Interactive Incoterms 2020 table

Incoterms are a set of rules issued by the International Chamber of Commerce, and the version in common use is Incoterms 2020. They are trade usage rather than law, so they only apply when the parties incorporate them into the contract. Stating the version is essential, because the same three letters can mean different things across versions.

Each rule answers three separate questions. The most common confusion is merging the cost question with the risk question. There are terms under which the seller pays the freight all the way to the port of arrival while risk passed to the buyer back at the port of departure. If the goods are lost at sea, the buyer still has to pay the seller in full, even though the seller is the party that paid the freight.

Seven terms can be used for any mode of transport, and four are for sea and inland waterway transport only. The four in the second group are designed around the image of goods crossing the ship's rail, so attaching them to a land border gate or an airport creates a grey area over when risk passes.

On the China to Vietnam road corridor I still regularly see contracts stating a sea freight term followed by the name of a land border gate. The fix is simple: switch to the group that works for any mode, and name the place of delivery specifically enough to say which yard, which warehouse, and which side of the border.

• The delivery term is followed by a specific named place, not three letters standing alone.
• The contract states which version of Incoterms is being incorporated.
• The way costs are actually split matches the stated term. Check by asking whose name is on the transport contract.
• There is a separate clause on when title passes, if that differs from when risk passes.
• For bilingual contracts, the contract states which language version prevails if the two conflict.