What are Incoterms 2020? A Comprehensive Guide for Exporters.

Incoterms 2020 is a set of rules consisting of 11 delivery terms published by the International Chamber of Commerce (ICC) that standardize the sharing of costs, risks, and responsibilities between sellers and buyers in international sales of goods. These rules aim to reduce disputes in foreign trade by clarifying who is responsible for the goods up to a certain point.

What are Incoterms used for?

• It clarifies which costs (transportation, insurance, customs clearance) the seller and buyer will bear.
• It determines at what point the risk passes from the seller to the buyer.
• It creates a common "language of trade" between parties in different countries.
• It speeds up the contract and proposal preparation process.

Delivery Terms under Incoterms 2020

Suitable for all types of transportation:

1. EXW – Ex Works (Delivery at Work Site)
2. FCA – Free Carrier
3. CPT – Carriage Paid To
4. CIP – Carriage and Insurance Paid To
5. DAP – Delivered at Place
6. DPU – Delivered at Place Unloaded
7. DDP – Delivered Duty Paid

Only those used in sea/inland waterway transport: 8. FAS – Free Alongside Ship 9. FOB – Free on Board 10. CFR – Cost and Freight 11. CIF – Cost, Insurance and Freight

How to Choose the Right Incoterms?

• Depending on the mode of transport : If container/road transport is used, options such as FCA and CPT are preferred; if sea transport is used solely, options such as FOB and CIF are preferred.
• According to the responsibility-sharing agreement : The party wishing to maintain control over the logistics process may choose a delivery term with less responsibility (e.g., EXW, FOB).
• Depending on who handles customs clearance : In delivery terms like DDP, the seller also assumes responsibility for customs duties in the destination country; this usually means a higher price.

Frequently Asked Questions

Is Incoterms 2020 different from Incoterms 2010? Yes, the 2020 revision introduced DPU (Delivered at Place Unloaded) instead of DAT (Delivered at Terminal), and some security/insurance requirements were updated.

Are Incoterms a legal contract? No, Incoterms are not a contract in themselves; they are standard rules used as a reference within a sales contract.

Which Incoterms are most commonly used? While it varies depending on the sector and type of transport, FCA and CIF are frequently preferred in container shipping.

Does Incoterms also specify the payment method? No, Incoterms only regulates cost/risk sharing; the payment method (cash, letter of credit, deferred payment, etc.) is determined separately in the contract.

Which Incoterms are safer for SMEs? For SMEs with limited logistics experience, options like CIF or CIP, where the seller is responsible for transportation and insurance, can simplify the process; however, it is recommended that each trade be evaluated according to its own specific conditions.

This content was prepared by the GoTradeGo team. If you would like support from a foreign trade expert regarding Incoterms selection or the contract process, you can access the relevant profiles on gotradego.com .