INCOTERMS® in International Trade

1. The significance of the Incoterms

The current version, Incoterms® 2020, entered into force on 1 January 2020 and remains, for the time being, the applicable version — experience shows that the ICC revises the rules only roughly every ten years, and a new version is not expected before around 2030. Designations such as “Incoterms 2024/2025/2026” do not exist and, where used, should always be understood as referring to the applicable Incoterms® 2020.

The Incoterms are globally recognised, standardised contractual and delivery terms that allocate costs, risk, and duties of care between the parties to an international (or domestic) contract of sale. They do not, however, govern the conclusion of the contract, the transfer of title, the processing of payment, or the legal consequences of a breach of contract; these matters are governed by the terms of the sale contract itself or by the applicable law.

2. The eleven Incoterms 2020 clauses

Incoterms® 2020 correspond in structure and classification to Incoterms 2010; the only structural change was the renaming of DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded), so that any agreed place can now serve as the place of destination:

• EXW – Ex Works
• FCA – Free Carrier
• FAS – Free Alongside Ship
• FOB – Free On Board
• CFR – Cost and Freight
• CIF – Cost, Insurance and Freight
• CPT – Carriage Paid To
• CIP – Carriage and Insurance Paid To
• DAP – Delivered At Place
• DPU – Delivered At Place Unloaded
• DDP – Delivered Duty Paid

3. Classification of the Incoterms

By mode of transport: clauses for any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and clauses for sea and inland waterway transport only (FAS, FOB, CFR, CIF). By the manner of performance: Group E — the collection clause (EXW); Group F — dispatch clauses under which the seller does not bear the main carriage costs (FCA, FAS, FOB); Group C — dispatch clauses under which the seller does bear the main carriage costs (CFR, CIF, CPT, CIP); Group D — arrival clauses (DAP, DPU, DDP).

4. Main and ancillary functions

The Incoterms primarily govern which obligations, costs, and risks each party bears for its respective leg up to or from the agreed handover point. In addition, among other things, they govern who procures the goods and transport documents, who insures, informs about, inspects, and packages the goods, and who bears the costs of each of these.

5. Key changes in the 2020 version compared with 2010

• Renaming of DAT to DPU (any place, rather than only a “terminal”, may now serve as the place of destination).
• Recognition of bills of lading bearing an “on-board” notation in connection with the FCA clause.
• A clearer presentation of the allocation of costs within the rules.
• Adjustment of the insurance cover under the CIF and CIP clauses to reflect current business practice.
• Recognition of the buyer’s or seller’s own means of transport under FCA, DAP, DPU, and DDP.
• Clear rules on the allocation of security-related obligations and costs in the carriage of goods.

6. Practical notes

The clause chosen must match the desired allocation of obligations and the mode of transport used; the maritime clauses (FAS, FOB, CFR, CIF) are suitable only for sea or inland waterway transport. The Incoterms become effective only if expressly agreed in the contract of sale — stating the version, e.g. “Incoterms® 2020 rules by the International Chamber of Commerce (ICC)”. The place of delivery or destination should be specified as precisely as possible. Attention should also be paid to the interplay with packaging law: whoever bears the risk of loss on crossing the border generally counts as the “producer” for packaging-law purposes and must license the packaging under the relevant extended producer responsibility scheme. In Germany, this means registration in the LUCID packaging register under the Packaging Act (Verpackungsgesetz); in Greece, a comparable extended producer responsibility regime exists under Law 2939/2001 (as most recently supplemented by, among others, Article 84 of Law 4819/2021), under which “obliged packaging producers” must register with the National Producer Register (Εθνικό Μητρώο Παραγωγών, E.M.PA.) held by the Greek recycling authority EOAN and join an approved producer-responsibility scheme (ΣΣΕΔ).

Note on the FOB clause: since Incoterms® 2010, the “ship’s rail” is no longer decisive for the passing of risk; what matters instead is the actual physical placing of the goods on board the ship.

Matters that the Incoterms do not cover — such as the transfer of title, payment terms, or the legal consequences of a breach of contract — must be agreed separately; as a general rule, this is governed by the national law applicable under the relevant conflict-of-laws rules (in Greece, for example, the Civil Code) or by the UN Convention on Contracts for the International Sale of Goods (CISG), unless its application has been excluded by the parties.

7. Source

The official ICC rulebook “Incoterms® 2020” is available as a bilingual (German/English) edition; since June 2021, the ICC has also offered a free Incoterms® 2020 app with additional materials (podcasts, articles).