What are Incoterms?
Incoterms (International Commercial Terms) are a set of international standard rules published by the International Chamber of Commerce (ICC) to define the responsibilities of sellers and buyers in international trade transactions.
Key Changes in Incoterms 2020
The 2020 version brings several significant changes from the 2010 version, including: replacement of DAT (Delivered at Terminal) with DPU (Delivered at Place Unloaded), enhanced cargo security provisions, and more detailed clarifications regarding CIF and CIP insurance.
Incoterms Groups by Risk
EXW (Ex Works) — least risk for the seller; buyer bears all costs and risks from the point of origin.
FOB (Free on Board) — most commonly used for sea shipments; seller bears costs until goods are loaded on the vessel.
CIF (Cost, Insurance & Freight) — seller bears costs, insurance, and freight to the destination port.
DDP (Delivered Duty Paid) — seller bears all costs including import duties; highest risk for the seller.
Tips for Choosing the Right Incoterms
The right choice of Incoterms depends on your bargaining position, ability to manage international logistics, and your relationship with trading partners. Always consult with an experienced freight forwarder before agreeing to terms in a contract.