The Ultimate Guide to International Shipping Terms For Beginners: FOB, CIF, and EXW Explained

Understanding International Shipping Terms: A Guide of International Term For Beginners to Become Smart Importers

Navigating the world of global trade can feel like learning a new language. Between FOB, CIF, and EXW, the terminology—known as Incoterms—can be overwhelming. However, understanding these terms is the key to controlling your costs and managing your risk.

At Oversea Exim, we believe in full transparency. In this guide, we break down the most common international shipping terms for the beginners so you can choose the best option for your business.

What are Incoterms?

Incoterms (International Commercial Terms) are a set of rules defined by the International Chamber of Commerce. They determine exactly who is responsible for:

1. Shipping Costs: Who pays for the freight, insurance, and duties?

2. Risk: At what point does the seller stop being responsible for the goods if they are damaged?

   
   

The 3 Most Common Terms for Your Business

1. EXW (Ex Works)

Under EXW, the buyer is responsible for almost everything. The seller simply makes the goods available at their factory.

• Best for: Buyers who have their own trusted logistics team in the seller's country.

• Risk: The buyer carries all the risk from the factory door to their warehouse.

  
  

2. FOB (Free On Board)

This is the most popular term in global trade. The seller (Oversea Exim) handles everything until the goods are loaded onto the ship. Once the container is on the vessel, the responsibility shifts to the buyer.

• Best for: Buyers who want control over sea freight costs and choosing their own shipping line.

  
  

3. CIF (Cost, Insurance, and Freight)

The seller pays for the freight and insurance to the buyer’s nearest port.

• Best for: New importers who want a "hassle-free" experience.

• Note: While convenient, the buyer is still responsible for customs clearance and inland transport once the ship arrives.

  
  

How Oversea Exim Simplifies Logistics

Choosing the wrong term can lead to unexpected storage fees or insurance gaps. When you work with Oversea Exim, we don't just give you a price; we provide a logistical consultation.

We help you calculate the "Landed Cost"—the total price of a product once it hits your warehouse—so there are no surprises.

Pro Tip: Always double-check your insurance coverage. Even if a term says the seller provides insurance, ensure the coverage amount is at least 110% of the invoice value.