Reading delivery terms: three questions beyond EXW, FOB or DAP pricing

Three abbreviations are not enough to describe an order

According to the International Chamber of Commerce, Incoterms® 2020 comprises 11 rules covering obligations, costs and risks between sellers and buyers. ICC's introduction advises stating the selected rule, the named place or port, and the version clearly. This is a set of trade rules for parties to incorporate into their contracts, not a new freight rate schedule for 2026.

Ask who performs the work, then ask who pays

The editorial team suggests that buyers create one line for each task: collection from the factory, domestic transport, formalities, the international leg and final delivery. For each line, note the party arranging it, the party paying for it and the required handover outcome. If the seller only says “shipping included,” ask them to specify the endpoint to avoid leaving a leg unaddressed.

For example, two quotations that both say delivery in a city may still differ in the warehouse address, vehicle access conditions or unloading arrangements. Include these practical details in the comparison table before assessing which price is lower.

Checklist when receiving a quotation

1. Check that the term name, location and version year are sufficiently specific. If you do not understand the proposed rule, ask the responsible party to explain it according to the actual cargo journey. Do not assign a term yourself based only on a supplier's statement.

2. Request clarification of included items, excluded items and pricing data. Separate the product price, additional packaging, service fees and anticipated charges where possible. An undetermined charge should have an update method and an authorized approver.

3. Compare the risk transfer point with the insurance arrangement and the planned handover record. ICC notes that under C-group rules, the named destination does not mean it is the delivery point where risk transfers. Therefore, read the applicable rule correctly rather than inferring that the party paying freight always bears risk until arrival.

Matters that require additional agreement

ICC's introduction states that Incoterms do not determine product specifications, payment terms or transfer of ownership. Buyers should still clearly record the approved sample, delivery deadline, payment milestones and how non-conforming goods will be handled. For shipments with multiple SKUs, attach the final version of the list to the transaction so that the purchase request and shipping request refer to the same shipment.

Use this article as a tool to prepare for discussions

This article does not select an optimal term for every importer and does not replace reading the full applicable rule. When requesting a quotation, send the delivery term proposed by the supplier, the collection location, the delivery location and the work you have already arranged at the same time. These details help the parties identify what still needs to be handled.