Incoterms

Incoterms are the International Chamber of Commerce’s standardized trade terms that define buyer and seller responsibilities for delivery, risk transfer, transport costs, insurance, and customs clearance in a sales contract. They specify where control changes hands and who pays for what as goods move from supplier to buyer, but do not determine title, price, currency, or contract law.

On the shop floor, Incoterms decide whether inbound raw material is the supplier’s responsibility up to the dock, terminal, or plant gate, or whether the buyer assumes risk at carrier handoff. Procurement teams bake these terms into purchase orders for imported resin, steel, castings, electronics, and MRO items, assigning freight, insurance, duties, and export/import clearance explicitly. Warehousing groups use the selected term to schedule inbound receipts, plan dock appointments, and determine when damage must be inspected immediately because risk shifted at origin or destination. For raw material tracking, the term sets the logistics milestone in ERP/MES systems, whether that is ex-works pickup, carrier handoff, port departure, arrival at a named place, or unloaded delivery. The difference between FCA, CPT, CIP, DAP, and DDP changes whether the supplier merely delivers to a carrier, pays freight, adds insurance, clears import duty, or brings goods to the plant site. The 2020 ICC framework includes 11 rules: seven for any mode, four for sea and inland waterway.