Incoterms

Incoterms (International Commercial Terms) are a set of standardised three-letter terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international trade. They specify who pays for transport, insurance, and customs duties, and where risk transfers between parties.

The current version is Incoterms 2020, with 11 terms grouped by mode:

• Any mode: 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), DDP (Delivered Duty Paid)
• Sea/inland waterway only: FAS (Free Alongside Ship), FOB (Free On Board), CFR (Cost and Freight), CIF (Cost, Insurance, and Freight)

The most common in ocean trade are FOB (seller delivers on board, buyer pays freight and insurance), CIF (seller pays freight + insurance to destination port), and DDP (seller pays everything including destination duties). Choosing the right Incoterm has major implications for cost, risk, and customs liability.