All incoterms explained

What are Incoterms?

Incoterms (International Commercial Terms) are standardized rules published by the International Chamber of Commerce (ICC). For each delivery term, they define:

• Who arranges the transport

• Who pays which costs (freight, loading/unloading, insurance, customs)

• When the risk transfers from seller to buyer

• Which party handles which customs documents and procedures

Incoterms are periodically updated, but their core purpose remains the same: providing a global, uniform framework for delivery terms in international trade.

Why are Incoterms important?

Choosing the right Incoterm:

• Reduces misunderstandings and potential claims

• Clarifies who is responsible for delays, damage or loss

• Helps you plan transport and customs processes efficiently

• Provides transparency in the total landed cost of a shipment

• Ensures all parties work with the same, internationally accepted rules

For a logistics partner like BF Global, Incoterms are a key tool to align expectations between all parties in the supply chain.

Overview of all Incoterms

The current set of Incoterms consists of eleven rules, which can be grouped into:

• Terms for any mode of transport (road, air, rail, sea)

• Terms only for sea and inland waterway transport

Incoterms for any mode of transport

1. EXW – Ex Works

   • The seller makes the goods available at their premises.

   • The buyer arranges and pays for all subsequent transport and bears almost all risks from that point.

2. FCA – Free Carrier

   • The seller delivers the goods to the carrier or another nominated place.

   • The seller handles export formalities.

   • Risk transfers when the carrier takes charge of the goods.

3. CPT – Carriage Paid To

   • The seller pays for carriage to the agreed place or first carrier.

   • Risk transfers to the buyer when the goods are handed over to the first carrier, even though the seller pays the main transport costs.

4. CIP – Carriage and Insurance Paid To

   • Similar to CPT, but the seller must also provide transport insurance with at least the agreed minimum coverage.

   • Risk transfers when the goods are delivered to the first carrier.

5. DAP – Delivered At Place

   • The seller arranges and pays for transport up to the named place of destination.

   • Goods are placed at the buyer’s disposal, ready for unloading.

   • The buyer handles import clearance and related costs; risk transfers upon arrival (before unloading).

6. DPU – Delivered At Place Unloaded

   • The seller pays and organises the entire carriage and is also responsible for unloading at the named place.

   • Risk transfers to the buyer once the goods have been unloaded.

7. DDP – Delivered Duty Paid

   • Maximum seller obligation: the seller arranges and pays for transport, export and import formalities, including duties and taxes.

   • Risk transfers when the goods are placed at the buyer’s disposal at destination, ready for unloading.

Incoterms for sea and inland waterway transport only

Use these terms only when the main leg of the journey is by sea or inland waterway.

8. FAS – Free Alongside Ship

   • The seller delivers the goods alongside the vessel at the named port of shipment.

   • From that point, costs and risks are for the buyer.

9. FOB – Free On Board

   • The seller delivers the goods on board the vessel at the port of shipment.

   • Thereafter the buyer bears all costs and risks.

10. CFR – Cost and Freight

    • The seller pays the freight to the named port of destination.

    • The risk, however, transfers to the buyer once the goods are on board in the port of shipment.

11. CIF – Cost, Insurance and Freight

    • The seller pays freight and provides marine insurance up to the named port of destination.

    • As with CFR, risk transfers when the goods are loaded on board at the port of shipment.

How to choose the right Incoterm?

When selecting the right Incoterm, consider questions such as:

• Which party is better placed to organise transport?

• Up to which point does the seller want to carry costs and risks?

• Who can more efficiently handle customs clearance in the exporting or importing country?

• Which party has better access to competitive freight rates and insurance?

Remember: an Incoterm is not a complete sales contract, but a crucial part of it. Always combine the chosen Incoterm with clear agreements on pricing, payment terms and product specifications.