incoterm

Incoterms, short for International Commercial Terms, are a set of internationally recognized trade terms published by the International Chamber of Commerce (ICC). They standardize the allocation of costs, risk, and responsibilities between seller and buyer for the delivery of goods under a sale contract. Incoterms are not laws and do not constitute a complete contract; they must be expressly referenced in the agreement and linked to a specific edition. The current widely used edition is Incoterms 2020.

Incoterms specify the point at which risk passes from seller to buyer and which party pays for transportation, insurance, and export and import duties, along with other costs. They are designed to apply to any mode of transport and include terms tailored for sea and inland waterways.

The 11 terms in the Incoterms 2020 edition are EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAP, DPU, and DDP. They are grouped into four categories (E, F, C, D) reflecting increasing levels of seller obligation: E terms place minimal obligations on the seller (EXW); F terms require the seller to deliver goods to the carrier or to a named place but not for main carriage; C terms involve substantial seller responsibility for carriage and costs; D terms require the seller to deliver at the named destination, often including unloading.

Key examples include EXW (seller minimal obligation), CIP (seller must procure insurance and arrange carriage to a named destination), and CIF/CFR (sea transport terms with varying insurance obligations). Limitations include that Incoterms do not determine title transfer, payment terms, or specific contract details beyond the delivery responsibilities; they must be integrated with the contract and the edition and named place of delivery specified.