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Short answer
Incoterms are a set of eleven three-letter trade terms published by the International Chamber of Commerce (ICC) that spell out the tasks, costs and risks involved in delivering goods from seller to buyer. The current edition, Incoterms 2020, has been in force since 1 January 2020. They work only when a contract says so: a purchase order or sales agreement has to name the rule, a place and the version.
What Incoterms rules are
The ICC describes itself as the creator and guardian of the Incoterms rules, which have been used in trade contracts worldwide since 1936 and were last updated in 2020. The rules are used in international and domestic contracts for the delivery of goods, and each one allocates tasks, costs and risks between the seller and the buyer.
The US International Trade Administration lists what the rules cover:
- who obtains export and import licences and completes customs formalities, and who pays for them;
- who contracts and pays for carriage and insurance;
- who bears the cost of packing and pre-shipment inspection;
- when delivery takes place and when risk transfers, by reference to the delivery provision of the chosen rule.
How Incoterms are used in a sales contract
Incoterms are generally incorporated into the contract of sale rather than applying on their own. The Trade Administration notes that parties may use the 2010 edition or another version after 2020, but they must specify which version they chose. In practice that means a contract states the rule, the named place and the edition together, for example a rule abbreviation followed by a place and “Incoterms 2020”.
The 11 Incoterms 2020 rules by transport mode (chart)
Incoterms 2020 is split into seven rules for any mode of transport and four rules for sea and inland waterway transport only. The grouping and names below follow the US International Trade Administration’s guide.
| Rule | Full name | Transport mode group |
|---|---|---|
| EXW | Ex Works | Any mode |
| FCA | Free Carrier | Any mode |
| CPT | Carriage Paid To | Any mode |
| CIP | Carriage and Insurance Paid To | Any mode |
| DAP | Delivered at Place | Any mode |
| DPU | Delivered at Place Unloaded | Any mode |
| DDP | Delivered Duty Paid | Any mode |
| FAS | Free Alongside Ship | Sea and inland waterway |
| FOB | Free on Board | Sea and inland waterway |
| CFR | Cost and Freight | Sea and inland waterway |
| CIF | Cost, Insurance and Freight | Sea and inland waterway |
What changed from the 2010 edition
The ICC highlights three changes in Incoterms 2020 that matter when you read older paperwork:
- DPU replaces DAT. Delivered at Place Unloaded was formerly DAT. It was renamed to reflect that the destination can be any place, and the Trade Administration notes that under DPU the seller must unload.
- FCA and bills of lading. FCA was revised so that, for sea carriage, the buyer can instruct its carrier to issue an on-board bill of lading.
- Insurance. CIP now carries a higher insurance cover requirement than CIF, and the ICC reserves CIF for maritime trade.
Where it matters for labs, clinics and supply purchasing
For a lab or clinic buying consumables, equipment or supplies from another country, the delivery terms in the quotation or purchase order are where an Incoterms rule would appear. The rules settle questions that otherwise surface only when a shipment is delayed or damaged: who arranged the carrier, who handled export and import formalities, and who was responsible at each stage of the journey.
A checklist built from the Trade Administration guide
- Name one of the eleven rules, using its three-letter code.
- Add the named place the rule refers to, such as a port, a facility or a destination address.
- State “Incoterms 2020” (or whichever edition you intend), because the version must be specified.
- Check that the rule suits the transport mode: FAS, FOB, CFR and CIF belong to sea and inland waterway transport.
- Write separate clauses for what Incoterms do not decide (see the next section).
Export-controlled items and research materials add their own licensing questions; see the CASRAI entry on export-controlled research. For sample and reagent transfers, the material transfer agreement governs the use of the material, which is a different question from delivery terms.
Common misunderstandings
Incoterms do not transfer title or set payment
According to the Trade Administration, Incoterms do not address when title passes, the method or timing of payment, the contract price or the identification of the goods, buyer-side customs documents, liability for non-conforming or late goods, or dispute resolution. Those points need their own contract clauses. Ordering paperwork, such as the difference between a purchase requisition and a purchase order, is also outside the rules.
The edition must be stated
Writing only “FOB” or “CIF” leaves the edition open. The rules say the version has to be specified, and Incoterms 2020 is not the only one parties may choose.
Incoterms FOB is not the same as domestic FOB
US domestic pricing uses “FOB origin” and “FOB destination” to describe where title and risk of loss move to the buyer, and that usage is separate from the Incoterms FOB rule, which is limited to sea and inland waterway transport. CASRAI’s comparison of FOB and delivered pricing in medical supply contracts covers the domestic usage, and the guide to filing a freight damage or shortage claim shows why knowing which party holds the risk matters when something arrives damaged.
FAQ
What is Incoterms 2020?
Incoterms 2020 is the current edition of the ICC’s eleven three-letter trade terms, in force since 1 January 2020. It sets out the tasks, costs and risks involved in delivering goods from sellers to buyers, and applies when a contract refers to it.
What is an Incoterms chart?
An Incoterms chart is a summary table of the eleven rules. The table above groups them by transport mode: seven for any mode of transport and four for sea and inland waterway only.
Do Incoterms apply to domestic shipments?
The ICC says the rules are used in both international and domestic contracts for the delivery of goods, as long as the contract adopts them.
Sources
- International Chamber of Commerce, Incoterms 2020 (checked 29 October 2026).
- International Chamber of Commerce, Incoterms rules overview (checked 29 October 2026).
- US International Trade Administration, Know Your Incoterms (checked 29 October 2026).
