What it is
The Incoterms are eleven three-letter rules published by the International Chamber of Commerce that say, in a sale contract, who arranges and pays for each leg of the transport, where the risk passes from seller to buyer, and who clears export and import.
They are contractual, not law: they apply because the parties wrote them into the contract, and they bind in any country. They say nothing about ownership, payment or the contract of carriage.
Where it applies
Any country, whenever a sale contract refers to them. The 2020 edition supersedes 2010; older editions still apply if a contract names them.
What to know
- 01Seven rules work for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU and DDP.
- 02Four rules are for sea and inland waterway only: FAS, FOB, CFR and CIF.
- 03Under FOB, CFR and CIF the risk passes when the goods are on board the vessel; under CPT and CIP, on handover to the first carrier, even though the seller pays the freight.
- 04DDP is the only rule where the seller clears import and pays import duties and taxes; under DAP the buyer clears import.
- 05EXW is the minimum obligation for the seller; in practice FCA is usually the better choice for exports, because the seller handles export clearance.
- 06CIP requires all-risks insurance cover (Institute Cargo Clauses A); CIF only the minimum cover (Clauses C).
Who needs to know it
- Sales and purchasing teams that draft or accept quotations.
- Forwarders who quote and organise the legs the rule assigns to their customer.
- Transport-manager candidates and logistics students, where the eleven rules are examined.
An informative summary, not legal advice. Always check the current text of the rule before deciding.