The first time a distributor in another country asks for your price "FOB" or "DAP their warehouse," most brand owners nod and go look it up. This is incoterms explained the way you need it: not a customs textbook, but the six terms you will actually see, what each one makes you responsible for, which ones to offer as a small brand, and where the money and the risk change hands. Get this right and an international quote takes ten minutes. Get it wrong and you can lose the whole margin on a shipment to a freight bill you did not know was yours.
What incoterms are and why buyers care
Incoterms are a set of standardized trade terms published by the International Chamber of Commerce. Each three-letter term answers the same questions for a shipment: who arranges and pays for each leg of transport, who handles export and import clearance, who pays duties, and — most importantly — at what exact point the risk of loss or damage moves from the seller to the buyer.
The current edition is Incoterms 2020, and a quote should name the term, the place, and the edition, for example "FCA, Columbus, Ohio, Incoterms 2020." The place matters as much as the term, because it is where your responsibility ends.
A buyer cares because your price means nothing until they know what it includes. Ten dollars a unit delivered to their warehouse with duties paid is a very different offer from ten dollars a unit sitting on your loading dock.
Incoterms explained: the six terms you will actually see
There are eleven incoterms. As a brand shipping cases and pallets, these six cover almost every conversation.
EXW — Ex Works
You make the goods available at your premises. The buyer does everything else: picks them up, exports them, ships them, imports them, pays the duties. Lowest responsibility for you, lowest price for them, and the risk transfers the moment the goods are at your door.
In practice, EXW is awkward for a foreign buyer because they have to handle US export paperwork from abroad. Many will ask for FCA instead.
FCA — Free Carrier
You hand the goods to the buyer's chosen carrier at a named place — your warehouse, a freight forwarder's depot, an airport — and you handle export clearance. Risk transfers at the handover. This is the term most small brands should learn first: it is clean, it works for air, sea, and truck, and it keeps you out of the ocean freight and import side entirely.
FOB — Free On Board
You get the goods onto the ship at a named port and clear them for export. Risk transfers once the goods are on board. FOB is a sea-freight term and is not the right choice for air or courier shipments, even though buyers sometimes use it loosely to mean "you get it to the port." If someone says FOB for an air shipment, ask whether they mean FCA.
CIF — Cost, Insurance and Freight
You pay for the ocean freight and insurance to the destination port, but risk still transfers when the goods are on board at the origin. That split — you pay the freight, but the goods are the buyer's problem during the voyage — confuses people. It is also sea-only.
DAP — Delivered At Place
You deliver to a named place in the buyer's country, typically their warehouse, and pay everything up to that point except import clearance and duties, which the buyer handles. Risk transfers on arrival, ready for unloading. Buyers like DAP because the price looks like a landed price. You should only offer it once you have a freight forwarder you trust.
DDP — Delivered Duty Paid
You do everything, including import clearance and paying duties and import taxes in the buyer's country. The buyer's only job is to unload. This is the maximum responsibility term, and it is the one small brands most often regret offering, because it makes you the importer in a country whose tax rules you do not know.
Which terms to offer as a small brand
Start with FCA at your warehouse or your forwarder's depot. It is what most experienced international buyers expect from a new supplier, it keeps your quote simple, and it means the distributor — who already imports from many suppliers — uses their own freight arrangements.
Offer FOB only for full container or large pallet loads going by sea, and only if you or your forwarder can manage the port handover.
Move to DAP when a valuable account asks for a delivered price and you have a forwarder who can quote door-to-door reliably. Build the freight cost into the price with a margin for surprises.
Avoid DDP unless you have registered for tax in that country or have a partner who handles it. Selling wholesale internationally covers the registration and compliance side that DDP would put on your plate.
A worked example with round numbers
Say a distributor in the UK wants a pallet of 600 units. Your wholesale price at your dock is 10 dollars a unit, so 6,000 dollars.
- EXW or FCA, your warehouse: you quote 6,000 dollars. The buyer arranges collection, sea or air freight, import clearance, and UK duties and VAT. You are done when the carrier signs for the pallet.
- DAP, their warehouse: your forwarder quotes about 900 dollars for door-to-door freight. You quote 6,900 dollars, or 11.50 a unit, and add a small buffer so a rate increase does not eat your margin. You carry the risk until the pallet arrives. The buyer still pays their own duties and VAT.
- DDP, their warehouse: on top of the 6,900 dollars you would have to estimate and pay UK duty and import VAT, handle customs entry in the buyer's name or yours, and get any of it back through processes you may not be set up for. Most small brands should decline and offer DAP instead.
The landed cost article walks through how the buyer sees these numbers from their side, which helps when they push for a delivered price.
Common mistakes on a first international quote
- Quoting a price with no incoterm. The buyer assumes the most generous interpretation. Always write the term, the place, and "Incoterms 2020."
- Using FOB for air freight. Say FCA.
- Confusing who insures the goods. Under FCA and FOB, the goods are the buyer's risk in transit — but if you want to be sure your customer receives them, ask the forwarder about coverage anyway.
- Forgetting export paperwork. Under every term except EXW, export clearance is yours. Your forwarder can file it, but you need to provide accurate descriptions, values, and classification codes.
- Offering DDP to win the deal. A distributor that needs you to be their importer of record is asking you to run a business in their country. How to find international distributors explains why a good distributor handles import themselves.
- Not tying the term to payment. Under FCA, risk transfers early, so payment before shipment or a deposit plus balance on handover is a reasonable ask for a new account.
Put it on the line sheet
Once you have chosen a default, print it on your international price list: "Prices FCA [your city], Incoterms 2020. DAP quotes available on request." Buyers who import regularly will read that and know exactly how to compare you with other suppliers. It also signals that you have done this before, even if this is your first shipment.
The short version
Incoterms define where your job ends and the buyer's begins. FCA is the default for a small brand. FOB is for sea pallets and containers. DAP is for delivered pricing once you have a forwarder. DDP is for later, if ever. Name the term, the place, and the edition on every quote.
Terms only matter once there is a distributor asking for a quote. WholesalePilot finds the distributors and wholesale buyers that fit your product, including international ones, verifies their emails, sends the outreach in your name, and books the calls — so the incoterm conversation happens with a real buyer.
An incoterm is a line on a map. Everything on your side of the line is your cost and your risk.
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