🌍 Understanding International Freight Incoterms

Incoterms (short for International Commercial Terms) are a set of globally recognized rules that define the responsibilities of buyers and sellers when shipping goods internationally. Created by the International Chamber of Commerce (ICC), these terms help avoid confusion and reduce legal disputes in global trade.

📦 What Are Incoterms?

Incoterms clarify:

  • Who pays for shipping, insurance, and duties

  • Who is responsible for the goods at each stage of transport

  • Where the risk transfers from seller to buyer

They are used in sales contracts to clearly outline these logistics responsibilities, especially in international freight transactions.

📘 Incoterms 2020 – The Latest Version

There are 11 Incoterms in the current 2020 edition, grouped by mode of transport:

🚛 Incoterms for Any Mode of Transport:

TermStands forKey PointEXWEx WorksBuyer handles all transport from seller's premises.FCAFree CarrierSeller delivers to a carrier chosen by the buyer.CPTCarriage Paid ToSeller pays freight to destination, risk transfers earlier.CIPCarriage and Insurance Paid ToSame as CPT but includes insurance.DAPDelivered at PlaceSeller delivers to the buyer's location (not unloaded).DPUDelivered at Place UnloadedSeller delivers and unloads goods.DDPDelivered Duty PaidSeller covers all costs including duties.

🚢 Incoterms Only for Sea & Inland Waterway Transport:

TermStands forKey PointFASFree Alongside ShipSeller delivers goods beside the vessel.FOBFree on BoardRisk passes when goods are on board the ship.CFRCost and FreightSeller pays freight, buyer takes risk once loaded.CIFCost, Insurance and FreightSame as CFR, but seller also insures the goods.

🔄 Example: FOB vs DDP

  • FOB (Free On Board):
    The buyer is responsible once the goods are loaded onto the ship.
    Ideal when the buyer manages shipping.

  • DDP (Delivered Duty Paid):
    The seller handles everything – transport, customs, duties – until the goods reach the buyer.
    Ideal for buyers who want a simple delivery experience.

✅ Why Incoterms Matter

Using the correct Incoterm:

  • Prevents misunderstandings about who handles what

  • Reduces shipping risks

  • Helps with customs clearance and documentation

  • Ensures smoother international trade agreements

📌 Quick Tips

  • Always specify “Incoterms® 2020” in contracts to avoid using outdated terms.

  • Combine with a specific location (e.g., “FOB Shanghai Port”).

  • Not all Incoterms include insurance – check carefully!

🧭 Need Help Choosing the Right Incoterm?

Our freight experts can guide you through selecting the best term for your shipment—based on cost, risk, and destination. Contact us today to ensure smooth and compliant international shipping!