Incoterms and how to use them in 2025 – 2026
If your organization operates internationally, you will inevitably deal with transport. During transport, it is important to make agreements regarding responsibilities, transport costs, and risks. This is where Incoterms come in. These are specific terms used to define who holds which responsibility during transport and when certain costs and risks are transferred from the seller to the buyer.
In this blog, you will read everything about what Incoterms are, which Incoterms exist, and how to use them.
What are Incoterms: The meaning
Incoterms (International Commercial Terms) essentially refer to the agreed delivery conditions of a shipment. While Incoterms literally translates to delivery conditions, the English term is most commonly used in the Netherlands as well. In the transport sector, they are used as standard terms that define who is responsible for the goods during transport. They determine who is responsible at any given moment in the journey from the buyer to the customer, as well as who pays which transport costs and who bears the risks of the transport. For example, who is held liable in the event of damage to the goods? And who must ensure that all customs obligations are met? These agreements were established internationally by the International Chamber of Commerce (ICC), most recently in 2020.
Please note! Are you doing business with the UK? If so, you may need to adjust your agreed Incoterms. The situation at the border has changed. Therefore, check carefully whether your current (price) agreements are still correct!
Clarity on Incoterms in 2025 – 2026 in one convenient overview?
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Incoterms categories
In total, this latest version consists of 11 Incoterms divided into four main categories. A main category can be identified by the first letter of the delivery conditions.
- E-Term – Here, the customer arranges everything related to the transport of the goods.
- F-terms – Here, the customer also arranges the majority of the transport. In this case, the seller is responsible for the preparations regarding transport and customs export clearance.
- C-terms – The C-terms work the other way around. Here, the seller arranges most matters regarding the transport. However, the risk during the main transport already lies with the buyer.
- D-terms – The D-terms also assign responsibility to the seller. In this case, the seller is the one who bears the risk for the transport and pays the bill.
This blog provides an explanation of each of the 11 Incoterms. In it, you will read what the Incoterm means, who arranges which matters, and who bears the risk.
Ex Works (EXW) meaning
In the case of Ex Works (EXW), almost all obligations lie with the buyer. The seller’s obligation is to make the goods available for collection at an agreed location. This location must be agreed upon in the delivery conditions. In most cases, this is a warehouse or factory belonging to the seller. All risks and costs regarding transport lie with the buyer of the goods. This also includes loading the goods at the place of collection.
It is important to know that customs formalities are also handled by the buyer in this case. This often causes problems for transport outside the EU. Since Brexit, this also applies to the UK. Therefore, you are unlikely to encounter EXW when trading with the UK or other countries outside the EU. EXW is discouraged for international transport.
Free Carrier (FCA) meaning
FCA means free to the first carrier. In this case, the carrier pays for the transport up to the agreed delivery point. The risk of the transport journey transfers to the buyer the moment the goods are handed over to the first carrier.
Within FCA, delivery can occur in two ways. This does not need to be specified in the contract:
- If the agreed delivery point is the seller’s factory or office, the transport risk is transferred as soon as the goods are loaded onto the buyer’s vehicle.
- If another point is agreed upon, the risk transfers to the buyer as soon as the goods are made available to the buyer and are ready for unloading.
From the moment of delivery, the buyer bears the risk and the costs for the transport. A key difference from EXW is that the seller is responsible for handling the customs formalities involved in the export of the goods. Everything regarding customs arising from the transit and import of goods lies with the buyer.
Carriage Paid To (CPT) meaning
In the case of CPT, the seller arranges the transport and its payment up to the agreed place of destination. However, the risks regarding the transport are transferred earlier, namely upon handover to the first carrier. The transfer of costs and risks therefore does not take place at the same time. All costs and responsibilities regarding customs formalities arising from the export of the goods also lie with the seller. The same generally applies to the transit of goods. The buyer arranges all customs matters regarding the import of the goods. If the terminal operator charges Terminal Handling Charges (THC), the buyer should inquire with the seller whether these costs are included in the transport price.
