Incoterms 2020: Updated Rules and Definitions

Updated Incoterms 2020: terms for importing and exporting

Incoterms, short for International Commerce Terms, are a set of terms created by the International Chamber of Commerce (the ICC) to ease and unify international trade contracts. The export and import Incoterms are used to determine and establish responsibilities in an international trade agreement.

Learn all about the newest updated Incoterms, which were last changed in 2020, and discover why Incoterms are important and their uses in international trade.

What are Incoterms?

The Incoterms are shipping terms That can be included in trade contracts to help regulate the procedures of shipping, importing and exporting cargo internationally. All Incoterms are referred to by three-letter acronyms, and each of them has its own set of rules and applications.

What is the purpose of incoterms?

Incoterms were first created in 1923 to create an international standard for commercial agreements. The first edition of Incoterms was published in 1936 and has been updated roughly every 10 years to keep up with the updates in the international commerce and logistics world.

The purpose of Incoterms is to define the tasks, costs, risks and responsibilities of each party when drafting an international sales contract. Although they are not laws, export and import Incoterms are recognised by governments and legal authorities.

What is determined by the latest and updated Incoterms?

  • Which party clears the goods for export and import
  • Which party covers freight, loading and terminal handling costs
  • Which party is responsible for purchasing insurance
  • Collection, delivery and destination locations
  • Clear definition of the point in which the risk transfers from one party to the other

Updated incoterms 2020

Find out more:

The guides linked above will help you understand the meaning of each Incoterm with examples of cases you can use them. If you need specific information about how to use the updated Incoterms 2020 when shipping, you can check our page on how to use Incoterms.

Learn how to use Incoterms

What are the different types of Incoterms?

There are several ways of dividing the different types of Incoterms. The main separation is done for the specific use case of each Incoterm – whether it is specific for one mode of transport or if it can be used for multimodal shipping.

Multimodal Incoterms 2020
The following Incoterms can be used for freight shipping using any transport mode, including multimodal deliveries:

EXW
FCA
CPT
CIP
DPU
DAP
DDP

Incoterms 2020 used for sea freight
The following Incoterms can only be used for sea, ocean or inland waterway freight shipping:

FAS
FOB
CFR
CIF

You can read more about the different types of Incoterms on our dedicated pages:

Why are Incoterms important?

Although they are not mandatory, using Incoterms for importing and exporting can significantly ease the trade process, and that is why traders are strongly advised to get familiar with their meanings and rules. It is important to be on top of changes and understand the latest version of the Incoterms, as there are always nuances compared to the previous versions used.

Using Incoterms for international freight shipping is meant to make the process smoother for all parties involved since they were created to establish an international set of rules and regulations that would have the same purpose and meaning in every country. Since Incoterms are not translated or localised, the risks of misunderstanding and translation errors are minimised.

For all of these reasons, the use of Incoterms is widely encouraged and accepted in the international trade and transport industry.

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Latest updated Incoterms: Incoterms 2020 FAQ

Who created the International Commerce Terms?
The International Chamber of Commerce created the first set of Incoterms and has been in charge of updating and encouraging their use since the 1920s. The ICC is the largest business organisation in the world and has members in over 100 countries.
How often are Incoterms revised and updated?
Although there is not a clear guideline on this matter, Incoterms are usually updated every ten years. The last time Incoterms were updated was 2019 in preparation for the following year, and traders are now using the new Incoterms 2020 from the 1st of January 2020 onwards.
The Incoterms 2020 was the update that replaced the previous Incoterms 2010. A few changes were made and updates in the rules of each Incoterm. We recommend reading our individual guides above to understand more about each change.
What is the latest version of Incoterms?
Currently, the latest version is the Incoterms 2020.
Is it possible to use a previous version of Incoterms when shipping?
Since the use of Incoterms is not a rule but a recommendation, it all depends on the agreement that is done between both parties. In this case, you can agree to use a previous version of Incoterms, but keep in mind that the ICC always recommends using the latest Incoterms (Incoterms 2020) to avoid miscommunications.