Incoterms 2020 are international trade rules defining the allocation of costs, responsibilities and risks between the seller and the buyer. In practice, they determine who arranges transportation, who is responsible for customs clearance, and at what point the risk of loss or damage to the goods passes to the other party in the transaction.
What are Incoterms 2020?
Incoterms 2020 are a set of international trade rules:
- created by the ICC (International Chamber of Commerce),
- used in international trade,
- not governing ownership of the goods,
- defining the parties’ responsibilities related to transportation and delivery.
Why is choosing the right Incoterms rule so important?
Choosing the wrong delivery terms can lead to many problems, such as:
- unexpected transportation costs,
- disputes over damaged goods,
- incorrect assumptions regarding customs clearance,
- problems when importing from outside the European Union.
Incoterms 2020 for all modes of transport
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
→ Link to the Incoterms 2020 brochure
Incoterms used for sea transport
FAS – Free Alongside Ship
Goods delivered alongside the vessel.
FOB – Free on Board
Goods delivered on board the vessel.
CFR – Cost and Freight
The seller pays the sea freight.
CIF – Cost, Insurance and Freight
The seller pays the freight and insurance.
EXW, FOB, CIF or DDP – which terms should you choose?
Practical guidelines:
- Beginner importer – most commonly DDP, DAP or CIF/CFR
- Experienced importer – FCA or FOB
- Exporter – the choice depends on the market and the level of control over transportation costs.
Most common mistakes when using Incoterms
- Confusing costs with the point at which risk transfers.
- Using the FOB rule for air transport.
- Failing to specify the exact place of delivery.
- Assuming that Incoterms regulate payment for the goods.
- Incorrectly defining customs-related responsibilities.
Need help choosing the right Incoterms?
Our specialists help importers and exporters choose the optimal trade terms, reduce risk and optimise international transportation costs.
Phone: +48 518 283 876
Email: kontakt@atc-cargo.pl
