International Commercial Terms (Incoterms) are global trade rules established by the International Chamber of Commerce (ICC) to clarify the responsibilities of buyers and sellers regarding delivery, risk transfer, cost allocation, and import/export customs clearance. The latest version is Incoterms 2020, which includes 11 terms such as EXW, FOB, CIF, DDP, etc. They are widely used in international trade contracts, letters of credit, and transport documents, helping reduce disputes arising from language and legal differences. When using them, the version (e.g., Incoterms 2020) should be specified, and attention should be paid to coordinating the terms with other contract clauses. Different terms differ significantly in the point of risk transfer (e.g., on board at the port of shipment, at destination) and cost allocation. For example, under FOB, the buyer bears freight and insurance, while under CIF, the seller is responsible for freight and insurance. The choice of terms should consider the mode of transport (e.g., FAS, FOB, CFR, CIF are only for sea freight) and the negotiating position of both parties.
📝 Examples
1. The delivery of goods under this contract shall apply the CIF term of Incoterms 2020. The seller is responsible for arranging transport and insurance to the port of destination, and the risk transfers to the buyer when the goods are loaded on board at the port of shipment. (Explains seller's obligations and risk transfer point under CIF)
2. We recommend using the DDP term, under which the seller bears all import customs clearance costs and risks and delivers the goods to the buyer's designated warehouse, with the buyer not needing to handle any import formalities. (Explains maximum seller responsibility under DDP)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner