Short for INternational COmmercial Terms, they establish who pays for what, where responsibility for a shipment begins and ends and how both sides manage risk. See how they've been updated for 2020.
Incoterms, or INternational COmmercial TERMS, are a set of rules that define—in a shipping contract—who is responsible for covering insurance, freight and transportation costs, as well as when these cost responsibilities and the assumption of risk shift from the buyer to the seller. They help facilitate international trade by providing common reference points. Incoterms rules are revised every 10 years by the International Chamber of Commerce Commission (ICC). For more information, see our Incoterms FAQs.
In order to broaden the scope to allow a delivery location other than just a terminal, DAT (Delivered at Terminal) has been replaced by DPU (Delivered at Place Unloaded). This means the goods are delivered once unloaded at the agreed-upon place.
Due to increasing disputes about the allocation of costs, especially those in or around the port or place of delivery, the precise allocation of costs between seller and buyer has been improved. The broad principle is that the seller is responsible for costs incurred up to the point of delivery, and the buyer is responsible for costs beyond that.
New transport security requirements (e.g. mandatory screening of containers) have become more prevalent. These requirements can add cost and risk delay if not fulfilled. The 2020 Incoterms rules make security obligations more prominent; these are covered in A4/A7 in each Incoterm.
Previous Incoterms assumed the transport of the goods between seller and buyer would be handled by a third-party carrier. They did not deal with situations where transport was provided by the seller or buyer (e.g. the seller's own truck). That position is now clarified in the FCA (Free Carrier) Incoterm: the buyer is required to "contract or arrange, at its own cost, for the carriage of the goods from the named place of delivery."
Explanatory notes for each Incoterm are more detailed and pictures are more useful.
Each Incoterm has been reordered so the delivery obligation (the key part) is more prominent, now in A2.
A new tool lets you compare each Incoterm element across all Incoterms. (e.g. you can view the delivery in A2 across all Incoterms.)
Multimodal Incoterms are now separate from maritime-only Incoterms, which reduces the risk of using the wrong one.
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