Incoterms 2020 Explained

Incoterms (International Commercial Terms) are standardised trade terms published by the International Chamber of Commerce (ICC) that define who — buyer or seller — is responsible for freight costs, insurance, customs clearance, and the point where risk transfers. They are used in international contracts to eliminate ambiguity about obligations.

For most parcel shipments through couriers like DHL, UPS, FedEx, DPD or GLS, DAP (Delivered at Place) is the standard. The seller arranges and pays for delivery to the buyer's address; the buyer handles import duties in their country. If you want to cover the buyer's import duties too, use DDP.

Under DAP, the seller delivers the goods to the buyer's named address but the buyer is responsible for paying import duties and taxes in their country. Under DDP, the seller covers everything — including import duties — so the buyer receives goods with no extra charges. DDP is more convenient for buyers but requires the seller to know the destination country's import duty rates.

Incoterms 2020 (the current version) made two main changes: DAT (Delivered at Terminal) was renamed DPU (Delivered at Place Unloaded), and CIP now requires sellers to arrange higher insurance cover (Institute Cargo Clauses A — all risks) by default, compared to the minimum cover previously required.

Only DDP (Delivered Duty Paid) includes import duties as the seller's responsibility. All other Incoterms place import customs clearance and duties on the buyer. Always clarify with your buyer whether duties are included in your price.