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What are Incoterms® 2020?
Incoterms® 2020 is a set of standardised trade terms that define the responsibilities between buyer and seller in terms of transport, costs and risk transfer when goods are transported from A to B.
They were created by the ICC (International Chamber of Commerce) and are a really important set of rules. Anyone who sends or receives goods should use them.
However, it can be difficult to find out which rules apply to which mode of transport. We have therefore created a clear overview for you.
Remember to save the PDF so that you always have the Incoterms® 2020 overview at your fingertips. You can download it as a PDF below.
Why are Incoterms® important?
Incoterms are there to help you avoid misunderstandings and legal problems in international trade. Incoterms have rules on:
- When the risk passes from the seller to the buyer
- Who bears responsibility and when for freight costs, customs duties and insurance
For both buyers and sellers, they therefore provide a clear set of rules that make international transactions easier to handle.
When you as the seller or buyer bear the risk, it is important that you insure the goods. This is because carriers only have limited liability for the goods being transported.
NB: Companies often have fixed Incoterms® that they use. It may therefore be a good idea to check whether your company has any fixed rules in this regard.
Free Incoterms® 2020 overview
We have created a visual overview for you that shows who bears responsibility and risk distribution for all Incoterms® 2020. Get it for free below and save it so you always have it at your disposal.
Incoterms 2020 is an updated version of Incoterms 2010. We therefore recommend using this latest version, such as the one below.
Overview of the most used Incoterms®
EXW (Ex Works)
EXW is a very popular Incoterm® that suits situations where the buyer wants full control over logistics
Seller's responsibility:
- The seller makes the goods available at their own premises (e.g. factory or warehouse).
Buyer's responsibility:
- The buyer is responsible for all costs and risks, from collection to delivery at the destination, including transport, insurance and customs duties.
Read more about EXW Incoterm®.
DAP (Delivered At Place)
DAP is also a widely used Incoterm®. It is often used when the seller has the opportunity to arrange transport to the buyer's location.
Seller's responsibility:
- The seller arranges transport and delivers the goods to an agreed destination – but without unloading them.
Buyer's responsibility:
- The seller bears the risk until delivery, but the buyer is responsible for customs clearance and payment of import duties.
Read more about DAP Incoterm®.
FOB (Free on Board)
FOB is used for sea freight and is suitable for situations where the buyer wants control from the port onwards.
Seller's responsibility:
- The seller is responsible for costs and risks until the goods are on board the ship at the port of shipment.
Buyer's responsibility:
- The buyer assumes the risk and costs from the moment the goods are loaded on board.
Read more about FOB Incoterm®.
How to choose the right Incoterms®?
When choosing Incoterms®, it is important to:
- Consider which mode of transport will be used (sea, air, road, or rail), as some Incoterms® can only be used for certain modes of transport.
- Some Incoterms® (e.g. CIF and CIP) require the seller to take out insurance for the goods. Choose an Incoterm® that fits your insurance and risk plan.
- Assess how experienced the buyer and seller are in international trade and logistics. If one party has less experience, it may be advantageous to choose an Incoterm® where the other party takes on more responsibility.
- If one of the parties does not have access to reliable logistics partners, you may consider choosing an Incoterm® where the other party is responsible for transport.
- For goods with special requirements, such as temperature-sensitive products, you should choose an Incoterm® that gives you control over the transport conditions.
- If you use several different modes of transport (e.g. ship and truck), you must ensure that your Incoterm® covers all modes of transport (e.g. FCA, CIP).
By considering these factors, you can choose the Incoterm® that best distributes responsibility, risk and costs between the buyer and seller. This allows you to minimise the risk of delays, misunderstandings and errors.
We hope you find our Incoterms® overview useful. If you have any questions about these, please feel free to reach out.
Thank you for reading.
Frequently asked questions about Incoterms®
What are Incoterms® 2020?
Incoterms® 2020 are the latest rules from the International Chamber of Commerce (ICC). They describe who is responsible for freight costs, insurance and risk when goods are bought and sold between countries.
What are DDP Incoterms® 2020?
DAP stands for "Delivered at Place" and means that the seller is responsible for transporting and delivering the goods to an agreed destination. However, the buyer is responsible for customs clearance and payment of import duties upon arrival of the goods. Read more about DDP Incoterm®.
What are FCA Incoterms® 2020?
FCA means Free Carrier. Here, the seller delivers the goods to the carrier chosen by the buyer. Once the goods have been handed over to the carrier, responsibility is transferred to the buyer. FCA can be used for all types of transport. Read more about FCA Incoterm®.
What is the difference between Incoterms® 2010 and 2020?
Incoterms® 2020 is an update of the 2010 rules. Both versions can still be used, but the 2020 rules are better suited to modern trade.
Is there an Incoterms® 2024?
No, there is no Incoterms® 2024. Incoterms® are usually updated every 10 years. The next version is not expected until around 2030. Incoterms® 2020 are still the latest rules.
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