Incoterms® 2020: start with delivery, cost and risk

Overview

ICC’s Incoterms® 2020 contains 11 rules allocating tasks, costs and risk between seller and buyer. A three-letter term does not replace the full sales contract.

Ask three separate questions

Who arranges each stage, who pays each charge, and when does risk pass? These answers need not coincide. Paying carriage to a destination does not necessarily mean retaining risk until arrival. Payment, product quality and ownership should be addressed separately in the contract.

Understand the two rule groups

Read the rule together with its named place and edition. This orientation table is GENLOG's explanation, not a reproduction of the ICC rules. An acronym does not settle ownership or payment timing.

A six-step selection process

1. Draw the actual movement, including collection, warehouse, terminal and vessel. A sea leg alone does not make a maritime rule the best description of a multimodal handover.
2. Mark where the seller can actually deliver and obtain evidence. Identify the receiver and the record proving the event.
3. Check customs capability at both ends. A contract term does not itself qualify a foreign party to perform export or import procedures.
4. Use separate columns for who arranges, who pays and who bears risk at each stage. Resolve contradictory assumptions before accepting a price.
5. Reconcile insurance, transport-document and payment requirements with their owners. Incoterms do not replace quality, ownership or breach provisions.
6. Record the rule, precise place and edition in the sales contract. Carry the agreed operational scope into quotation and handover instructions.

Worked scenario: collection at a factory

A Binh Duong factory plans to hand a packed container to a buyer-appointed carrier. Before selecting the acronym, identify the truck, loading responsibility, counting process and export arrangements. “The buyer handles transport” is not enough to conclude EXW.

Prepare two alternatives to the same final destination, allocating the origin tasks differently. Attach an actual task list and handover evidence to each. Compare prices only after confirming that each arrangement is workable.

If an existing contract names a broad location, obtain clarification rather than putting a private interpretation into shipping documents. A changed collection point can affect costs and evidence as well as the address. Record who approves those consequences.

Resolve these misunderstandings

• Paying freight does not automatically mean bearing every transit risk. Identify delivery and payment separately.
• A three-letter rule is not a complete contract. Agree the goods, price, payment, ownership and dispute process as appropriate.
• A country name may leave the handover unclear. Specify the actual port, address or point required.
• An operations email should not silently change the commercial delivery term. Obtain approval from the responsible parties.

May an older edition be used? Identify what the parties actually incorporated. Do not automatically rewrite an existing agreement because this learning guide discusses 2020; refer unresolved issues to the contract owner.

Before agreement

Identify the transport modes and cargo type. Agree the exact delivery point and destination. Allocate customs work and any insurance requirement. Reconcile the transport quotation with the sales contract, and retain changes under the shipment reference.

References

GENLOG practical guide, reviewed on 24 October 2026 using public primary sources. Examples are illustrations, not official tariffs or contract templates.

Next guide

FOB versus CIF: distinguish freight payment from risk