Connecting the dots between the buyers and sellers through world trade.
What are Incoterms®?
Incoterms ® or International Commercial Terms are the common language of international trade. Established by the International Chamber of Commerce (ICC), they are standard terms which are commonly incorporated into contracts for the trade of goods around the world.
They help buyers and sellers avoid costly misunderstandings by clarifying who bears the obligations, costs and risks involved in the delivery of goods from sellers to buyers.
Incoterms® provide clarity and predictability to businesses across the globe.
The Incoterms® were last updated in 2019 and hence Incoterms® 2020 are the most current version of the terms. However, some buyers and sellers still prefer to use Incoterms® 2010.
In total, there are 11 sets of Incoterms®, of which, 7 are applicable to all modes of transport, and the other 4 cater to sea and inland waterway transport only.
Incoterms® for all modes of transport
- Ex Works (EXW)
- Free Carrier (FCA)
- Carriage Paid To (CPT)
- Carriage and Insurance Paid To (CIP)
- Delivered at Place (DAP)
- Delivered at Place Unloaded (DPU)
- Deliver Duty Paid (DDP)
Incoterms® for sea and inland waterway transport
- Free Alongside Ship (FAS)
- Free on Board (FOB)
- Cost and Freight (CFR)
- Cost, Insurance and Freight (CIF)
It can be hard to keep track of all the Incoterms® and what they mean for you and your business.
That’s why we’ve created a simple infographic, summarising the key Incoterms® you will encounter when dealing with ocean or air shipping, and the split of responsibilities between buyer and seller.
Quick tips on Incoterms®
When considering Incoterms®, understanding what buyers and sellers must each do under each set of terms is key. Allocation of risk between the parties will shift depending on which Incoterms® you choose. During transactions related to a new shipment, there are a few questions you should seek to clarify with your buyer/seller:
- Cost allocation: Who will pay for what?
- Obligations: Who will take on which obligation in the shipping process?
- Risk: Who covers which cargo risk or pays for insurance?
Answers to the above will give you the basic information you need to decide which Incoterms® should be incorporated into the contract. If you are using an Incoterm® in your sale and purchase contract, this should be set and agreed upon before the cargo is sold or the transportation is booked.
Always consult the ICC's information and website for latest updates on Incoterms® and the full obligations and risks you will need to comply with for each set of terms. We recommend seeking legal advice to determine which Incoterms® are right for you.
This page is for information only and is relied upon at your own risk. Maersk is not party to sales contracts between buyer and seller and if you are uncertain which Incoterms® to use for a particular transaction you should seek independent legal advice.
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterms® Rules may be obtained from the ICC website iccwbo.org.