skip to main text

Logistics Glossary International Rules for Terms of Trade, Incoterms

Registration dateSEP 14, 2021

Cello Square - logictics_terms.zip Incoterms
1) Definition of Incoterms What are Incoterms? Standard terms for commercial transactions for domestic and international use, published by the International Chamber of Commerce.
It’s an abbreviation for “International Commercial Terms.” It consists of eleven rules with three-alphabet titles, and ICC revises them every ten years.
In other words, Incoterms are standardized rules of transaction designed to reflect transaction practices for all products with regard to contractual obligations among different parties in international trading, that is, risks, costs, and insurances of sellers and buyers.


2)Classification of standardized transaction conditions by mode of transportaion ① Applicable to all transportation terms regardless of mode of transportation
EXW(EX Works)
- The buyer bears most expenses and risks arising from the shipping process.
- The seller is only responsible for connecting the buyer with the product.
- All liabilities transfer to the buyer, once he/she confirms the products (including the loading of the products).
FCA(Free Carrier)
- The seller is responsible for delivering the goods to the buyer’s carrier at an agreed location.
- The seller is responsible for export customs clearance.
- All risks are borne by the buyer after the carrier receives the goods.
CPT(Carriage Paid to)
- The seller delivers the goods to a carrier of his/her choice in the exporting country and pays the transportation costs to the destination in the importing country.
- The carriage includes all transportation costs including ocean, air, and land freight charges.
CIP(Carriage and Insurance Paid to)
- CIP consists of similar conditions as CPT except for the seller’s obligation to pay for insurance premium.
- The seller is responsible for purchasing an insurance policy with the highest coverage (ICC-A).
- If the buyer wants a more comprehensive coverage, the buyer should prepare such an insurance policy.
DAP(Delivered at Place)
- The seller bears the risks and costs of delivering the goods to the agreed address.
- The delivery is deemed complete when the goods are delivered to the destination and ready for unloading.
DPU(Delivered Place Unloaded)
★2020 revision (DAT removed, DPU newly added)
- In Incoterms 2010, DAT was the only rule that requires the goods to be delivered in the unloaded state. However, it restricted the place of delivery to the terminal of the destination.
- To address this issue, Incoterms 2020 adopted the DPU rule, which allows products to be delivered to any place in the destination in the unloaded state.
DDP(Delivered Duty Paid)
- The seller bears most risks arising from the shipping process.
- The seller bears all risks and costs of delivering the goods to the agreed address.
- The seller must confirm whether the goods are ready for unloading, assume responsibilities for all matters regarding import and export, and pay all custom duties.
② Rules applicable to ocean and inland transportation
FAS(Free Alongside)
- The seller bears all costs and risks until the goods are delivered alongside the ship.
- The buyer bears the risks after the export/import customs clearance is complete.
FOB(Free On Board)
- The seller bears all costs and risks until the goods are delivered to the ship.
- The buyer bears all responsibilities from the moment that the goods are loaded onto the ship.
CFR(Cost and Freight)
- The seller has the same responsibilities as FOB. However, the seller must pay for transporting the goods to the port.
- As in FOB, the buyer bears all responsibilities from the moment that the goods are loaded onto the ship.
CIF(Cost, Insurance and Freight)
- This rule only applies to maritime transportation. It consists of the same terms as CFR, except for maritime insurance premiums.
- The seller enters into a transportation contract for delivering the goods to the designated port of destination and pays for the costs and fares for the delivery, and the maritime insurance premiums to the port of destination.
- The goods are insured before shipment, and the seller is the insured party until loading. After shipping, the buyer becomes the insured party.
3)Incoterms 2020 : 5 Revision Points
(Incoterms 2010 to Incoterms 2020)
①DPU DAT removed; DPU newly added

②CIP Insurance scope revised for CIP

③④FCA Obligation to issue shipped B/L at FCA
Self-transportation (not 3PL) allowed for FCA (Buyer) and D rules (Seller)

⑤EXW String sales applied to all rules except for