When negotiating an export or import deal, you will come across abbreviations like EXW, FOB, CIF and DDP. These are not obscure codes but Incoterms: internationally recognized trade rules that define precisely who bears what between seller and buyer. Understanding them protects you from surprises in cost and responsibility. Here is a simplified guide for beauty brands.
What Are Incoterms?
Incoterms are a set of standardized trade terms that govern three essentials of any international transaction: who pays transport costs, when risk passes from seller to buyer, and who handles export and import formalities. Clearly specifying the Incoterm in the contract prevents disputes and makes your pricing accurate.
Common Terms, Simplified
- Ex Works: the seller only makes the goods available at their premises; the buyer then bears everything, transport, clearance and risk. Minimal responsibility for the seller.
- Free On Board: the seller bears costs and risks until the goods are loaded at the origin port, after which responsibility passes to the buyer.
- Cost, Insurance and Freight: the seller pays transport and insurance to the arrival port, noting that the point where risk transfers may differ from where costs end.
- Delivered Duty Paid: the seller bears almost everything until delivery at the destination, including import duties. Maximum responsibility for the seller.
Why This Matters for Your Brand
The Incoterm you choose directly affects:
- Price: a quote differs dramatically depending on whether it includes transport, insurance and duties
- Risk: it determines who bears the loss if goods are damaged or lost at a given stage
- Control: some terms give you greater control over carrier choice and shipping route
How to Choose the Right Incoterm
There is no single best choice; the right one depends on your experience and who can best manage each stage:
- If you are new to importing, you may prefer terms where the supplier handles more of the organization
- If you have a reliable freight forwarder in your country, you may prefer terms giving you more control and clearer cost
- Always specify the Incoterm and its version explicitly in the contract and invoice
A Final Tip
Do not assume the other party understands the Incoterm as you do; write the details clearly and use a freight forwarder or trade advisor when needed. Early clarity saves you costly disagreements later. The rules are revised periodically, so confirm the version that applies to your deal.
Two More Terms Worth Knowing: FCA and CPT
FOB and CIF apply only to sea and inland waterway transport, but many beauty brands ship smaller, higher-value orders by air, especially samples and early orders. Two terms designed for any mode of transport are worth knowing.
Free Carrier (FCA)
The seller delivers the goods to a carrier named by the buyer, at a location agreed in the contract — the seller's premises, an airport, or a freight forwarder's warehouse. Risk transfers to the buyer once the goods are handed to that carrier, which makes FCA a flexible, widely used term for air shipments of cosmetics.
Carriage Paid To (CPT)
The seller pays for transport to the named destination, but risk still transfers to the buyer once the goods are handed to the first carrier, not on arrival. This distinction — cost and risk transferring at different points — is one of the most common sources of confusion in Incoterms, and it is worth confirming explicitly with your supplier for every shipment.
Frequently Asked Questions
Does the Incoterm Determine Who Owns the Goods?
No. Incoterms govern cost and risk, not legal ownership. Ownership is typically addressed separately in the sales contract or through payment terms. A buyer can bear the risk for goods that are not yet legally theirs, and vice versa.
Can the Incoterm Be Changed After the Order Is Placed?
It should be agreed before the order is confirmed and reflected on both the contract and the commercial invoice. Changing it afterward can create disputes over insurance coverage and customs documentation, so it is best treated as a fixed part of the deal from the start.
At Assil Ouargane in Morocco, we work with brands under clear commercial terms suited to their export experience, as part of our private-label services for our natural products. To discuss the delivery terms best suited to you and request a quote, contact us through our website.