Shipping internationally? Know your Incoterms!

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27 May 2025

What are Incoterms?

Incoterms (short for International Commercial Terms) are a set of standardised trade terms created by the International Chamber of Commerce (ICC).

They define who is responsible for each step of an international delivery, including:

• Transportation costs
• Insurance
• Export and import formalities
• Risk in case of damage or loss during transport

In other words, Incoterms make it crystal clear where your responsibilities begin and end during an international shipment.

There are several Incoterms with different obligations and responsibilities for the seller (exporter) and buyer (importer).

What are the 11 Incoterms?

By agreeing on Incoterms you know who is responsible for arranging the transport, who pays the costs of the transport and who bears the transport risk.

The latest version, Incoterms 2020, includes 11 standard Incoterms:

• Ex Works (EXW)
The seller makes the goods available at their premises. The buyer bears all costs and risks from that point onward, including loading and export.

Note: Under EXW, the seller is not required to provide export documentation (like an export declaration).

This can lead to issues if the buyer is not based in the same customs territory or cannot access the export system.

• Free Carrier (FCA)
The seller delivers the goods to a carrier or another party at an agreed location. Usually at their own site, a terminal of freight forwarders warehouse.

Risk transfers to the buyer once the goods are handed over to the carrier.

• Carriage Paid To (CPT)
The seller pays for transport to a named destination (e.g. a port or distribution hub). Risk transfers to the buyer once the goods are handed to the first carrier.

• Carriage and Insurance Paid To (CIP)
Same as CPT, but the seller must also provide insurance covering the buyer’s risk during transit.

• Delivered at Place (DAP)
The seller delivers when the goods are ready for unloading at the named place for a destination. Buyer takes care of unloading and import.

• Delivered at Place Unloaded (DPU)
The seller is responsible for delivery and unloading at the destination. It’s the only term where the seller unloads the goods.

• Delivered Duty Paid (DDP)
The seller delivers the goods for the destination and pays all costs, including import duties and taxes. The buyer receives the goods fully cleared.

For sea and inland waterway transport only:

• Free Alongside Ship (FAS)
The seller delivers the goods alongside the ship at the port of shipment. The buyer is responsible from that point on.

• Free on Board (FOB)
The seller loads the goods onto the ship. Risk and costs transfer to the buyer once the goods are on board.

• Cost and Freight (CFR)
The seller pays for transport to the destination port. Risk transfers to the buyer once the goods are on board the ship.

• Cost Insurance and Freight (CIF)
Same as CFR, but the seller must also provide insurance for the buyer during sea transport.

Why do Incoterms matter?

Imagine you’re shipping a parcel from Germany to the UK. Sounds simple, right? But there are a couple important questions that need to be answered in advance.

Who arranges the transport? Who pays customs duties? What if the shipment gets damaged? Incoterms answer all these questions before the shipment even starts.

Agreeing on the right Incoterm in advance, means fewer surprise costs, fewer delays and fewer arguments.

And when you’re shipping across borders, that’s a big deal.

How Shipcloud supports you with Incoterms

Shipcloud simplifies international logistics with smart tools that help you manage Incoterms effectively:

1. Smart carrier integrations with Incoterm-specific options
Shipcloud connects with major international carriers (like DHL Express, UPS and FedEx) that support Incoterm settings during the label or shipment creation process.

Depending on the carrier, you can define the appropriate Incoterm right from our interface or via our API.

2. Customs Documentation and DDP/DAP Handling
For Incoterms involving customs clearance and import duties (like DAP or DDP), Shipcloud supports automated creation of key customs documents, such as commercial invoices and CN23 forms.

In DDP shipments, customs clearance is handled and paid by the seller. In DAP, the buyer is responsible for import clearance and duties.

3. Real-time shipment tracking
Incoterms define who’s responsible at different stages, so visibility matters.

Shipcloud’s real-time tracking tools let you and your customer follow the shipment, spot customs issues early and solve them proactively.

Please note: Shipcloud does not offer customs advisory services, product classification or support in customs-related appeals or dispute procedures.

For these, we recommend working with a licensed customs broker of logistics partner.