Logistics

Incoterms

Also known as: International Commercial Terms

Incoterms are the standard way to remove ambiguity from international sales. Each term — FOB, CIF, CFR, DAP, DDP, FCA, EXW — fixes the exact point in the logistics chain where responsibility and risk pass from seller to buyer.

The current edition is Incoterms 2020. Getting the term right matters because it decides who pays freight, insurance and clearance, and therefore changes both the P&L and the risk exposure of the deal.

A modern CTRM ties every deal to its Incoterm and works out which cost lines belong to which side.

Related terms

FOB
FOB (Free On Board) is the Incoterm where the seller delivers the goods on board the vessel at the agreed port of loading. From that moment the buyer carries the cost and the risk of the sea leg.
CIF
CIF (Cost, Insurance and Freight) is the Incoterm where the seller pays for the goods, the insurance and the freight to the destination port — even though risk passes to the buyer once the goods are loaded.
Bill of Lading (B/L)
The Bill of Lading, or B/L, is the document issued by the ocean carrier acknowledging receipt of the cargo and acting as title to the goods. It is the most critical piece of paper in a seaborne commodity deal.

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