Incoterms®
What are Incoterms®?
Incoterms® are internationally recognised trade terms that define the responsibilities of buyers and sellers in international and domestic trade transactions.
They help clarify who is responsible for transport, delivery, insurance, customs clearance, costs and risk at different stages of the movement of goods.
Incoterms® do not replace a sales contract. Instead, they form part of the commercial agreement between buyer and seller.
Why do Incoterms® matter?
Incoterms® matter because they reduce uncertainty. Without a clearly agreed Incoterm, buyers and sellers may misunderstand who is responsible for arranging transport, paying freight, insuring goods, managing customs formalities or bearing risk during shipment.
This can lead to unexpected costs, delayed shipments, document errors and payment disputes.
Common examples of Incoterms®
Commonly used Incoterms® include:
EXW — Ex Works
FOB — Free on Board
CIF — Cost, Insurance and Freight
DAP — Delivered at Place
DDP — Delivered Duty Paid
Each term changes the balance of responsibility between buyer and seller.
Common mistakes
Common mistakes include:
using an Incoterm without understanding the operational consequences
forgetting to name the place, port or destination
assuming Incoterms® define payment terms
assuming Incoterms® transfer ownership
choosing a term that does not match the shipping method
How iTradeDigital helps
iTradeDigital helps buyers and sellers apply trade terms within a structured digital trade workflow. By connecting Incoterms®, transaction responsibilities, documents and payment requirements in one place, iTradeDigital helps reduce ambiguity and improve execution.
Related terms
• EXW
• FOB
• CIF
• DAP
• DDP
• Commercial invoice
• Bill of lading
FAQs
Do Incoterms® define payment terms?
No. Incoterms® define responsibilities for delivery, costs and risk. Payment terms must be agreed separately.
Do Incoterms® transfer ownership?
No. Incoterms® do not determine when legal title passes from seller to buyer.
Are Incoterms® only used for international trade?
No. They can also be used in domestic transactions, but they are especially important in cross-border trade.