What are Incoterms 2020 and why do they matter?
Updated: 2026-10-16
Short answer
Incoterms® 2020 are 11 internationally recognized trade rules published by the International Chamber of Commerce (ICC). They clarify which responsibilities, costs, and risks belong to the buyer and seller when goods are delivered, helping prevent disputes in international trade.
What Are Incoterms 2020?
Incoterms® 2020 are a set of 11 trade rules published by the International Chamber of Commerce (ICC). They define important responsibilities of buyers and sellers when goods are delivered under a sales contract. The rules address delivery, transfer of risk, transportation costs, insurance obligations under certain rules, and export and import clearance responsibilities.
Why Do Incoterms Matter?
Incoterms help buyers and sellers understand who arranges transportation, who pays particular shipping costs, when responsibility for loss or damage transfers, and who handles customs formalities. Agreeing on the correct rule can reduce unexpected expenses, delivery disputes, and misunderstandings.
How to Use Incoterms 2020
The selected rule should be written clearly in the sales contract together with a precise named place or port and the version being used, such as FCA Shanghai, Incoterms® 2020. The named place matters because it helps determine where delivery occurs and when risk transfers. Incoterms do not, by themselves, establish payment terms or transfer ownership of the goods.
Choosing the Right Rule
The appropriate rule depends on the transport method, the buyer's and seller's logistics capabilities, insurance needs, and who can manage customs clearance. FOB and CIF are intended for sea and inland waterway transport, while rules such as FCA, CPT, DAP, and DDP can be used for different modes of transport. Review the official ICC guidance at https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/.