In brief
Incoterms are delivery terms issued by the International Chamber of Commerce that define obligations, costs and transfer of risk between seller and buyer.
Contents
What is Incoterms?
The International Commercial Terms are published by the International Chamber of Commerce (ICC) in Paris. The current version, Incoterms 2020, comprises eleven rules, each agreed as a three-letter code with a named place, for example FCA Hamburg. Seven rules apply to all modes of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and four only to sea and inland waterway transport (FAS, FOB, CFR, CIF).
Each rule specifies where delivery is deemed to have taken place, when the risk of loss or damage passes to the buyer, who bears which costs and who handles export and import formalities. The range extends from EXW, under which the buyer assumes almost all obligations, to DDP, under which the seller is responsible up to the place of destination, including import duties.
They do not govern the transfer of ownership, payment terms, liability for breach of contract or the applicable law. Incoterms only apply if they are expressly agreed, stating the version year.
In practice: maintenance and procurement
For buyers, the rule determines costing and responsibilities: who files the export declaration, who insures, and from when does one bear the risk? A quotation should always be compared with its rule, named place and version year.
Synonyms and abbreviations: International Commercial Terms · Incoterms 2020 · Incoterms rules · international delivery terms
Frequently asked questions
Which Incoterms rule is most favourable for buyers?
There is no rule that is cheapest across the board. A quotation on EXW terms often looks cheaper because the buyer takes on almost all costs, formalities and risks itself. With DDP, these are included in the price, but the seller's calculation is less transparent. For a fair comparison, quotations should be converted to the same rule and internal effort should also be taken into account.
What does the named place mean in Incoterms?
Each rule is combined with a place, such as a city or an exact address. This place determines where delivery is deemed to take place and at which point costs and risk pass to the buyer. The more precisely it is specified, the less room there is for misunderstandings. Simply naming a country is generally not sufficient.
May older versions of Incoterms still be agreed?
Yes. The International Chamber of Commerce does not declare earlier versions invalid, so contracting parties can still agree, for example, Incoterms 2010. It is important to state the version year explicitly, as the rules differ between versions. For specific contract drafting, expert advice should be sought in case of doubt; this entry does not constitute legal advice.