What an Incoterm actually decides
An Incoterm is a three-letter term in your purchase contract that answers three questions: who arranges and pays for each leg of the transport, where the risk of loss passes from seller to buyer, and who handles export and import clearance.
It does not decide who owns the goods, and it does not replace a contract. But it is the single line that changes the landed cost the most, and it is agreed before anyone speaks to a freight forwarder.
The eleven terms
| Term | Meaning | Risk passes |
|---|---|---|
| EXW | Ex Works | At the seller's premises |
| FCA | Free Carrier | On handover to your carrier |
| FAS | Free Alongside Ship | Alongside the vessel |
| FOB | Free On Board | Once loaded on the vessel |
| CFR | Cost and Freight | Once loaded (seller pays freight) |
| CIF | Cost, Insurance and Freight | Once loaded (seller pays freight and insurance) |
| CPT | Carriage Paid To | On handover to the first carrier |
| CIP | Carriage and Insurance Paid To | On handover to the first carrier |
| DAP | Delivered at Place | At the named destination |
| DPU | Delivered at Place Unloaded | Once unloaded at destination |
| DDP | Delivered Duty Paid | At destination, duties paid |
The three that matter most for Chile
- FOB — what most Chilean importers should buy on. The supplier delivers loaded at the origin port with export clearance done, and your forwarder takes over. You see the real freight cost.
- CIF — the supplier pays freight and insurance to the Chilean port. Simpler, but the freight is buried in the product price and you do not choose the carrier or the routing.
- EXW — you are responsible from the factory gate, including Chinese or European export clearance, which a foreign buyer generally cannot do alone. Avoid unless you have an agent at origin.
Why DDP usually costs you more than it saves
Under DDP the supplier delivers to your door with duties paid. It sounds like the easiest possible arrangement, and for a small sample it often is.
For anything regular it means a customs declaration filed in your name, by an agent you did not appoint, with a value you did not see. You remain liable for that declaration for years. The convenience is real; so is the exposure.
The mistake that costs most
Comparing an EXW price against an FOB price against a DDP price as if they were the same number. They are three different scopes of service, and the cheapest headline is frequently the most expensive landed cost.
Before you sign, tell us the term you are being offered. We will tell you what it commits you to, and it costs nothing.
Frequently asked questions
Which Incoterm is best for importing into Chile?
FOB suits most importers: the supplier delivers the goods loaded at the origin port with export clearance done, and your forwarder takes over. You see the real freight cost instead of having it buried in the product price.
What is the difference between CIF and FOB?
Under FOB the risk passes once the goods are loaded and you arrange the freight. Under CIF the seller pays freight and insurance to the destination port, but you do not choose the carrier or the routing and the cost is inside the product price.
Is DDP a good idea?
For a small sample, often yes. For regular imports it means a customs declaration filed in your name by an agent you did not appoint, with a value you did not see — and you stay liable for that declaration for years.
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