Incoterms are standardized international trade rules published by the International Chamber of Commerce that define the responsibilities of buyers and sellers during the sale and movement of goods. They explain who arranges transport, who pays certain shipping costs, who handles export or import clearance, and when risk transfers from seller to buyer. Common Incoterms include EXW, FCA, FOB, CIF, DAP, DDP, and others. Incoterms do not replace a sales contract, but they help clarify logistics responsibilities and reduce disputes in global trade. The current set consists of 11 standardized trade terms.
The 11 Incoterms 2020
- EXW: Ex Works
- FCA: Free Carrier
- CPT: Carriage Paid To
- CIP: Carriage and Insurance Paid To
- DAP: Delivered at Place
- DPU: Delivered at Place Unloaded
- DDP: Delivered Duty Paid
- FAS: Free Alongside Ship
- FOB: Free on Board
- CFR: Cost and Freight
- CIF: Cost, Insurance, and Freight
Why Incoterms Matter
Incoterms determine who controls the shipment, who bears the risk of loss during transit, and who is responsible for customs clearance. Selecting the right Incoterm aligns with your company’s supply chain strategy and risk tolerance.
Related terms: Commercial Invoice.
