Know Your Incoterms

Help ensure a smooth export transaction and avoid potentially costly mistakes. Use internationally recognized Incoterms® to clarify the tasks, costs and risks for buyers and sellers in these transactions.

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Incoterms, widely-used terms of sale, are a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.

An Overview of Incoterms® 2020

The Incoterms® are a set of 11 individual rules issued by the International Chamber of Commerce (ICC) which define the responsibilities of sellers and buyers for the sale of goods in international transactions. Of primary importance is that each Incoterms rule clarifies the tasks, costs, and risks to be borne by buyers and sellers in these transactions. Familiarizing yourself with Incoterms will help improve smoother transactions by clearly defining who is responsible for what and each step of the transaction.

The Incoterms® 2020 rules are updated and grouped into two categories reflecting modes of transport. Of the 11 rules, there are seven for ANY mode(s) of transport and four for SEA or LAND or INLAND WATERWAY transport.

The seven Incoterms® 2020 rules for any mode(s) of transport are:

EXW - Ex Works (insert place of delivery)

FCA - Free Carrier (Insert named place of delivery)

CPT - Carriage Paid to (insert place of destination)

CIP - Carriage and Insurance Paid To (insert place of destination)

DAP - Delivered at Place (insert named place of destination)

DPU - Delivered at Place Unloaded (insert of place of destination)

DDP - Delivered Duty Paid (Insert place of destination).

Note: the DPU Incoterms replaces the old DAT, with additional requirements for the seller to unload the goods from the arriving means of transport.

The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are:

FAS - Free Alongside Ship (insert name of port of loading)

FOB - Free on Board (insert named port of loading)

CFR - Cost and Freight (insert named port of destination)

CIF - Cost Insurance and Freight (insert named port of destination)

Can I still use Incoterms® 2010 after January 1, 2020?

Yes, all contracts using any incoterms are valid if they are agreed upon by all parties to the transaction, and correctly identified on the export-related documents. Although the ICC recommends using Incoterms® 2020 beginning January 1, 2020, parties to a sales contract can agree to use any version of Incoterms after 2020. They need to clearly specify the chosen version of Incoterms being used (i.e., Incoterms® 2010, Incoterms® 2020, or any earlier version).

Incoterms Clarify Responsibilities of Parties to a Sales Transaction

What Incoterms Do Not Cover

As noted above, Incoterms are generally incorporated in the contract of sale, however, they do not:

Where can I learn more about the new Incoterms® 2020 rules?

The latest version of the Incoterms® 2020 rules is now published by International Chamber of Commerce (ICC) and protected by copyright. The revised rules reflect the latest developments in commercial transactions. As of January 1, 2020, all sales contracts should include references to the Incoterms® 2020 rules. You may obtain Incoterms® 2020 rules visit the ICC website.

*Disclaimer

This information has been provided as a resource to familiarize U.S. exporters with Incoterms®. This page is not legal advice, and the information provided is not the official legal or full definition of each Incoterm®. When pursuing a specific export transaction, you are encouraged to conduct your own due diligence and to consult legal counsel as appropriate. Licensed freight forwarders may also be helpful.

The terms of sale and Incoterms do not determine the type of export transaction as described in the U.S. Census Bureau’s Foreign Trade Regulations, as they have no regulatory basis. A standard export transaction is a transaction in which the USPPI facilitates the export of goods by arranging the physical movement of the goods from the United States. A routed export transaction is a transaction where the FPPI selects a U.S. forwarding or other agent to facilitate the export of goods from the United States, regardless of the terms of sale.