Learn what Incoterms 2020 are, their meaning in shipping, and how to use terms like FOB, CIF, and EXW. Explore the Incoterms chart for exporters and gain practical knowledge for international trade and maritime logistics.
Why Knowing Incoterms Can Save Your Shipment
Imagine shipping goods overseas and discovering—too late—that you’re responsible for damages that occurred in another country. Misunderstanding shipping terms can be costly. That’s where Incoterms® come in. These standardized trade terms prevent confusion and ensure that buyers and sellers agree on who does what—and when.
Whether you’re a maritime student, cadet, ship officer, freight forwarder, or exporter, understanding Incoterms meaning in shipping is fundamental to navigating global trade.
What Are Incoterms?
Incoterms® (International Commercial Terms) are a globally recognized set of standard trade terms published by the International Chamber of Commerce (ICC). They clarify:
-
Responsibilities between buyer and seller
-
Risk transfer points
-
Cost allocation for transport, insurance, duties, and delivery
✅ What Do Incoterms Do?
-
Standardize contracts in international shipping
-
Define who pays for what
-
Prevent disputes in logistics and delivery
🔎 Incoterms are updated every 10 years. The most recent edition is Incoterms 2020.
Incoterms 2020: Quick Overview
SEO Keyword: what are Incoterms 2020
Incoterms 2020 consist of 11 terms, grouped by mode of transport:
🚢 For Any Mode of Transport (Multimodal):
-
EXW (Ex Works)
-
FCA (Free Carrier)
-
CPT (Carriage Paid To)
-
CIP (Carriage and Insurance Paid To)
-
DAP (Delivered at Place)
-
DPU (Delivered at Place Unloaded) – new in 2020
-
DDP (Delivered Duty Paid)
⚓ For Sea & Inland Waterway Transport Only:
-
FAS (Free Alongside Ship)
-
FOB (Free On Board)
-
CFR (Cost and Freight)
-
CIF (Cost, Insurance, and Freight)
Incoterms Chart for Exporters and Importers
Here’s a simplified Incoterms chart showing who handles transport, insurance, and customs:
| Term | Export Duties | Main Transport | Import Duties | Risk Transfer | Insurance |
|---|---|---|---|---|---|
| EXW | Buyer | Buyer | Buyer | At seller’s warehouse | Buyer |
| FOB | Seller | Buyer | Buyer | At ship’s rail (port of origin) | Buyer |
| CIF | Seller | Seller (w/ insurance) | Buyer | At ship’s rail (destination) | Seller |
| DDP | Seller | Seller | Seller | At buyer’s door | Seller |
📌 Use this chart as a reference when negotiating international contracts or shipping quotes.
Common Incoterms Explained: FOB vs CIF vs EXW
SEO Keyword: FOB vs CIF vs EXW explained
📦 EXW (Ex Works)
-
Seller makes goods available at their premises
-
Buyer bears all costs and risks from pickup to delivery
Best for: Experienced buyers with logistics capabilities
🚢 FOB (Free On Board)
-
Seller delivers goods on board a named vessel at the port of departure
-
Risk transfers once loaded onto the ship
Best for: Sea freight, bulk shipments, buyer-arranged transport
🌊 CIF (Cost, Insurance, and Freight)
-
Seller pays for transport and insurance to destination port
-
Risk transfers at port of departure
Best for: Buyers wanting insurance but control post-arrival
Why Are Incoterms Important in Shipping?
SEO Keyword: Incoterms meaning in shipping
Incoterms define:
-
Who books freight and insurance
-
Who handles customs clearance
-
Where risk and responsibility shift from seller to buyer
-
Payment responsibilities (duties, taxes, handling)
🔍 Real-World Impact:
Without Incoterms, disputes can arise over:
-
Damage during transit
-
Unexpected charges
-
Delivery delays
🧭 For maritime professionals and students, Incoterms are foundational to cargo operations, chartering, freight negotiations, and logistics contracts.
How to Choose the Right Incoterm
Consider:
-
Buyer and seller experience levels
-
Access to ports, carriers, and customs services
-
Willingness to handle risk and cost
-
Country-specific import/export regulations
For Exporters:
-
Use FCA or FOB when buyer arranges transport
-
Use DAP or DDP to offer full-service delivery and attract more buyers
For Importers:
-
Choose EXW or FOB if you want more control
-
Choose CIF or DDP if you prefer all-in-one delivery
Educational Use: Incoterms in Maritime Training
🎓 For Students & Cadets:
-
Study Incoterms as part of maritime law, logistics, and chartering modules
-
Practice real-case scenarios: What Incoterm should a Greek exporter use for shipping to Singapore?
🛳️ For Officers & Professionals:
-
Understand Incoterms in freight negotiations and contracts of carriage
-
Avoid liability through correct term selection
Trends and Updates: Incoterms 2020 and the Future
🔄 Key Changes in Incoterms 2020:
-
DAT replaced by DPU (Delivered at Place Unloaded)
-
Insurance requirements updated for CIF and CIP
-
Security-related costs clarified
📈 Future Outlook:
-
Growing need for digital contracts and blockchain-based Incoterms verification
-
Integration into logistics management platforms and smart shipping systems
FAQs: People Also Ask
What are Incoterms 2020?
They are international trade terms defining the obligations of buyers and sellers in cross-border transactions, last updated by the ICC in 2020.
What is the difference between FOB, CIF, and EXW?
-
FOB: Buyer pays for transport from port
-
CIF: Seller pays for transport and insurance
-
EXW: Buyer does everything from seller’s warehouse
Are Incoterms legally binding?
Yes, when explicitly stated in a sales contract. They are not law but widely recognized commercial standards.
Can Incoterms be modified?
Yes, parties can agree to custom terms—but any modifications must be clearly documented in the contract.
Conclusion: Incoterms Are the Language of Global Trade
In today’s fast-paced global logistics network, knowing your Incoterms is essential for avoiding costly misunderstandings and improving operational efficiency. Whether you’re drafting a contract, negotiating freight, or preparing shipping documents, Incoterms ensure all parties are on the same page—literally and legally.
⚓ Want to go deeper?
-
Download our Free Incoterms 2020 Chart for Exporters
References & Further Reading
-
UNCTAD – International Trade Facilitation Standards
-
FIATA – Freight Forwarding Guidelines
-
“A Practical Guide to Incoterms®” – Logistics Management Journal