by What Are INCOTERMS?
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]
