What are Incoterms?
Incoterms (International Commercial Terms) are a set of standard terms from the International Chamber of Commerce (ICC). They define exactly where responsibility and risk pass from seller to buyer in an international deal.
The latest version is Incoterms 2020 and contains eleven terms. Some are specific to sea freight, while a few are used for virtually all freight – including road.
The most common for road freight
For road transport you'll most often meet these:
- EXW (Ex Works) – the buyer collects at the seller's premises and bears everything thereafter, including customs.
- FCA (Free Carrier) – the seller hands the goods to the carrier; risk passes there.
- DAP (Delivered At Place) – the seller delivers to a named place; the buyer handles import customs.
- DPU (Delivered At Place Unloaded) – like DAP, but the seller also unloads the goods.
- DDP (Delivered Duty Paid) – the seller bears everything to the end, including import duty and VAT.
Risk vs cost – where's the line?
The basic idea is simple: the further down the list (toward DDP), the more responsibility sits with the seller. With EXW the buyer carries almost everything; with DDP the seller carries almost everything.
What matters is knowing exactly where risk passes – because that decides who covers any damage in transit, and who insures it.
Common mistakes
EXW can leave the buyer with unexpected trouble over export customs in the seller's country. DDP can leave the seller with unexpected liability for import customs in a country they don't know. And mixing up who clears customs is a classic.
If you're unsure, get in touch. We look at your deal and help you choose a term that matches how the transport is actually meant to run – and handle customs where it's needed.
Common questions
Which Incoterm should I choose?+
It depends on how much responsibility you want to take and where risk should sit. FCA and DAP are common, balanced choices for road freight. We're happy to help you choose.
What's the difference between DAP and DDP?+
With DAP the buyer handles import clearance; with DDP the seller covers import duty and VAT all the way.
Do Incoterms cover customs?+
Incoterms decide who's responsible for customs handling, but the clearance itself still has to be done. We can handle that for you.