Incoterms 2020: The Guide for 2025

As businesses plan their international shipments for 2025, a common question arises: “Which Incoterms should we be using?” This guide is designed to provide complete clarity on the subject. 

The official, valid rules for all global trade in 2025 are Incoterms 2020 (sometimes misrepresented as incoterms 2025).

This article will serve as your definitive guide. We will briefly touch on the update cycle, then dive deep into what Incoterms are, the fundamental purpose behind their use, and how you can leverage the Incoterms 2020 framework to bring clarity and security to your supply chain. 

A Note on Incoterms 2025 Updates 

The logistics industry often sees speculation about new rules. However, the International Chamber of Commerce (ICC), which governs Incoterms, has historically followed a ten-year revision cycle (2000, 2010, 2020). Following this pattern, the next update is not anticipated until around 2030. 

Therefore, for any sales contracts and shipments planned for 2025, your business must continue to use and reference Incoterms 2020. This framework is the current, and only, official standard. 

What Are Incoterms? A Fundamental Overview 

Incoterms are the universal language of international trade. They are a set of eleven standardized, three-letter terms that define the key responsibilities of a seller and a buyer in a commercial transaction. 

Their primary purpose is to clarify three critical aspects of a shipment: 

1. Tasks: Who is responsible for organizing transport, securing insurance, and handling import/export customs procedures? 

1. Costs: Who pays for each specific cost along the shipping journey (e.g., freight, loading, terminal fees, duties)? 

1. Risk: At which precise point in the journey does the risk of loss or damage to the goods transfer from the seller to the buyer? 

It is equally important to understand what Incoterms do not define. They do not cover the price of the goods, the terms of payment, or the transfer of title/ownership. These crucial elements must be specified elsewhere in your sales contract. 

How Are Incoterms Used in Global Trade? 

The fundamental idea behind using Incoterms is to create a predictable and universally understood agreement between trading partners, regardless of their native language or local laws. 

When a seller and a buyer agree on an Incoterm and include it in their sales contract, they are incorporating a pre-defined set of rules that govern the delivery of the goods. This simple act removes ambiguity and drastically reduces the risk of disputes over costs and responsibilities. 

For the rule to be effective, it must be cited correctly in documentation by specifying the rule, the precise location, and the version: [Chosen Rule] [Named Port or Place] Incoterms 2020. This precision ensures both parties know exactly where costs and risks are transferred. 

The Complete List of Incoterms 2020 

The Incoterms 2020 framework is your essential toolkit for shipping in 2025. The eleven rules are organized into two distinct categories. For a deeper dive, you can also reference our primary Incoterms explained page. 

Rules for Any Mode(s) of Transport 

These seven modern and flexible rules are recommended for most shipments, especially those involving containerized freight or multiple modes of transport. 

• EXW (Ex Works): Seller’s minimum obligation. Buyer bears almost all costs and risks. 

• FCA (Free Carrier): Seller delivers to a carrier nominated by the buyer. Highly flexible and recommended for container shipments. 

• CPT (Carriage Paid To): Seller pays for carriage, but risk transfers to the buyer early on. 

• CIP (Carriage and Insurance Paid To): Same as CPT, but the seller must also arrange high-level insurance for the buyer. 

• DAP (Delivered at Place): Seller is responsible for delivery to a destination, but not for import clearance. 

• DPU (Delivered at Place Unloaded): Seller is responsible for delivery and unloading at the destination. 

• DDP (Delivered Duty Paid): Seller’s maximum obligation, including import clearance and duties. 

Rules for Sea and Inland Waterway Transport 

These four traditional rules are for non-containerized bulk cargo (e.g., grain, oil) where the seller loads goods directly onto the vessel. 

• FAS (Free Alongside Ship): Risk transfers when goods are placed alongside the vessel. 

• FOB (Free On Board): Risk transfers once goods are loaded “on board” the vessel. 

• CFR (Cost and Freight): Seller pays for freight, but risk transfers once goods are on board. 

• CIF (Cost, Insurance and Freight): Same as CFR, but the seller also provides minimum insurance. 

 

How to Choose the Right Incoterm for 2025 

Selecting the right Incoterm is a strategic decision that affects your bottom line. Consider these key factors for your 2025 shipments: 

1. Mode of Transport: This is the most crucial factor. For containerized freight (even by sea), always use one of the seven “any mode” rules like FCA. The four “sea-only” rules (FOB, CIF, etc.) should be reserved for bulk cargo. 

1. Desired Level of Control: Do you want to manage the main freight segment yourself? An ‘F’ rule (like FCA) is ideal. Do you prefer the seller to handle transport to your country? A ‘D’ rule (like DAP) may be better. 

1. Risk Management: Each rule defines the precise point of risk transfer. Decide if you are more comfortable assuming risk early in the journey or having the seller retain it for as long as possible. 
2. Commercial Leverage: Who has better access to cost-effective logistics? Sometimes a seller can secure better freight rates in their home country, making ‘C’ or ‘D’ terms advantageous for the buyer. 

Conclusion: Key Principles for Shipping in 2025 

As you plan for the future, a solid understanding of Incoterms is essential for successful global trade. 

Here are the key principles to remember: 

1. The Standard is Incoterms 2020: These are the official and valid rules for all your shipments in 2025. 

1. The Purpose is Clarity: Incoterms are a tool to clearly define tasks, costs, and risks between a seller and a buyer, preventing costly disputes. 

1. The Choice is Strategic: Your selection of an Incoterm is a critical financial decision that should align with your business strategy, mode of transport, and risk tolerance. 
2. Expertise is Available: The world of global trade is complex, but Mydello is here to simplify it. We provide the digital tools and human expertise to make your shipping process seamless.