Logistics 101
Incoterms
Incoterms (International Commercial Terms) are a set of internationally recognised trade rules created by the International Chamber of Commerce (ICC).
They define the responsibilities of buyers and sellers when goods are traded across borders — specifically, who is responsible for transport, insurance, customs clearance, and the payment of duties and taxes at each stage of the delivery process.
Each Incoterm is represented by a three-letter abbreviation, such as EXW (Ex Works), DAP (Delivered at Place), or DDP (Delivered Duty Paid).
These abbreviations appear on commercial invoices and shipping documents to clearly outline the terms of sale and the division of costs and risks.
By using Incoterms correctly, both exporter and importer know exactly who covers costs and assumes risks from the moment the goods leave the seller's premises until they reach the buyer.
This clarity helps prevent confusion, delays, and disputes in international trade.
The latest version — Incoterms 2020 — applies worldwide across all transport modes, including road, air, and sea.
At Pallet2Ship, most international services operate under:
- DAP (Delivered at Place) for exports — the seller arranges delivery to the destination country, while the receiver handles import customs, duties, and taxes.
- EXW (Ex Works) for imports — the sender makes the goods available for collection, and the receiver is responsible for all customs, duties, and taxes.
DDP (Delivered Duty Paid), where the seller pays all import costs and taxes, is not available for all services, so customers should check with us before booking.
👉 Learn more about Incoterms 2020: Incoterms
Frequently Asked Questions
about XI EORI number
Incoterms (International Commercial Terms) are global trade rules published by the International Chamber of Commerce (ICC). They define how responsibilities, costs, and risks are shared between buyers and sellers when goods move across borders — including who handles transport, customs, and taxes.
Using the right Incoterm ensures that both the exporter and importer understand their obligations. It prevents disputes and customs delays by clearly identifying who arranges transport, who clears the goods, and who pays duties and taxes. It’s essential for smooth, compliant international shipping.
Incoterms are created and maintained by the International Chamber of Commerce (ICC). They were first issued in 1936 and are updated periodically to reflect modern logistics practices. The latest version, Incoterms 2020, is the one currently in force.
The Incoterms 2020 edition introduced clearer guidance on insurance, security requirements, and cost allocation between buyers and sellers. It applies to all transport modes — road, sea, air, and rail — and replaced the previous 2010 version.
There are 11 Incoterms in total. Seven apply to any transport mode (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and four apply only to sea or inland waterway transport (FAS, FOB, CFR, CIF). Each defines a different split of cost and risk between seller and buyer.
• EXW (Ex Works): The goods are made available at the seller's premises.• DAP (Delivered at Place): The seller delivers the goods to an agreed destination, but the buyer handles import customs and pays any duties and taxes.• DDP (Delivered Duty Paid): The seller manages transport and pays all customs duties and taxes — however, this option is not available on all Pallet2Ship services, so please confirm in advance.
Most of our export shipments are sent under DAP (Delivered at Place), and most imports operate on EXW (Ex Works). Under both terms, the receiver is responsible for import duties, taxes, and customs clearance. DDP (Delivered Duty Paid) is limited to specific services and must be confirmed with us before booking.
Yes. Incoterms specify who handles customs procedures. For EXW and DAP, the receiver completes import clearance and pays all related duties or VAT. Selecting the correct term ensures the right party manages paperwork and avoids clearance delays.
On their own, Incoterms are not laws. But when included in a sales contract — e.g., “DAP Berlin Incoterms 2020” — they become binding trade conditions. They are widely recognised by customs, carriers, and courts to determine each party’s obligations.
You can read official guidance on GOV.UK or obtain the full Incoterms 2020 rulebook from the International Chamber of Commerce (ICC). The ICC version includes detailed explanations and practical examples for each trade term.