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An Overview of Incoterms


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Understanding Incoterms

What are Incoterms?

Incoterms are international sales conditions that define various aspects of handling and paying for the shipping of goods from the point of origin to the point of destination.

What does "Incoterms" stand for?

"Incoterms" is shorthand for "International Commercial Terms" according to the International Chamber of Commerce.

What do Incoterms define and identify?

  • Define the expenses and duties between the seller and the buyer.
  • Identify the point at which the risk of cargo loss or damage passes from the buyer to the seller.
  • Send instructions to banks, carriers, forwarders, customs brokers, and other parties involved in shipping.

What don't Incoterms cover?

  • Address ownership or the transfer of title.
  • Cover the cost of the goods (payment terms are separate).
  • Describe insurance responsibility (except for CIF and CIP terms).

Commonly Used Incoterms

FOB (Free on Board) / FCA (Free Carrier)

  • In FOB, the seller is responsible for delivering goods to the port and loading them onto a ship.
  • In FCA, the seller delivers goods to the buyer's designated location.
  • Both terms specify when the risk transfers from the seller to the buyer.

Ex Works (EXW)

In EXW, the seller makes the goods available at their location. The buyer is responsible for all costs and risks from that point.


Which Incotermsversions do buyers and sellers refer to?

Buyers and sellers commonly refer to Incoterms2010 and Incoterms2020.

Variations in Incoterms 2020

Incoterms 2020 introduced changes, including a new option for the buyer to direct the carrier to issue a transport document at their expense and risk. The seller's responsibility for export clearance in the FAS (Free Alongside Ship) clause.


Incoterms play a crucial role in international trade by clarifying responsibilities, risks, and instructions in the shipment of goods.

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