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Incoterms & Delivery Terms

Incoterms

Also known as: International Commercial Terms

Incoterms are a standardized set of three-letter trade terms published and periodically revised by the International Chamber of Commerce (ICC) that spell out the respective obligations of buyers and sellers in a cross-border sale of goods. Each term allocates three things with precision: which party arranges and pays for transport and insurance, the exact point at which the risk of loss or damage passes from seller to buyer, and which party is responsible for export and import customs formalities. Because they are recognized worldwide, Incoterms remove ambiguity from contracts written between parties in different legal systems and languages, and they should always be quoted with a named place and the applicable version year, for example 'FOB Shanghai (Incoterms 2020).'

The JFS takeLicensed customs broker · Filer 82G

One line on the purchase order, skimmed by everyone, and it decides who clears customs, and therefore who becomes importer of record — a legal position with duty liability and a five-year recordkeeping obligation attached. Quote the year: "FOB Shanghai" without "Incoterms 2020" is an argument waiting to happen.

Where it matters for compliance

  • The term does not determine customs value on its own, but it determines which costs are already in the price and which must be added or deducted.
  • It has no binding effect on CBP. Agreeing DDP with a seller does not move your obligations as importer of record.

Related terms

EXWEx Works represents the minimum obligation for a seller: the goods are simply made available for collection at the seller's own premises — a factory, warehouse, or plant — and from that moment nearly every cost and risk shifts to the buyer.FOBFree On Board is a maritime-only term under which the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment and clears them for export.CIFUnder Cost, Insurance and Freight the seller pays the cost of the goods, contracts and pays for ocean freight to the named destination port, and procures a minimum level of marine cargo insurance for the buyer's benefit.DDPDelivered Duty Paid places the maximum obligation on the seller, who must deliver the goods to the named destination in the buyer's country having borne every cost along the way — export clearance, main carriage, insurance, import duties, taxes, and customs formalities.

Reviewed by a licensed customs broker. Definitions are general information, not legal or customs advice for a particular shipment. Duty rates, tariff programs and agency requirements change frequently.