International trade involves logistical and financial responsibilities. Many companies therefore ask: what are incoterms and why are they important? Incoterms define who is responsible for transport, costs and risks during international deliveries. Understanding them helps organisations gain more control over international supply chains and prevent disruptions.
What are incoterms?
Incoterms (International Commercial Terms) are globally recognised delivery conditions that define responsibilities for transport, insurance, customs procedures and risk transfer.
They are used worldwide in import and export transactions. By clearly defining responsibilities in advance, companies can create more predictability in their supply chain and better manage costs and service levels.
The rules are published by the International Chamber of Commerce. The current version is Incoterms® 2020.
Visual overview of commonly used incoterms
| Incoterm | Transport arranged by | Risk transfer | Key feature |
| EXW | Buyer | At pickup | Minimum seller responsibility |
| FCA | Buyer (after handover) | At carrier | Suitable for multimodal |
| FOB | Buyer (after loading) | On board vessel | Sea freight |
| CIF | Seller | Before departure | Includes insurance |
| DAP | Seller | At delivery point | No import duties |
| DDP | Seller | Final destination | Maximum service |
Practical implications
Incoterms determine:
- who arranges transport
- when risks transfer
- who manages customs
- how costs are allocated
- how much supply chain control is possible
Choosing the right incoterm allows companies to align logistics performance with commercial objectives.
Common mistakes
Typical errors include:
- lack of internal alignment
- selecting the wrong incoterm
- underestimating costs
- unclear contracts
- insufficient knowledge
This can result in delays, additional costs and operational uncertainty..
Logistics coordination and further insight
Understanding incoterms helps organisations structure international logistics more effectively. In cross-border supply chains, professionally organised international transport plays a key role.
