What are Incoterms?
The Incoterms, or International Commercial Terms, are a set of predefined commercial trade terms published and updated multiple times by the International Chamber of Commerce (ICC). They provide a standard set of definitions for trade terms— delivery terms and terms of sale— for international trade use.
Incoterms are ubiquitous in international commerce— trade bodies, courts, and lawyers all advocate their use, as they serve as a universal language while defining sales agreements. Incoterms specify which party (seller or buyer) are responsible for costs and risks associated with international transportation and delivery of goods.
With their latest update in January of 2020, Incoterms have guided international trade in a more organized and lawful direction.
“Incoterms” is a registered trademark term of the ICC.
The history of Incoterms:
The first Incoterms were published in 1930, and since 1990, the ICC has issued revisions to address the changing landscape of international trade. These revisions have been published in the beginning of each decade since (1990, 2000, 2010, and 2020). The 2020 Incoterms were divided into two sets:
- The first set applies to any mode of transport - 7 Incoterms
- The second applies to goods shipped only by ocean - 4 Incoterms
The 7 Incoterms 2020 rules for any mode(s) of transport:
- EXW - Ex Works ( place of delivery)
- FCA - Free Carrier ( named place of delivery)
- CPT - Carriage Paid to ( place of destination)
- CIP - Carriage and Insurance Paid to ( place of destination)
- DAP - Delivered at Place ( named place of destination)
- DPU - Delivered at Place Unloaded ( of place of destination)***
- DDP - Delivered Duty Paid ( place of destination)
***The DPU Incoterms replaces the old DAT
The 4 Incoterms 2020 rules for Sea and Inland Waterway transport:
- FAS - Free Alongside Ship (name of port of loading)
- FOB - Free on Board (named port of loading)
- CFR - Cost and Freight (named port of destination)
- CIF - Cost Insurance and Freight (named port of destination)