What are Incoterms® rules?

"Incoterms" is a trademark of the International Chamber of Commerce.

The Incoterms® rules have become an essential part of the daily language of trade. They have been incorporated in contracts for the sale of goods worldwide and provide rules and guidance to importers, exporters, lawyers, transporters, insurers and students of international trade.

Below are short descriptions of the 11 rules from the Incoterms® 2020 edition. These should be read in the context of the full official text of the rules which can be obtained from the ICC Business Bookstore.

RULES FOR ANY MODE OR MODES OF TRANSPORT

• • EXW - Ex Works
    Seller delivers when it places the goods at the disposal of the buyer at the seller's premises or at another named place.
    The seller does not need to load the goods on any collecting vehicle or clear them for export.

• • FCA - Free Carrier
    Seller delivers the goods to the carrier or another person nominated by the buyer at the seller's premises or another named place. The parties should specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

• • CPT - Carriage Paid To
    Seller delivers the goods to the carrier or another person nominated by the seller at an agreed place and the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

• • CIP - Carriage and Insurance Paid To
    Seller delivers the goods to the carrier or another person nominated by the seller at an agreed place and the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

• • DAP - Delivered at Place
    Seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. the seller bears all risks involved in bringing the goods to the named place.
  • DAT - Delivered at Place Unloaded
    Seller delivers when the goods, once unloaded from the arriving means of transport are placed at the disposal of the buyer at a named terminal at the named port or place of destination. the seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

• • DDP - Delivered Duty Paid
    Seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. the seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

• • FAS - Free Alongside Ship
    Seller delivers when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment. The risk of loss or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

• • FOB - Free on Board
    Seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment on.

• • CFR - Cost and Freight
    Seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

• • CIF - Cost, Insurance, and Freight
    Seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

The seller also contracts for insurance cover against the buyer's risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.