What are Incoterms?

Incoterms (International Commercial Terms) are a globally recognised set of three-letter rules that allocate responsibilities between buyer and seller — transport, insurance, export and import clearance, and the point at which risk passes.

The chosen Incoterm decides who is the importer of record, who pays duty and VAT, and who is responsible for the import declaration. DDP, for example, puts clearance and duty on the seller; EXW puts almost everything on the buyer.

Whoever is the importer of record under the Incoterm carries legal responsibility for the commodity code on the declaration — so the party clearing the goods needs confidence the classification is correct.