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Getting to know your Incoterms®: What are Incoterms?

In this guideline, you will learn to implement this set of internationally recognized rules that define the responsibilities of buyers and sellers in international transactions.

Incoterms®: An Overview

What are Incoterms?

Incoterms are a set of 11 international trade rules issued by the International Chamber of Commerce (ICC) to define the responsibilities of sellers and buyers for the sale of goods in international markets. Each of these rules clarifies the costs, tasks, and risks to be taken care of by buyers and sellers during the completion of these transactions. If you’re an international seller, it’s helpful to familiarize yourself with Incoterms, in order to secure a smoother process of defining who is responsible for each step of the purchase and delivery.

There are 11 Incoterms rules and they are all grouped into two categories which reflect the modes of transport for the sold goods. For example, of these 11 rules, seven of them can be used for any and all mode(s) of transportation, while only four of them apply to sea, land, or inland waterway transport.

The Incoterms rules are edited or updated once every 10 years. Incoterms® 2020, the newest version, was released at the end of 2019 and was put to use starting on Jan. 1 of this year.

Incoterm

Sea, Land, or Inland Waterway

All Modes of Transport


EXW

Ex Works

(Insert place of delivery)


FCA

Free Carrier

(Insert place of delivery)


CPT

Carriage Paid to

(Insert place of destination)


CIP

Carriage and Insurance Paid To

(Insert place of destination)


DAP

Delivered at Place

(Insert named place of destination)


DPU*

Delivered at Place Unloaded

(Insert of place of destination)


DDP

Delivered Duty Paid

(Insert place of destination)


FAS

Free Alongside Ship

(Insert name of port of loading)


FOB

Free on Board

(Insert named port of loading)


CFR

Cost and Freight

(Insert named port of destination)


CIF

Cost Insurance and Freight

(Insert named port of destination)


Can I use older versions of Incoterms® after January 1, 2020?

Yes. Although the ICC recommends using the most recent Incoterms® 2020, both parties to a sales contract can agree to use any version of these rules. The only thing required is to clearly specify the chosen version of Incoterms being used in a given sales contract.

What Incoterms Cover

What Incoterms Don’t Cover

Incoterms are incorporated to the Contract of Sale. They are used to specify certain responsibilities of the buying or selling parties, however, they don’t:

To learn more about specific Incoterms, head over to our Trade Knowledge Base.