Incoterms (International Commercial Terms)
Incoterms (International Commercial Terms) are trade terms published by the International Chamber of Commerce (ICC). Each three-letter term says who pays freight and insurance, who clears customs at each end, and where risk passes from seller to buyer. Sellers and buyers write one into the quote and the sales contract.
What Incoterms mean in practice
FOB, CIF, EXW and DDP are the codes that sit next to the price on an export quote. Each one fixes where the seller's job ends and the buyer's begins: who books the ocean freight, who buys the cargo insurance, and who clears customs.
The ICC revises the rules from time to time; its current edition is Incoterms 2020. Each term is a complete ruleset. It names the delivery point, who arranges transport, who pays freight and insurance, who handles export and import clearance, and the moment risk of loss or damage moves to the buyer.
A rug exporter quoting FOB Mundra is telling the buyer three things. We load the goods on the vessel at Mundra, clear Indian export customs and pay every cost up to that point. You book the ocean freight, insure the cargo and clear it at your port, and the risk is yours once the goods are on board.
FOB, CIF, EXW and DDP explained
FOB (Free On Board)
The seller loads the goods on board the vessel at the named port of shipment, clears export customs and pays all costs to that point. The buyer pays ocean freight, insurance and import clearance. Risk passes when the goods are on board. Example: FOB Mundra.
CIF (Cost, Insurance and Freight)
The seller loads the goods, clears export customs and pays ocean freight and minimum insurance to the destination port. Risk still passes to the buyer when the goods are on board at origin. The buyer handles import clearance and onward delivery. Example: CIF Los Angeles.
EXW (Ex Works)
The seller makes the goods available at its factory or warehouse. The buyer arranges and pays for loading, transport, insurance, and export and import clearance. Risk passes when the goods are placed at the buyer's disposal. Example: EXW Jodhpur.
DDP (Delivered Duty Paid)
The seller delivers the goods cleared for import at the named destination and pays freight, insurance, export clearance, import duty and taxes. Risk passes when the goods arrive ready for unloading at that place. Example: DDP New York.
Why Incoterms appear on every export quote
An Incoterm makes two prices comparable. A buyer holding one quote FOB Shanghai, one CIF Hamburg and one DDP Berlin cannot rank them until they know what each price covers. The term is the shared language that says what the seller delivers and what the buyer still pays for.
Freight cost
Bulky, light goods such as furniture, rugs and cushions cost more to ship than buyers expect. Under FOB the buyer pays that freight separately; under CIF the seller folds it into the price. The term settles which before the purchase order is signed.
Insurance
Who pays if the cargo is lost or damaged at sea? Under FOB the buyer insures it; under CIF the seller buys cover; under DDP the seller carries the risk all the way to the buyer's door.
Customs and duty
Export clearance, import clearance, duties and taxes each need an owner. Under FOB and CIF the buyer clears the goods at their end; under DDP the seller does. Naming the term up front heads off disputes over customs bills nobody planned for.
Risk transfer point
Risk of loss or damage moves from seller to buyer at one defined place. For FOB it is on board the vessel at origin, for EXW it is the factory gate, and for DDP it is the named destination.
How Poly9 AI handles FOB quoting
In Poly9 AI, the FOB port and the lead time come from your cost recipes. A recipe names the port, the per-unit cost and the lead time, and the AI applies them to every configuration a buyer asks about. The reply carries the price, the FOB port and the lead time together.
You keep costs in rupees, or whatever currency you buy in. The buyer reads the quote in theirs at the rate and markup you set. In the sample conversation on the rugs and home textiles page, a buyer asks for 20 Kashan 8×10 rugs in a custom colorway. The reply gives the per-piece price, the total and “lead time 6–8 weeks, FOB Mundra.”
When a buyer asks for CIF or DDP and your recipe has no freight or insurance to that destination, Poly9 AI returns price on request. The request goes to your team, who quote the landed cost themselves. The AI never guesses a freight rate or a duty.
Terms Incoterms connects to
FOB rules and quoting
How to quote FOB from your cost rules. It shows where the FOB port, lead time and unit cost sit in a recipe, and how the quote shows all three.
Cost recipe
The pricing rules behind a custom product quote. FOB port, lead time, per-unit cost and your markup rule are all part of the recipe the AI reads.
Price on request
What the AI returns when a rule is missing, such as freight to a CIF or DDP destination you have not priced. Your team quotes it instead.
RFQ (Request for Quote)
The buyer's request for a price on a configured product. An RFQ often names the Incoterm the buyer expects, and the seller quotes to it.
MOQ (Minimum Order Quantity)
The smallest order a maker will accept. MOQ, Incoterm and lead time are the trade facts that sit together on an export quote.
Rugs and home textiles
Sales AI for rug and textile exporters. Size, colorway and construction are priced from your rules, with FOB port and lead time in one reply.
Meeting retail buyer criteria
What retail buyers check before onboarding a vendor, including how to state FOB port, lead time and payment terms so buyers can qualify you.
Questions about Incoterms
What is the difference between FOB and CIF?
When should an exporter quote FOB rather than DDP?
What does “FOB Mundra” mean?
Who pays customs duty under FOB?
How does Poly9 AI handle Incoterms in quotes?
Can a buyer negotiate the Incoterm?
Quote FOB from your cost recipes
Poly9 AI prices every configured variant from your cost recipes, shows the FOB port with lead time, and returns price on request when a rule is missing. Add your catalog or start from your industry sample, on a plan paid monthly.