Incoterms® Rules

A delivery term is best understood as a set of parallel dials rather than a single setting. Each rule fixes several distinct allocations at once, and the common error is to assume they all move together — that whoever pays for carriage also bears the risk over it, for example. In several rules they deliberately do not coincide.

Cost

Which party bears each category of expense along the journey — inland carriage, loading, main carriage, discharge, terminal charges, onward delivery — and up to which point.

Risk

The point at which the risk of loss of or damage to the goods passes from seller to buyer. After that point the buyer bears the loss even if the seller is still paying for something.

Carriage

Which party is obliged to contract for transport, and how far that contract must run.

Insurance

Whether either party is obliged to procure cargo insurance for the benefit of the other. Most rules impose no such obligation; a minority do, and the level required differs between them.

Export and import formalities

Which party is responsible for clearing the goods for export, for transit where relevant, and for import — including obtaining the licences and paying the charges that clearance requires.

Documents and information

What each party must provide to the other, and at whose cost and risk, so that the other can perform its own obligations.

The rules are divided into two families. One family is intended for any mode of transport, or for more than one mode, and works wherever the delivery point is — an inland warehouse, a terminal, a factory gate. The other family is intended for sea and inland waterway transport and is built around delivery at a port, with reference points such as the ship’s side or the vessel itself.

The division matters practically for agricultural trade. Bulk cargoes moving vessel-by-vessel and containerised cargoes moving door-to-door are different physical operations, and terms designed around a ship are not necessarily apt for a container handed over at an inland depot. The ICC materials address this distinction directly, and it is one of the principal reasons the two families exist.

AgricultureID carries separate reference pages describing what several individual rules allocate, each in general terms and none reproducing rule text.

• EXW — the minimum-obligation end of the range, with delivery at the seller’s own premises
• FCA — delivery to a carrier or nominated party, usable for any mode
• FOB — a sea and inland waterway rule, with delivery on board a vessel at a named port of shipment
• CIF — a sea and inland waterway rule in which the seller contracts carriage and a specified level of insurance to a named port of destination
• DDP — the maximum-obligation end of the range, with the seller delivering cleared for import

The rules have been revised periodically since they were first published by the ICC in 1936. Revisions change the set: rules have been added, withdrawn, renamed, and altered in their detail between editions. A three-letter term therefore does not have a fixed meaning across time — it has the meaning given to it by a particular edition.

This is why a term is cited with three components: the rule, the named place or port, and the edition. Omitting the named place leaves the delivery point undefined; omitting the edition leaves the content of the term undefined. Older editions remain in use where parties choose them, and a contract that names one edition is governed by that edition regardless of whether a later one exists.

The rules apply because the parties incorporate them into their contract of sale. They are not legislation and do not apply automatically. Where a contract’s own terms conflict with the incorporated rule, the relationship between the two is a matter of contract law and of how the contract is drafted, not something the rules settle by themselves.

The scope of the rules is narrower than their ubiquity suggests, and most disputes that get described as "an Incoterms problem" are about something the rules never claimed to cover.

• They do not transfer title or determine when ownership of the goods passes — that is governed by the contract and the applicable law
• They are not a contract of sale, and do not exist independently of one
• They do not set the price, the currency, or the payment mechanism
• They do not specify the quality, quantity, or conformity of the goods
• They do not govern breach, remedies, limitation of liability, force majeure, or the forum for disputes
• They do not create a contract of carriage or of insurance, though they may oblige a party to enter into one
• They do not override mandatory law, and cannot make an import lawful that the importing jurisdiction prohibits

For agricultural consignments the last point deserves emphasis. A delivery term can allocate who is responsible for obtaining an import permit or presenting a phytosanitary certificate, but it has no bearing on whether the authority will accept the consignment. Admissibility is decided by the importing jurisdiction against its own requirements; the term only decides which party carries the burden of dealing with them.