Incoterms are a globally recognised set of standards, developed and maintained by experts and practitioners brought together by the International Chamber of Commerce (ICC), used in international and domestic contracts for the delivery of goods. They clarify the tasks, costs and risks involved in delivering goods from seller to buyer. According to HMRC, they are not set by HMRC and are not specific to customs valuation.
What are Incoterms?
The ICC describes the Incoterms rules as internationally accepted definitions and rules of interpretation for the most common commercial terms used in contracts for the sale of goods. The rules were first published in 1936.
The ICC also says the rules are recognised by UNCITRAL as the global standard for the interpretation of the most common terms in foreign trade. HMRC notes that they are used worldwide in domestic contracts for the delivery of goods as well as international ones.
What do Incoterms decide between a seller and a buyer?
Both the ICC and HMRC describe the purpose of the Incoterms rules in the same terms: they help avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers. HMRC’s guidance gives examples of how particular terms allocate each of these.
- Tasks: under Delivered Duty Paid (DDP), HMRC says the seller must clear the goods not only for export but also for import, pay any duty for both export and import, and carry out all customs formalities.
- Costs: under Cost and Freight (CFR) and Cost, Insurance and Freight (CIF), HMRC says the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
- Risk: under Free Alongside Ship (FAS), HMRC says the risk of loss of or damage to the goods passes when the goods are alongside the ship.
Examples of what individual Incoterms say
HMRC’s guidance summarises points from several of the rules. These are examples, not the full text of any rule.
- Ex Works (EXW): the seller places the goods at the disposal of the buyer at the seller’s premises or at another named place, such as works, factory or warehouse. The seller does not need to load the goods on any collecting vehicle.
- Free Carrier (FCA): risk passes to the buyer at the delivery point within the named place of delivery.
- Cost, Insurance and Freight (CIF): the seller is required to obtain insurance only on minimum cover.
- Carriage and Insurance Paid To (CIP): the seller is required to obtain insurance only on minimum cover.
- Delivered at Place (DAP): the seller bears all risks involved in bringing the goods to the named place.
Under FCA, HMRC says the parties are well advised to specify as explicitly as possible the point within the named place of delivery, because the risk passes to the buyer at that point. HMRC also tells buyers to note that under CIF and CIP the seller’s insurance obligation is only minimum cover.
For keeping the agreed contract terms together with the rest of your shipping paperwork, see Managing Export Documents in One Place: A Practical Guide.
Incoterms are not customs rules or a valuation method
HMRC states that the Incoterms rules are not set by HMRC and are not specific to HMRC or customs valuation. It adds that the use of a particular Incoterm does not restrict the use of any valuation method: for example, goods delivered duty paid can be valued under method 1.
How goods are valued for customs where you export or import is a question for a customs broker or the customs authority in that country.
Which version of Incoterms is current?
The ICC describes Incoterms 2020 as the most recent version, taking into account the latest developments in commercial practice. It entered into force on 1 January 2020.
HMRC points out that the terms are regularly updated, and advises that the most current information should be searched regularly so that outdated Incoterms are not used. One example of change: HMRC notes that DPU (Delivered at Place Unloaded) replaces the former Incoterm DAT (Delivered at Terminal).
When to get specialist help
This post explains what Incoterms are and gives examples of how they allocate tasks, costs and risks. It does not cover when ownership of the goods transfers, how the sale price is set, payment terms, or the full wording of each rule.
- For the sale contract itself, including ownership and payment terms, ask a lawyer who handles commercial contracts.
- For which term suits a particular shipment, and what freight and insurance arrangements look like in practice, ask a freight forwarder.
- For customs clearance, duty and customs valuation, ask a customs broker or the customs authority in the country concerned.
- For the official text of the current rules, go to the ICC.
More export explainers are on the blog.
Related reading
- How to Find International Buyers Without Agents
- Managing Export Documents in One Place: A Practical Guide
Sources
Checked against the official sources above on 29 October 2026. Rules and forms change, so confirm the current version on the official page before you act.