Incoterms®

Incoterms® (short for International Commercial Terms) are terms of agreement between the seller and buyer regarding who is responsible for payments, insurance, customs clearance, and handling goods throughout the freight process. Incoterms® are defined and revised by the International Chamber of Commerce (ICC), setting internationally recognized rules for sellers and buyers in export transactions. 

Incoterms®2020 outlines 11 rules, seven of which apply to all modes of transport and four to sea and inland waterway transport. The first seven rules are: 

• EXW – Ex Works (insert place of delivery) 
• FCA – Free Carrier (Insert named 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 place of destination)   
• DDP – Delivered Duty Paid (Insert place of destination).  

The four rules that apply to sea and inland waterway transportation are: 

• 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)

Having considered and satisfied all of the above rules throughout the freight journey, buyers and sellers can avoid miscommunication about who is responsible for the cargo and at what stage responsibility transfers to the other party.