Glossary: Order rules

Incoterms

Incoterms are standard three-letter trade terms published by the International Chamber of Commerce (ICC). They say who arranges and pays for transport, insurance and customs, and where risk passes from seller to buyer, in an international sale.

Reviewed by Hoa Nguyen, Senior Marketer. Last reviewed October 4, 2026
Last updated October 4, 2026

In detail

Incoterms 2020 has 11 rules. Seven work for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four are for sea and inland waterway only: FAS, FOB, CFR and CIF. Each rule splits the work and the risk between seller and buyer at a named place.

Four matter most for B2B sellers online. EXW (Ex Works): the buyer collects at the seller's premises and carries nearly all cost and risk. FCA (Free Carrier): the seller hands the goods to the buyer's carrier and clears export. DAP (Delivered at Place): the seller delivers to the named place, ready to unload, and the buyer clears import and pays duties and taxes. DDP (Delivered Duty Paid): the seller delivers cleared for import and pays duties and import taxes.

Incoterms cover delivery, cost and risk. They do not transfer ownership, set the price or decide payment terms. Always write the rule, the named place and the version, for example 'DAP Hamburg, Incoterms 2020'. DDP can need a tax registration in the buyer's country, so ask your freight forwarder before you offer it.

For a web store, whether duties and import taxes are collected from the buyer at checkout decides in practice if a sale works like DDP or DAP. Say which one applies in your shipping policy and on quotes, so buyers are not surprised by a customs bill.

Example

A UK brand sells to a retailer in Germany on DAP Hamburg terms. The brand arranges and pays transport to the retailer's warehouse in Hamburg, and the retailer clears customs and pays the import VAT and any duty.