The main reason for Incoterms is that the seller must calculate the price of the product with all extra costs included. Let me give you some examples.

1. EXW – EXWORKS is mostly used when the business is done within one continent and the transportation will be done by land. This way the seller will provide the prices in EXW terms. The buyer will organize the transportation.
   But there are some cases when the seller can take care of transportation because he can get better price. The example is when trading from poorer country to a more advanced country this way the transport will be cheaper for the poorer one. So the price for products stays the same, but in the Invoice there is an added cost for transportation.
   Here is an example screen shot:
   
2. Some companies use Ex Factory instead of Ex Works. It is used because they have more than one factory throughout the region and you can choose from which factory you would like to load these goods.
   
3. FOB – Free On Board. If you have good relationships with some agent or agency who can get you a good price for transportation it is a wise choice to manage the transportation yourself. This way you will get more control over the transport and more confidence that everything is going well. In this case choose the FOB terms.
   Here are some screen shots from price lists of how FOB is viewed:
    

   

   

The main advice is to look for these transportation terms in every price sheet. This is very important! From my experience you can get 50 offers from Chinese companies with FOB terms and there will be one with others – and it will be hard to compare the prices between them.

In 1936 for the first time these terms were introduced and they have been changed for six times. The last change was in 2000 and this is referred as Incoterms 2000. There are 13 terms to be used.

Incoterms 2000:

EXW – EX WORKS
EXW means that seller produces the goods, but the buyer will come and pick up the goods from the warehouse/factory it is produced. The buyer is responsible for loading the cargo.

FCA - FREE CARRIER
FCA means that seller will produce and deliver the goods to a specific destination, which is chosen by the buyer. It could be the warehouse or some point where buyer would take over the cargo and deliver it further himself. All the costs for transportation is made by the seller.

FAS - FREE ALONGSIDE SHIP
FAS means that seller delivers the goods within reach of ships cranes. The buyer makes all the reservations for the ship and loading.

FOB - FREE ON BOARD
FOB means that seller pays all the cost to deliver the goods to port and load them on to ship.

CFR - COST AND FREIGHT
CFR means that buyer delivers goods to port, loads them to the ship and after this the buyer is responsible for safety of the cargo (insurance). The seller will pay the costs and freight necessary to bring the cargo to the destination port.

CIF - COST, INSURANCE AND FREIGHT
CIF – Seller pays not only all the things mentioned in CFR, but also pays the insurance.

CPT - CARRIAGE PAID TO
CPT means that seller must pay the freight of carriage of the goods to the named destination.

CIP - CARRIAGE AND INSURANCE PAID TO
CIP is similar to CPT, but this time insurance is paid by the seller.

DAF - DELIVERED AT FRONTIER
DAF means that the seller will deliver the goods to the destination port, but the cost of customs will be paid by the buyer.

DES - DELIVERED EX SHIP
DAF means that the seller will deliver the goods to the destination port, but the cost of unloading will pay the buyer.

DEQ - DELIVERED EX QUAY
DES means that seller delivers the goods to quay that is mentioned in the contract.

DDU - DELIVERED DUTY UNPAID
DDU – the seller is responsible for all the costs to deliver the goods to the destination place. The buyer must pay the duty and any additional costs.

DDP - DELIVERED DUTY PAID
DDP is the same as DDU, but seller pays the duty. The buyer must pay all additional costs.