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INCOTERMS is a set of international rules promoted by the International Chamber of Commerce (ICC) for the uniform interpretation of commonly used trade terms in foreign and domestic trade.

The ICC first implemented Incoterms in 1936. The most recent revisions occurred in 1990, 2000 and 2010.

For Incoterms 2010 rules to apply to a sale contract, an explicit reference to their application must be made. For example, an indication of CFR Miami Port would not incorporate Incoterms 2010 rules into the sale contract, whereas CFR Miami Port Incoterms 2010 would.

The chosen Incoterms rule should be appropriate to the goods and to the means of their transport. It will indicate which party to the sale contract, proforma invoice, agreement or purchase order has the obligation to complete the carriage or insurance arrangements, at which point the seller delivers the goods to the buyer, and the costs each party is responsible for.

The chosen Incoterms rule can work only if the parties name a place or port, and will work more efficiently if the parties specify the place or port as precisely as possible. For example, a named inland destination should have a full street address and not merely state ‘buyer's warehouse'.

Subjects that are in scope within the Incoterms 2010 rules:

• Delivery of Goods - place of delivery and timing of delivery i.e., at the premises of the seller, at the time of shipment but prior to carriage, or upon arrival.
• Transfer of Risks - place and time of actual transfer linked to the delivery of goods.
• Division of Costs - from time of dispatch to arrival at the place or port of destination.
• Insurance - seller must obtain at least the minimum coverage provided by Clauses (C) of the Institute Cargo Clauses (LMA/IUA) or any similar clauses. Insurance cover is to be for a minimum of 110% of the goods value. Insurance coverage is to extend from the point of delivery until at least the named port or place of destination.
• Documentation - relating to export & import clearance; security related clearance and electronic communications.

Subjects that are out of scope within the Incoterms 2010 rules:

• Payment conditions - this is for the sale contract, proforma invoice, and agreement or purchase order to indicate.
• Transfer of Ownership - ICC Publication 546 (Transfer of Ownership in International Trade) covers the transfer of ownership of goods.
• Detailed carriage requirements - these are between the carrier and the parties to the sale contract, proforma invoice, agreement or purchase order i.e., covering the establishment of the freight contract.
• Variants - alterations or additions to Incoterms such as "FOB Stowed". Where variants are given, a full explanation should be stated as to the requirements for determining delivery and the data content of the presented documents.
• Other issues relating to the fulfillment of the contract - breach of contract and the legal effect, defects in goods, force majeure, indemnity claims, etc.

Rules covering any mode of transport or combination of transport modes -

• EXW Ex-Works (named place of delivery)
• FCA Free Carrier (named place of delivery)
• CPT Carriage Paid to (named place of destination)
• CIP Carriage and Insurance Paid to (named place of destination)
• DAT Delivered at Terminal (named terminal at port or place of destination)
• DAP Delivered at Place (named place of destination)
• DDP Delivered Duty Paid (named place of destination)

Rules covering sea or inland waterway transport only -

• FAS Free Alongside Ship (named port of shipment)
• FOB Free on Board (named port of shipment)
• CFR Cost and Freight (named port of destination)
• CIF Cost, Insurance and Freight (named port of destination)