The best Incoterm for an exporter depends on how much responsibility and control they are willing to assume for the shipment and what level of risk they want to bear. Generally, exporters prefer Incoterms that minimize their responsibility for transportation, customs clearance, and insurance costs, while still ensuring that payment and delivery are secure.
Here’s a breakdown of which Incoterms are typically best for exporters:
1. EXW (Ex Works) – Best for Exporters Who Want Minimal Responsibility
Why it’s good for exporters:
- Minimal responsibility: The exporter has the least responsibility in an EXW arrangement. The exporter simply makes the goods available at their premises or another agreed location, and the buyer takes on all responsibility for transportation, export clearance, insurance, and delivery.
- Risk management: The seller has no liability for the goods once they are made available for pickup.
When to use EXW:
- When the exporter wants to minimize costs and risks and is comfortable letting the buyer manage the shipping, customs, and insurance.
- Best suited for: Exporters who deal with experienced buyers who handle logistics on their own and are familiar with the destination country’s import requirements.
2. FOB (Free on Board) – Good for Exporters Who Want to Control the Port of Shipment
Why it’s good for exporters:
- Control over shipping: The exporter controls the goods up until they are loaded onto the ship, ensuring that the export customs process is handled correctly and the goods are shipped according to their terms.
- Shared risk: The risk transfers to the buyer once the goods are on board the vessel, which helps limit the seller’s exposure to risk during transit.
When to use FOB:
- When the exporter wants to control the goods until they are loaded on the vessel, but is willing to transfer risk to the buyer once the goods are on board.
- Best suited for: Exporters who have reliable carriers and are familiar with the port of departure and export procedures.
3. CIF (Cost, Insurance, and Freight) – Good for Exporters Who Want to Control Shipping but Still Offer a Competitive Package
Why it’s good for exporters:
- More attractive to buyers: Since the exporter arranges and pays for shipping and insurance, this can be appealing to buyers, especially those who may not have the expertise or infrastructure to arrange shipping and insurance.
- Good for establishing trust: The exporter has a lot of control over the shipping process, which can lead to a more streamlined and predictable transaction, with fewer surprises for the buyer.
- However: The exporter still bears the risk of the goods until they are loaded onto the vessel, so while they control much of the process, the risk is shared during transit.
When to use CIF:
- When the exporter wants to offer a complete service package (including shipping and insurance) to the buyer, but is still okay with the risk shifting once the goods are loaded onto the ship.
- Best suited for: Exporters who deal with buyers in markets where buyers are less familiar with shipping and insurance and need extra assistance.
4. FCA (Free Carrier) – Suitable for Exporters with a Strong Logistics Partner
Why it’s good for exporters:
- Flexibility: The exporter delivers goods to a carrier or a specified location (usually at the port or terminal) and then hands over responsibility for transportation. It allows for flexibility in choosing the transportation method.
- Minimal risk: The risk for the exporter ends once the goods are delivered to the carrier at the agreed-upon location, and the buyer assumes the rest of the transportation risk.
When to use FCA:
- When the exporter has a reliable logistics partner but wants to limit their responsibility by only handling delivery to the carrier, not full transportation.
- Best suited for: Exporters who are familiar with logistics and transportation processes but don’t want to take on the burden of managing the entire delivery.
Summary of Best Incoterms for Exporters
| Incoterm | Level of Responsibility for Exporter | Control Over Shipping | Risk to Exporter |
| EXW | Very Low (Exporter only makes goods available) | No control over shipping | Minimal (Risk is transferred as soon as goods are available for pickup) |
| FOB | Moderate (Exporter arranges transport to port) | Control up to loading onto the ship | Low (Risk transfers once goods are loaded onto the vessel) |
| CIF | Moderate to High (Exporter arranges and pays for shipping and insurance) | Full control over shipping and insurance | Moderate (Risk transfers once goods are loaded onto the vessel) |
| FCA | Low (Exporter delivers goods to the carrier) | Control over delivery to carrier | Low (Risk transfers once goods are handed over to carrier) |
Conclusion:
For exporters, the best Incoterm typically depends on how much control and responsibility they want over the shipment:
- EXW is the best for exporters who want to minimize responsibility and risk.
- FOB is a balanced option for those who want control over the shipment process but are willing to transfer some risk to the buyer.
- CIF is ideal when the exporter wants to provide a complete service (shipping, insurance) to the buyer while maintaining some control.
- FCA is good if the exporter wants flexibility and control over the first part of the transport but doesn’t want to handle the entire delivery process.
In general, EXW and FOB are the most commonly used Incoterms for exporters who wish to limit their liability and responsibilities. However, if you want to offer more value to your buyer and gain a competitive edge, CIF might be a better option.
