What are Incoterms

What are Incoterms

Incoterms are a set of pre-defined international rules published by the International Chamber of Commerce which determine the contractual clauses to be used in international commercial sales contracts. When looking for container shipping rates, you must keep Incoterms in mind as the Incoterm you choose may affect your overall shipping costs.

Incoterms determine

  • Who is responsible for price (who pays each part of the international transport)

  • When risk is exchanged between the seller and the buyer during the transport of the goods (who is responsible at any given time)

  • The delivery location (provided to the seller)

  • Who hires and pays for the transportation required

  • Who hires and pays for the insurance used

  • The handling and cost of each necessary document

Incoterms 2010

The latest version of Incoterms, Incoterms 2010, was published on January 1st 2011 and defines 11 different Incoterms, down from the 13 in Incoterms 2000.

In the current version, Incoterms are divided into four groups (E, F, C and D), depending on the delivery location of the goods and the responsibility for payment at different stages of the international transport.

Incoterms Group E

Condition: The buyer is responsible for collecting the goods at the seller’s warehouse and bears all associated risk and cost.

Incoterms Group F

Condition: The seller is responsible for bringing the goods to the buyer’s predefined transport medium; the buyer then accepts cost and risk responsibility from that point onwards.

Incoterms Group C

Condition: The seller bears all costs to the destination port (including international transport) however, risk transfer will be made once the goods are loaded on the means of transport.

  • CPT Incoterm (Carriage Paid to, any means of transport)

  • CIP Incoterm (Carriage and Insurance Paid to, any means of transport)

  • CFR Incoterm (Cost and Freight, exclusive to shipping)

  • CIF Incoterms (Cost, Insurance and Freight, exclusive to shipping)

Incoterms Group D

Condition: The seller bears all risks and costs necessary to bring the goods to the destination country.

How to choose the right Incoterm

If you’re still confused over which Incoterm to choose, we recommend giving our article on how to choose a safe and competitive Incoterm a read to find out which Incoterm is right for you.


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