what are incoterms 
to facilitate commerce around the world the international chamber of commerce icc publishes a set of incoterms officially known as international commercial terms globally recognized incoterms prevent confusion in foreign trade contracts by clarifying the obligations of buyers and sellers parties involved in domestic and international trade commonly use incoterms as a kind of shorthand to help understand one another and the exact terms of their business arrangements some incoterms apply to any means of transportation while others apply strictly to transportation across water understanding incotermsthe international chamber of commerce icc developed incoterms in 1936 and updates them periodically to conform to changing trade practices 1 the icc s mission is to promote open markets and ensure global economic prosperity through trade because the icc is a networked business organization that reaches more than 45 million companies in more than 100 countries it is seen as having unparalleled expertise in establishing rules to guide international trade 4 while adherence to its incoterms is voluntary the icc established rules are commonly used by buyers and sellers as a regular part of trade transactions incoterms provide a universal set of rules and guidelines that help facilitate trade in essence they provide a common language that traders can use to set the terms for their trades buyers and sellers can use incoterms in a variety of activities necessary to conduct business typical activities that call for the use of incoterms include filling out a purchase order labeling a shipment for transport completing a certificate of origin or documenting a free carrier agreement fca 2because the icc regularly updates incoterms contracts should specify which version they are using e g incoterms 2020 also be aware that trade terms used in different countries may appear identical on the surface but they can have different meanings when used domestically incoterms rules for any mode of transportsome common examples of incoterms rules for any mode of transportation include delivered duty paid ddp delivered at place dap and ex works exw the seven incoterms for any mode of transport are dpu for example indicates that the seller delivers the goods to a terminal and assumes all the risk and transportation costs until the goods have arrived and been unloaded after that the buyer assumes the risk and transportation costs of the goods from the terminal to the final destination 2ddp indicates that the seller assumes all the risk and transportation costs the seller must also clear the goods for export at the shipping port and import at the destination moreover the seller must pay export and import duties for goods shipped under ddp 2under incoterm ex works exw the seller is only required to make the goods available for pickup at the seller s business location or another specified location under exw the buyer assumes all the risk and transportation costs 2in 2010 the two main categories of incoterms were updated and classified by modes of transport the first classification applies to any mode of transport while the second classification only applies to sea and inland waterway transport 5incoterms rules for sea and inland waterway transportthe icc has specific incoterms rules for inland waterway and sea transport such as cost insurance and freight cif and free on board fob the incoterms for sea and inland waterway transport are free on board fob shipment terms for example indicate that the seller delivers the goods on board a designated vessel named by the buyer the buyer or seller may assume all the risk and transportation costs depending on whether the goods are sold under the fob shipping point or fob destination point 2cost insurance and freight cif terms indicate that the seller must deliver the goods to a designated port and load them on a specified vessel assuming responsibility for paying all transportation insurance and loading costs after that the buyer assumes the cost and risk associated with transporting the cargo from the designated port to its warehouse or business 2