, and export customs clearance fees.


Cost and freight (CFR)

  1. The place of transportation is the port of the importer.
  2. The time of transfer of risk is when products are loaded onto the ship at the export destination.

  3. Export customs clearance and transport are carried out by the exporter, while import customs clearance is carried out by the importer. Transport cost is borne by the exporter.

  4. Details: CFR term is applied to shipping by ship, and the cost of shipping to the place of import and export customs clearance is added to the EXW term price.

Transport cost/Insurance & Freight (CIF)

  1. The transportation location is the port of importer.
  2. The time of transfer of risk is when products are loaded onto the ship at the export destination.
  3. Export customs clearance and transport are carried out by the exporter, while import customs clearance is carried out by the importer. Transport cost is borne by the exporter.
  4. Details: CFR term is applied to shipping by ship, and the cost of shipping to the place of import and export customs clearance is added to the EXW term price. That is, there is a certain difference between EXW price and shipping cost.

3. How can I understand Incoterms (price terms) more easily?

An illustration of Incoterms that clearly explains the extent to which the exporter is responsible for “risk” and “cost” among the contents of Incoterms is attached.


Types of pricing terms (Incoterms 2020)

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