INCOTERMS 2020

Incoterms® (ICC) — International Commercial Terms

(Incoterms® 2020 remains the current ICC edition)

The most widely used rules for interpreting trade terms in international commerce are published by the International Chamber of Commerce (ICC) and are known as Incoterms®. (ICC – International Chamber of Commerce)

Incoterms® clarify to the buyer what is included — and what is not included — in the sale price, and they define where the seller’s delivery obligation ends and where the buyer’s begins for transport, risk, and (where applicable) customs-related responsibilities. They are contract tools: they only apply when incorporated into the sales contract or purchase order. (icc-switzerland.ch)

Definition of Incoterms®

INternational COmmercial TERMS: standard trade terms created by the ICC in 1936 and periodically revised. The current ICC set is Incoterms® 2020, applicable from 1 January 2020. (ICC – International Chamber of Commerce)

Incoterms® are one clause among many in a commercial contract (price, lead times, payment terms, warranty, remedies, etc.). They are closely linked to the routing and delivery structure of the goods (whether transport is invoiced separately or embedded in the price).

Practical rule: always write Incoterms® like this:
[Incoterm® rule] + [named place] + [Incoterms® 2020]
Example: FCA Basel, Incoterms® 2020 / DAP Lyon, Incoterms® 2020

What Incoterms® define

Incoterms® define three things, and only three things:

1) Division of obligations (who does what)

Who arranges and pays for:

• transport and handling
• insurance (only in certain terms)
• export/import customs formalities (where applicable)
• delivery-related documentation

2) Distribution of costs (who pays what)

Who bears the costs of transport, handling, insurance, and customs-related steps (where applicable). The cost allocation depends on the named place you specify.

3) Transfer of risk (where risk passes)

The point at which risk transfers from seller to buyer is the place of delivery—and it does not always match the place of destination. This is a common source of disputes.

What Incoterms® do NOT define

Incoterms® do not define:

• transfer of ownership/title
• the price itself or payment method/timing
• remedies, dispute resolution, governing law, or retention of title clauses (icc-switzerland.ch)

These must be addressed elsewhere in the contract.

Incoterms® are 3-letter codes in two groups (11 rules total)

7 Multimodal Incoterms® (any mode / multi-modal)

Use these when the delivery place can be a warehouse, terminal, port area, airport, inland hub, border point, etc.—including containerized ocean freight (where delivery typically happens at a terminal/yard, not “over the ship’s rail”).

• 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 (seller must unload — unique in Incoterms®)
• DDP — Delivered Duty Paid

2026 consultant cautions (high-impact):

• Avoid using FOB/CFR/CIF for container shipping in most cases. For containers, delivery is usually at a terminal (not on board), so FCA/CPT/CIP is typically a better fit. (DHL)
• FCA + Letter of Credit: Incoterms® 2020 introduced an option supporting an on-board B/L notation under FCA (subject to carrier cooperation), to reduce L/C friction. (ch.kuehne-nagel.com)
• Insurance level change (2020): under CIP, the seller’s default insurance requirement is higher (Institute Cargo Clauses A), while CIF remains at Clauses C by default. (dachser.ch)

4 Maritime / Inland Waterway Incoterms® (port-to-port / non-containerized focus)

Use these when delivery is defined at the port (or inland waterway port) and is operationally aligned with bulk, breakbulk, or conventional maritime shipments:

• FAS — Free Alongside Ship
• FOB — Free On Board
• CFR — Cost and Freight
• CIF — Cost, Insurance and Freight

Commercial logic (simple but non-negotiable)

The further the seller commits to logistics services (transport, risk, insurance, import steps), the more cost and operational exposure the seller takes on—and that should be reflected in the sales price, not hidden through unclear “extras.”

Best practice: select the Incoterm® deliberately (risk, cost, control), specify the exact named place, and align the term with the real transport flow (especially container vs. non-container maritime).