What are Incoterms?
Incoterms are 11 three-letter trade terms published by the International Chamber of Commerce (ICC) that set out which tasks, costs and risks the seller and the buyer each take on in a sale of goods. The current edition, Incoterms 2020, entered into force on 1 January 2020. Example (round numbers): a supplier quotes 30,000 dollars "DDP Chicago, Incoterms 2020". DDP means Delivered Duty Paid, so the seller arranges delivery to Chicago and the import clearance, and its price has to cover them.
- Incoterms are eleven ICC trade terms, first published in 1936, that allocate tasks, costs and risks between seller and buyer.
- Incoterms 2020 has seven rules for any mode of transport and four for sea and inland waterway transport.
- Incoterms do not set the price, the payment method or timing, or when ownership passes.
- Each rule needs a named place or port, and the contract should state the edition, such as Incoterms 2020.
- Parties may still agree to use an earlier edition if they identify it clearly.
How Incoterms work
Each rule states who arranges carriage and insurance, who handles export and import customs formalities, who pays for each step, and when risk of loss or damage passes from seller to buyer by reference to delivery. The term is written with a place, for example "FCA Shenzhen" or "CIF Rotterdam".
| Group | Rules |
|---|---|
| Any mode of transport (7) | 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 and inland waterway (4) | FAS Free Alongside Ship; FOB Free on Board; CFR Cost and Freight; CIF Cost Insurance and Freight |
Sources: ITA, Know your Incoterms; ICC, Incoterms rules. As published on 29 October 2026.
DPU replaced the earlier DAT rule and adds the seller's duty to unload the goods.
What Incoterms do not cover
The International Trade Administration lists what the rules leave to the contract of sale:
- all the conditions of the sale, the goods and the price;
- the method and timing of payment;
- when title, or ownership, passes;
- which documents the seller must provide for the buyer's customs clearance;
- liability for nonconforming goods, late delivery and dispute resolution.
That is why a proforma invoice should state the Incoterm, the price and the payment terms together, and why a letter of credit names the documents separately.
Common mistakes
- Using a sea rule for containers or air freight. FOB, CFR and CIF are sea and inland waterway rules; FCA, CPT and CIP work for any mode.
- Leaving out the place. "FOB" without a named port is incomplete.
- Not stating the edition. Write "Incoterms 2020" so both sides use the same rules.
- Expecting the Incoterm to settle payment. It does not; agree payment terms separately.
Related terms and how Helm handles it
Costs named in the Incoterm, such as freight and insurance, also appear on the commercial invoice. Helm pays suppliers and freight forwarders by SWIFT or local rails where available, with the rate, fee and expected arrival shown before sending; see Helm for importers.
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How many Incoterms are there?
Eleven. Incoterms 2020 has seven rules for any mode of transport and four for sea and inland waterway transport.
Are Incoterms 2020 still current?
Incoterms 2020 entered into force on 1 January 2020 and is the edition the ICC publishes as current. Parties can agree to use an earlier edition if they name it clearly in the contract.
Do Incoterms decide when the buyer pays?
No. The International Trade Administration notes that Incoterms do not cover the method or timing of payment, the price, or when ownership passes. Those belong in the sales contract.
What is the difference between FOB and FCA?
FOB, Free on Board, is one of the four rules for sea and inland waterway transport and names a port of loading. FCA, Free Carrier, can be used for any mode of transport and names a place of delivery.
References
- International Chamber of Commerce: Incoterms rules
- International Trade Administration: Know your Incoterms
- International Trade Administration: Common export documents
This guide is general information for businesses, not financial, legal or tax advice. Rules, fees and timings were checked against the sources listed on the review date and may change.