Incoterms Explained: A Simple Guide for Australian Importers
Incoterms are the three-letter terms, such as FOB, CIF and EXW, that appear on your supplier’s quote and invoice. They decide which costs and risks your supplier pays for and which you pay for. Agreeing the wrong term can mean paying twice for freight, or finding unexpected charges when your goods arrive.
The current version, Incoterms 2020, has 11 terms. Here are the ones Australian importers see most often.
The most common Incoterms
| Term | Your supplier pays for | You pay for |
|---|---|---|
| EXW (Ex Works) | Making the goods available at their premises | Everything else: pickup, export clearance, freight, import |
| FCA (Free Carrier) | Export clearance and handing goods to your carrier | Main freight and everything after |
| FOB (Free on Board) | Delivery onto the ship at the origin port, including export clearance | Sea freight, insurance and all Australian costs |
| CFR (Cost and Freight) | Sea freight to the Australian port | Insurance, unloading and all Australian costs |
| CIF (Cost, Insurance and Freight) | Sea freight and minimum insurance to the Australian port | Australian port charges, clearance, duty and delivery |
| DAP (Delivered at Place) | Freight to your premises | Import clearance, duty and GST |
| DDP (Delivered Duty Paid) | Everything, including Australian duty and GST | Unloading at your premises |
Which term should you choose?
FOB: usually the best balance
With FOB, your supplier handles everything in their own country, which they know best, and you control the international freight. That means you choose the forwarder, see the real freight cost, and avoid hidden mark-ups.
Be careful with CIF and CFR
CIF and CFR look convenient because the freight is “included”. But the supplier’s forwarder often recovers its costs through high destination charges in Australia, which you pay on arrival. Ask for a breakdown of Australian charges before agreeing to these terms.
EXW: only if you’re ready to handle export
EXW gives the lowest product price, but you become responsible for export clearance in the supplier’s country. That can be difficult in some countries, so FCA is often a better choice.
DDP: easy, but less control
DDP means your supplier arranges and pays everything, including Australian duty and GST. It’s convenient, but you can’t claim the GST back through your own business, and you have little control over timing.
Get it right before you order
The Incoterm is agreed when you place your order, so talk to us before you confirm with your supplier. We can quote the freight for each option and help you compare the true landed cost. See our country import guides or contact our team.
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