INCOTERMS are standardized trade terms published by the International Chamber of Commerce (ICC).
They are used in international contracts to clearly define the responsibilities between exporters and importers.
They clarify:
- Who arranges and pays for transport?
- Who handles export/import duties?
- At which point the risk transfers from seller to buyer?
🧾 Why Are INCOTERMS Important?
✅ Prevents misunderstandings in contracts
✅ Minimizes legal disputes
✅ Helps in accurate pricing and cost negotiation
✅ Clearly defines buyer and seller roles
✅ Standardized globally (used in 190+ countries)
🔢 INCOTERMS 2020 – The 11 Terms You Must Know
Here are the 11 INCOTERMS classified into 2 categories:
🚢 For Any Mode of Transport:
| Term | Full Form | Risk Transfer |
|---|---|---|
| EXW | Ex Works | At seller’s factory/warehouse |
| FCA | Free Carrier | When goods are handed to carrier |
| CPT | Carriage Paid To | When delivered to the first carrier |
| CIP | Carriage and Insurance Paid | Same as CPT + insurance |
| DAP | Delivered at Place | Risk on seller until destination |
| DPU | Delivered at Place Unloaded | Risk on seller until unloaded |
| DDP | Delivered Duty Paid | Seller bears all costs, duties, and risk till buyer’s door |
⚓ For Sea or Inland Waterway Transport:
| Term | Full Form | Risk Transfer |
|---|---|---|
| FAS | Free Alongside Ship | At port beside ship |
| FOB | Free On Board | When goods are on the vessel |
| CFR | Cost and Freight | Buyer assumes risk once loaded |
| CIF | Cost, Insurance & Freight | Same as CFR + insurance |
🧠 Examples for Indian Exporters
- Exporting Basmati Rice from India to Dubai?
Use FOB – Free On Board, let buyer handle freight. - Selling readymade garments to the US on DDP?
You handle everything — customs, duties, freight. - Shipping ceramic tiles to Europe with CIF?
You pay freight + marine insurance, risk transfers once shipped.
✅ Best INCOTERMS for Beginners
- FOB – Most commonly used for sea exports
- CIF – Good if you want to provide full-service shipping
- EXW – Use if the buyer handles everything from your warehouse
- DDP – Advanced term, best avoided by new exporters
🔐 Pro Tips
- Always match your payment term (LC, Advance) with the INCOTERM
- Clarify responsibilities in writing even when using INCOTERMS
- Don’t assume your freight forwarder handles everything — ask clearly
- Know your buyer’s expectations and shipping preferences
📥 Free Resource:
🎁 Download our printable INCOTERMS 2020 Summary Sheet
🔗 Explore more tools & downloads → [Visit Export Resource Hub]
