Incoterms — short for International Commercial Terms — are a set of standardized three-letter trade terms published by the International Chamber of Commerce (ICC) in Paris. First published in 1936 and now in their ninth edition (Incoterms 2020), they define the responsibilities of buyers and sellers in international sales contracts.
Each Incoterm allocates four core obligations:
- Costs — Who pays for export packing, inland transport, main carriage, insurance, and import duties
- Risk — Where in the journey the risk of loss or damage transfers from seller to buyer
- Delivery — Where and when the seller has fulfilled its delivery obligation
- Customs clearance — Which party handles export and import formalities
Incoterms do not address title transfer, payment terms, or breach of contract — those remain governed by the sales contract and the applicable law (UCC, CISG, etc.). They also do not constitute a complete sales contract on their own.
Incoterms 2020 has 11 rules in total, split into two categories:
- Multimodal rules (any mode of transport) — EXW, FCA, CPT, CIP, DAP, DPU, DDP
- Sea and inland waterway rules — FAS, FOB, CFR, CIF
To incorporate Incoterms into a contract, the parties should reference the specific edition: "FOB Long Beach, California, Incoterms 2020." A reference to "FOB" without an edition creates interpretive risk, as the rules have changed materially across editions (most recently between Incoterms 2010 and 2020).