Carriage and Insurance Paid To (CIP) meaning
In the case of CIP, the seller arranges the transport and its payment up to the agreed place of destination. However, the risks regarding the transport are transferred earlier, namely upon handover to the first carrier. The transfer of costs and risks therefore does not take place at the same time. All costs and responsibilities regarding customs formalities arising from the export of the goods also lie with the seller. The same generally applies to the transit of goods. The buyer arranges all customs matters regarding the import of the goods. If the terminal operator charges Terminal Handling Charges (THC), the buyer should inquire with the seller whether these costs are included in the transport price.
The difference with CPT, as described above, is that the seller is obliged to take out cargo insurance for the buyer’s goods. If this insurance is insufficient to cover any damage, the buyer will have to cover the transport costs.
Delivered at Place Unloaded (DPU) meaning
DPU assigns responsibility for the risks and costs of transport to the seller up to the agreed delivery point. There, the seller must offer the goods to the buyer unloaded. All costs and responsibilities regarding customs matters arising from the export of the goods also lie with the seller. The buyer arranges all customs matters regarding the import of the goods.
Delivered At Place (DAP) meaning
With DAP, the seller is responsible for the risks and costs of transport up to the agreed delivery point. There, the seller must offer the goods to the buyer ready for unloading. This is the difference with the DPU described above. All costs and responsibilities regarding customs formalities arising from the export of the goods also lie with the seller. The buyer arranges all customs matters regarding the import of the goods.
Delivered Duty Paid (DDP) meaning
In DDP transport, the seller is responsible for the risks and costs of transport up to the agreed delivery point. There, the seller must offer the goods to the buyer ready for unloading. In principle, DDP is the same as DAP, as mentioned above. The main difference lies in the handling of customs formalities. With DDP, the seller is responsible for all costs and risks regarding the customs formalities associated with both the export and import of the goods.
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Difference between DAP and DDP
In principle, DAP and DDP are exactly the same. In both cases, the seller is responsible for the risks and costs of transport until delivery at the place of destination. The only difference is that the costs and risks of import duties and sales taxes are for the seller in the case of DDP, whereas they are assigned to the buyer in the case of DAP.
Free Alongside Ship (FAS) meaning
FAS is only used in the case of sea freight. Looking at transport to the UK, FAS is therefore also relevant. In this case, the goods must be delivered by the seller “alongside” the ship. In practice, this means next to the vessel. For delivery alongside the ship, the costs and risks lie with the seller; thereafter, they lie with the buyer. All costs and responsibilities regarding customs formalities arising from the export of the goods also lie with the seller. The buyer arranges all customs matters regarding the import of the goods.
This Incoterm is particularly relevant for bulk and breakbulk cargo. Containers are often handed over at the terminal. In that case, FCA is often more relevant.
Free On Board (FOB) meaning
FOB is also only used in the case of sea freight. Looking at transport to the UK, FOB is therefore also relevant. In the case of FOB, the goods must be delivered by the seller onto the ship. The definition of “on board” in the 2020 Incoterms is past the ship’s rail.
For delivery onto the ship, the costs and risks lie with the seller; on the ship, the costs and risks are divided, and after unloading from the ship, they lie with the buyer. All costs and responsibilities regarding customs formalities arising from the export of the goods also lie with the seller. The buyer arranges all customs matters regarding the import of the goods.
Cost and Freight (CFR) meaning
The seller bears the costs of transport until the goods have arrived at the port of destination. Looking at transport to the UK, CFR is therefore also relevant. The risk of transport is transferred to the buyer earlier, namely from the moment the goods are loaded onto the ship. An important detail is that insurance is not included in this case.
If the terminal operator charges Terminal Handling Charges (THC), the buyer should inquire with the seller whether these costs are included in the transport price. All costs and responsibilities regarding customs formalities arising from the export of the goods also lie with the seller. The buyer arranges all customs matters regarding the import of the goods.
