Incoterms
Also: International Commercial Terms, ICC-Klauseln, Lieferklauseln, Incoterms 2020, Incoterms® 2020, Handelsklauseln
AI-generated
Incoterms are internationally standardized trade terms issued by the International Chamber of Commerce (ICC) that define in the sales contract who bears transportation costs, at what point risk transfers from seller to buyer, and who is responsible for which formalities.
Key facts
- Incoterms® 2020 comprises eleven terms that clearly assign risk transfer, cost allocation, and formalities in international trade.
- Incoterms do not govern the transfer of ownership — this is determined by the applicable national law.
- The choice of term directly affects the total landed cost, as it determines who bears freight, insurance, and customs clearance.
- In practice, incorrectly applied terms frequently lead to ambiguity in damage cases and make it harder to enforce claims.
What are Incoterms?
Incoterms (International Commercial Terms) are standardized delivery terms published by the International Chamber of Commerce (ICC). They address three central questions of any delivery transaction in a concise format: Who bears transportation costs for which leg of the journey? At what point does risk transfer from seller to buyer? Who is responsible for customs clearance and arranging any required insurance? What Incoterms explicitly do not govern is the transfer of ownership of the goods — that is determined by the applicable national law. Details such as payment terms or warranty claims are also not part of the terms.
How do Incoterms work in practice?
The current edition, Incoterms® 2020, comprises eleven terms divided into two groups: terms applicable to all modes of transport (e.g. EXW, FCA, CPT, CIP, DAP, DPU, DDP) and terms applicable exclusively to sea and inland waterway transport (FAS, FOB, CFR, CIF). Each term designates a specific point of transfer. Under EXW (Ex Works), for example, the buyer bears full responsibility for transport from the moment the goods leave the seller's premises. Under DDP (Delivered Duty Paid), by contrast, the seller bears all costs and risks up to the buyer's unloading point, including customs clearance. In day-to-day business, procurement and logistics teams select the term jointly: it affects who engages freight forwarders, who arranges insurance, and who files claims in the event of damage or delays. A poorly chosen term can result in damage cases where responsibility cannot be clearly assigned, or in unexpected costs that were not factored into the quoted price.
What matters when making a selection?
When choosing the right term, you should consider the following points:
- Competence and negotiating power: Who can procure the main carriage at a better rate — buyer or seller? This directly affects the total landed cost.
- Insurance requirements: CIP, for example, requires a more comprehensive minimum level of coverage than CIF — relevant for high-value goods.
- Customs expertise: DDP requires the seller to be authorized to carry out customs clearance in the country of import, which is not always the case.
- Documentation obligations: The point of transfer determines which documents must be available and when. Gaps in documentation delay claims and payment processing.
- Risk allocation and internal processes: Logistics and warehouse planning teams need to know from which moment they are responsible for the goods in order to manage goods receipt processes and damage recording properly.
Whether a particular term is actually advantageous depends on the individual case. Especially in complex supply chains, it is advisable to involve procurement, logistics, and where appropriate the legal department before a term is written into the contract.
Related terms
- 3PL
3PL (Third Party Logistics) refers to the outsourcing of operational logistics processes – such as warehousing, order picking, or transportation – to an external service provider. The company retains strategic responsibility, while the 3PL vendor handles operational execution.
- 4PL - Fourth Party Logistics
4PL (Fourth Party Logistics) refers to a logistics model in which an external partner coordinates the entire supply chain and manages multiple 3PL providers and carriers without performing any physical transport or warehousing services itself.
- Avisierung
Pre-advice refers to the advance notification of a delivery by the supplier to the recipient before the goods arrive. It enables the warehouse to plan staffing, dock capacity, and put-away processes in a timely manner.
- Beschaffungslogistik
Procurement logistics encompasses all logistical processes that manage the flow of materials from suppliers through to handover at the warehouse or production facility. It connects purchasing, transportation, and goods receipt into a seamless inbound process.
- CIF
CIF (Cost, Insurance and Freight) is an Incoterms delivery clause under which the seller bears the transport costs and insurance up to the agreed port of destination. However, the transfer of risk to the buyer occurs at the point of loading at the port of origin.
- Cargo Handling
Cargo Handling refers to the physical processing of freight at transshipment points such as ports, terminals, hubs, or warehouses. It encompasses all operational activities from loading and unloading through sorting to cargo securing.
- Carrier
A carrier is a transport service provider that physically moves goods from a point of origin to a destination. It assumes operational responsibility for the actual transport – as opposed to freight forwarders or logistics service providers, who often only coordinate.
- Compliance Definition
Compliance refers to adherence to legal regulations, regulatory requirements, internal policies, and contractual obligations.
- Containerlogistik
Container logistics refers to the planning, control, and execution of all processes related to the transport and handling of freight containers – from pre-carriage through ocean freight to on-carriage.
- Cost-to-Serve
Cost-to-Serve refers to the total costs incurred to fully serve a specific customer, customer segment, or order. The metric consolidates all relevant cost components along the order fulfillment process and enables cause-based cost allocation.
- Cross-Docking
Cross-docking refers to a goods handling process in which items are transferred directly from inbound receiving to outbound shipping without interim storage. The goal is to reduce throughput times and avoid warehousing costs.
- Cross-Docking
Cross-docking is a logistics method in which goods are transferred directly from inbound to outbound transport at a transshipment point, without going through conventional put-away and storage.
- Distributionslogistik
Distribution logistics encompasses all processes that move goods from the manufacturer or warehouse to the end customer – from network planning through storage and transportation to order fulfillment.