What are Incoterms®?
Incoterms®, are widely used essential terms of trade for the sale of goods; a set of globally recognized trade rules organized into 11 abbreviated terms which define the responsibilities of sellers and buyers. Incoterms® specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities. These rules serve as a guide for individuals participating in the import and export global trade. Incoterms® ensure a smooth transaction, avoid penalties and costly mistakes.
The Incoterms® rules for 2020 are updated and grouped into two categories displaying modes of transport. Of the 11 rules, 7 are for ANY mode(s) of transport and four apply for ocean, land, or inland waterway transport. First published in Paris in 1936 by the International Chamber of Commerce (ICC), the Incoterms® rules provide are:
- Uniform interpretation of general contract clauses primarily found in export and import transactions.
- Illustration of the timing and distribution of costs and risks between buyers and sellers.
- Instructions to forwarders, carriers, customs brokers, banks, and other financial institutions involved in shipping goods
The 7 Incoterms® 2020 Rules for Any Mode(s) of Transport are:
*The DPU Incoterms® replaces the former DAT with an additional requirement for the seller to unload the goods from the arriving means of transport.
- EXW – Ex Works (place of delivery usually, seller’s premises)
- FCA – Free Carrier (place of delivery
- CPT – Carriage Paid To (place of destination)
- CIP – Carriage and Insurance Paid To (place of destination)
- DAP – Delivered at Place (place of destination)
- DPU – Delivered at Place Unloaded (insert of place of destination)*
- DDP – Delivered Duty Paid (place of destination)
The 4 Incoterms® 2020 Rules for Ocean, Land, and Inland Waterway Transport are:
- FAS – Free Alongside Ship (port of loading)
- FOB – Free on Board (of loading)
- CFR – Cost and Freight (port of destination)
- CIF – Cost Insurance and Freight (port of destination)
ICC’s Incoterms® 2020 Version
The latest version of the Incoterms® 2020 rules is now published by the International Chamber of Commerce (ICC) and protected by copyright. The revised rules reflect the latest developments in commercial transactions. As of January 1, 2020, all sales contracts should include reference to the Incoterms® 2020 rules. You may obtain Incoterms® 2020 rules by visiting the ICC website.
Disclaimer: This information provided serves as a resource to familiarize U.S. importers with Incoterms®. This page is not legal advice and the information provided is not the official legal or full definition of each Incoterm®. “The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterm® Rules may be obtained from the ICC website. Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above.“