1. What are Incoterms?

Incoterms (International Commercial Terms) is a set of international commercial terms that regulate between the seller and the buyer. In foreign trade transactions, there are many disputes and risks, so Incoterms terms were created to divide costs and responsibilities for delivery of goods between the two parties.

2. The role of Incoterms in the import and export sector

- Determining responsibilities between the two parties: Incoterms clearly define the responsibilities of the seller and the buyer in transportation, insurance and customs procedures, helping to avoid misunderstandings and disputes.

- Allocation of risks between the buyer and the seller: Incoterms stipulate the time of transferring risks from the seller to the buyer.

- Cost regulations: Incoterms conditions specify who is responsible for costs incurred such as transportation, insurance and customs fees.

- Support contract negotiations: The use of Incoterms in contracts makes negotiations easier, thanks to the clarity of the obligations of the parties.

- Standardization of international transactions: Incoterms are popular international standards, creating uniformity and transparency in global transactions.

3. The latest version of Incoterms in 2025

(1) Group E

EXW - Ex Works - Delivery at Work: The seller is obliged to complete the delivery task when placing the goods under the buyer's designation at the seller's warehouse or the buyer's designated location. The remaining work of the buyer, the risk will be calculated from this point

(2) Group F

FCA - Free Carrier - Delivered to the carrier

The seller completes the delivery obligation after delivering the goods to the carrier designated by the buyer at the seller's warehouse, or another designated location. The remaining work belongs to the buyer.

FAS - Free together - Deliver goods alongside the ship

The seller fulfills the delivery obligation after placing the goods alongside the ship designated by the buyer at the port of loading to ship to the buyer. The seller will bear the cost of hiring the means of transport. The remaining task belongs to the buyer.

FOB - Free on Board - Transporting goods onto the ship

The seller's task is to carry out the packaging procedures, export customs clearance, find an intermediary carrier, bear the costs and risks of lifting the goods onto the ship. The seller's risk will end when the goods are on board.

Therefore, in group F, remember the important points. The seller's transfer task will increase gradually from FCA => FAS => FOB

(3) Group C

CFR - Cost and Freight - Cost and freight

The seller's task fulfills the delivery obligation after delivering the goods at the port of loading. The seller must also pay the costs of the means of transport. The remaining task belongs to the buyer.

CIF - Cost, Insurance and Freight - Cost, Insurance and Freight

The seller fulfills its delivery obligation by delivering the goods on board the ship at the port of loading. The seller also hires the means of transport and pays the freight and insures the goods. The remaining responsibility rests with the buyer.

CPT - Carriage Paid to - Carriage Paid to Place

The seller fulfills its delivery obligation when it hands the goods over to the carrier hired by the seller. If there are several carriers, the risk passes when the goods are delivered to the first carrier. The remaining responsibility rests with the buyer.

CIP - Carriage and Insurance Paid to - Carriage and Insurance Paid to

The seller fulfills its delivery obligation when it hands the goods over to the carrier, the seller is also responsible for hiring the ship, paying the freight to the port of discharge and from the port of discharge to the place designated by the buyer. In addition, the seller also bears the cost of insuring the goods. The remaining responsibility rests with the buyer.

In addition, the seller also bears the cost of purchasing insurance for the goods. The remaining responsibility belongs to the buyer.

(4) Group D

For groups E, F and C, delivered in the exporting country. Group D, goods are delivered in the importing country.

DPU - Delivered At Place Unloaded - Delivered goods at the place of unloading

The seller fulfills the obligation to deliver the goods when the goods have been unloaded from the means of transport and transported to a specified terminal. The seller must bear the risk until the goods are unloaded at the terminal according to safety regulations. The remaining responsibility belongs to the buyer.

DAP - Delivered at Place - Delivered at the buyer's warehouse

The seller completes the delivery when the goods are placed under the buyer's designation on the means of transport but have not passed the specified destination. The remaining responsibility belongs to the buyer.

DDP - Delivered duty paid - Delivered goods cleared for import

The seller delivers the goods after the goods have been unloaded from the means of transport and arrived at the specified terminal. The seller bears the risk until the goods are safely unloaded at the named terminal.

4. Points to note when using Incoterms

(1) Incoterms are not laws

Incoterms are not laws and are not binding. Buyers and sellers are not required to comply with them if they are not included in the contract. Only when the parties agree to apply them and clearly state them in the contract, will the rules become their obligations and responsibilities.

(2) Validity of previous versions of Incoterms

There are many versions of Incoterms, and new versions do not invalidate previous versions. When using Incoterms in international trade, it is necessary to clearly state the name of the version so that the parties understand their responsibilities. Failure to specify the version may cause problems when comparing and checking the validity of the contract.

(3) Refer to the Incoterms rules accurately

There are many versions of Incoterms and if you want to apply them to a sales contract, you need to clarify them in the contract by using language such as: [Selected conditions, place name, Incoterms 2020].

(4) Legal validity and scope of use

Many newcomers to the import-export field often focus on the provisions of Incoterms and ignore local laws. Incoterms terms may be invalid if local laws are not followed.

Through the above sharing, you understand more about what Incoterms are? Researching the terms and conditions of Incoterms and complying with them is necessary when performing a sales contract. Import-export parties need to clearly understand the terms and conditions of Incoterms to ensure that the negotiation and transaction process goes smoothly.