Incoterms explained

Seven work for any transport. Four are only for sea and inland waterway.

Under a C rule, the seller pays for the journey, but the risk has already passed when the goods leave. So if a ship sinks on a CIF sale after loading, the buyer bears the loss, and claims on the insurance the seller bought for it. In a D rule, the goods travel at the seller's risk until they arrive. Mix these up, and you'll have an argument at exactly the worst moment.

Three other common points to raise before you sign:

• Containers and FOB. The ship's rail doesn't suit container freight. The seller loses control at the terminal, well before the ship loads. For containers, ICC's checklist points to FCA, and CPT or CIP are the any-mode equivalents of CFR and CIF.
• EXW for exports. The buyer is responsible for export clearance, even though it may not be able to file in the seller's country. ICC's checklist advises exporters to consider EXW only for domestic sales, if at all. FCA is often the better choice.
• DDP. The seller has to be able to act as importer. Check this first. ICC notes that some countries don't allow it at all.

This is our own illustration, with invented figures and no margin added. A UK maker sells 30 oak tables to a buyer in Toronto. The factory price is GBP 12,000.

Each column is the same goods. The difference is what the seller has to do and carry. On DDP, a change in the rate is the seller's loss: ICC notes it's the only rule where the seller pays the tariff. That's a live risk with US tariffs changing on short notice. Whatever you pick, the rule also affects the customs value: an EXW price doesn't include freight that a CIF country will add back. See landed cost.

ICC's summary lists these:

• DPU replaced DAT, and it can be used for any place, not just a terminal.
• FCA can now cover an on-board bill of lading, if the parties agree, which helps with letters of credit.
• CIP needs a higher level of insurance than before, while CIF is unchanged. Ask whether either level suits your goods.
• Security requirements now appear in the obligations for each rule.
• Own transport is allowed: FCA buyers and D-rule sellers can move the goods themselves instead of using a third-party carrier.

1. How's it moving? Containers and air freight rule out FAS, FOB, CFR and CIF in practice.
2. Who has the better freight rate and the better local knowledge? Whoever does should run that stage.
3. Who can clear customs where? Generally, each party should handle its own country.
4. How is it being paid for? A letter of credit might need a particular document.
5. Who's taking the risk on tariffs, and how long's the quote valid?

Name the rule, a precise place, and the edition, for example FCA Felixstowe Container Terminal, Incoterms 2020. A rule without a place is half a sentence. The place matters more for a D rule, because a city name doesn't tell the carrier which door. Put the same wording on your commercial invoice and proforma.

A contract is governed by the edition it refers to, so an older edition isn't necessarily invalid. It's just better to be clear. ICC says it reviews the rules every 10 years, and its 2026 workplan says it's beginning the work for an Incoterms 2030.