Cost Insurance and Freight (CIF) meaning
The seller bears the costs of transport until the goods have arrived at the port of destination. Looking at transport to and from the UK, CIF is therefore also relevant. The risk of transport is transferred to the buyer earlier, namely from the moment the goods are loaded onto the ship. This is the same as CFR. The difference is that in the case of CIF, the seller is obliged to take out insurance, which is not the case with CFR.
If the terminal operator charges Terminal Handling Charges (THC), the buyer should inquire with the seller whether these costs are included in the transport price. All costs and responsibilities regarding customs formalities arising from the export of the goods also lie with the seller. The buyer arranges all customs matters regarding the import of the goods.
Incoterms 2010 VS 2020
The 2020 Incoterms are the most recent version. Compared to 2010, there are several differences between the two versions.
- New Incoterm: Incoterms 2020 introduces a new Incoterm called “CIF with destination”. This is a variation of the existing CIF term, but specifically intended for use when the seller is responsible for arranging transport to the country of destination.
- Adjustments to existing Incoterms: Some existing Incoterms have been modified in the 2020 version to provide clarity and prevent potential misunderstandings. For example, the term “Free Carrier” (FCA) now includes the option to specify agreed locations other than the seller’s facilities. Additionally, DAT (Delivered At Terminal) has been replaced by DPU.
- Changes in responsibilities: The 2020 Incoterms clarify the responsibilities of buyers and sellers regarding insurance and proof of delivery. Furthermore, changes have been made to the distribution of responsibilities concerning the loading and unloading of goods.
- Clarification of costs: The 2020 Incoterms provide more detailed information on the distribution of costs between buyer and seller. Specific guidance has been included to clarify responsibilities and risks regarding the payment of freight costs and insurance.
It is important to know that the 2020 Incoterms replace the 2010 version, but earlier versions may still be valid if explicitly agreed upon between the buyer and seller. Therefore, always ensure you check which version is mentioned in your agreement!
How do you use Incoterms?
Incoterms become important when doing (international) business. It is essential to make clear agreements between buyer and seller regarding who bears which responsibility during transport. By using standardized options as mentioned above, you prevent miscommunications.
Some Incoterms are only applicable to transport over water. This applies to FAS, FOB, CFR, and CIF. You do not need these for transport involving only road haulage. If you are transporting goods to and from the UK, you can also use them. After all, the UK remains an island!
How often should I check my Incoterms agreements?
It is very important to check your Incoterms regularly. This ensures that your agreements are still up to date! For new trade agreements, it is always advisable to review the terms. This way, you can be sure you are using the latest version and that the agreements are correct. So, do not simply copy them from another agreement!
Furthermore, it is wise to choose a fixed time to check your agreements, for example, once a year. In any case, check your Incoterms if there are changes in international agreements or if a new version is published by the ICC. No worries, we don’t expect that new version until 2030.
Incoterms 2025 – 2026
Incoterms are updated once every 10 years. The latest update is the Incoterms 2020. Therefore, there are no specific Incoterms from 2025 and 2026. You can simply use the 2020 agreements for those years. The next update is not expected until 2030. So, for the time being, nothing changes!
A previous edition can be found in the Incoterms 2010. These are no longer widely used. It is important to mention the specific year of your Incoterms in your agreements to prevent misunderstandings.
EASY Road Transport and Incoterms
As EASY Road Transport, we do not make agreements regarding Incoterms directly with you. Incoterms are agreements made between the buyer and the seller. EASY Road acts as the carrier. Therefore, you will not enter into contracts with us in which specific Incoterms are agreed upon.
At EASY Road Transport, we do deal with Incoterms, but more regarding the question of who should be contacted at what time for appointments and in case of problems. In the event of special agreements between buyer and seller, we would like to be informed!
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