What is Incoterms in export and all you need to know

International trade plays a vital role in driving India's economic growth. In January 2025 alone, according to statistics from the Observatory of Economic Complexity (OEC), India exported goods worth $36.4 billion.¹ Major export destinations included the United States ($8.44 billion), the United Arab Emirates ($3.07 billion), the United Kingdom ($1.17 billion), Bangladesh ($1.07 billion), and China, highlighting India’s expanding footprint in global markets².

As businesses in India continue to tap into overseas demand, managing international shipments efficiently has become more critical than ever. Smooth trade transactions depend on clear agreements between buyers and sellers, especially around who handles shipping, insurance, customs duties, and risk during delivery.

This is where Incoterms come in. Developed by the International Chamber of Commerce (ICC), Incoterms provide a globally accepted framework that defines the responsibilities of exporters and importers. By understanding and using the right Incoterms, businesses can avoid costly misunderstandings, protect their interests, and build stronger international partnerships.

What are Incoterms?

Incoterms, short for "International Commercial Terms," are 11 standardised terms developed and introduced by the International Chamber of Commerce (ICC) in 1936. These terms clearly define the roles, costs, and risks for buyers and sellers involved in transporting and delivering goods in international and domestic trade transactions.

Understanding what Incoterms are is crucial for exporters because it ensures both parties know exactly who is responsible for each stage of the shipping process, from export duties to insurance and final delivery. This minimizes disputes and unexpected costs when delivering goods overseas.

Over the years, Incoterms have been periodically revised to reflect changing practices in international logistics. The latest version, Incoterms 2020, provides updated guidance for today’s dynamic trade environment.

Categories of Incoterms

Incoterms are divided into two main categories to address different transportation needs:

1. Rules for any mode of transport: These versatile rules apply to goods shipped by any mode of transportation — whether by road, rail, air, or sea. They are useful and handy for international trade transactions where multiple modes of transport might be involved, offering flexibility and clarity in diverse logistics scenarios.
2. Rules for sea and inland waterway transport: This category is established for shipments carried exclusively by sea or inland waterways. These rules consider the unique aspects of maritime transport, such as the risks involved during port handling and the transfer of goods.

Understanding these categories is critical for choosing the correct Incoterm, ensuring that both parties are clear on their responsibilities and risks throughout shipping from India to any domestic or international destination.

Important and most commonly used Incoterms for export 

If you're wondering how many types of Incoterms there are, the answer is 11. Out of the 11 Incoterms, seven apply to any mode of transport. However, for exports involving door-to-door delivery, these five terms are the most relevant. They clearly define the responsibilities of the seller and buyer throughout the shipping process. 

EXW (EX Works)

Under EXW, the seller makes the goods available for pickup at their premises — such as a warehouse or factory. From that point on, the buyer assumes full responsibility for arranging transport, covering all costs, and bearing all risks involved in delivering the goods overseas.

Commonly used when: The buyer has strong logistics partnerships in India and prefers full control over international shipping.

FCA (Free Carrier)

Under FCA, the seller delivers the goods to a pre-agreed point where a carrier chosen by the buyer takes over. Once the goods are handed over, the buyer is responsible for any transport-related risks and costs.

Advantage: FCA is widely used for exports from India, offering flexibility across road, air, and sea shipments.

CPT (Carriage Paid To)

The seller takes on the responsibility of paying for the transportation of goods to a predetermined destination. However, once the goods are handed over to the first carrier, the buyer assumes all risks, including the possibility of damage or loss during transit.

Important to note: Even though shipping costs are covered by the seller, buyers should still consider insuring the goods after handover.

DAP (Delivered At Place)

With DAP, Indian exporters deliver the goods directly to the buyer’s premises or another agreed location abroad. The seller bears all risks and costs until the goods are ready for unloading at the destination.

Tip: DAP is often preferred when selling to overseas customers who expect a door-to-door service without handling customs paperwork themselves.

DDP (Delivered Duty Paid)

With DDP, the seller assumes the highest level of responsibility. The exporter handles transportation, pays import duties, manages customs clearance, and delivers the goods ready for unloading at the final destination.

Widely used for: E-commerce shipments, business-to-consumer (B2C) deliveries, and markets where buyers prefer landed cost pricing.

Commonly used Incoterms for B2B and B2C sellers

While all 11 Incoterms serve important roles in international shipping, some are more commonly used by businesses depending on their shipping model and customer base. 

Popular Incoterms for B2B Sellers

For Indian exporters dealing with international businesses, EXW and FCA are two of the most common choices. These Incoterms offer several advantages for B2B transactions:

• Cost control: Sellers retain flexibility over logistics costs by transferring responsibility early.
• Alignment with buyer expectations: This is especially important when selling to markets like Europe and the US, where buyers might prefer to manage delivery arrangements.
• Risk transfer: Early risk transfer allows sellers to focus on production rather than international shipping complexities.

Popular Incoterms for B2C Sellers

When shipping directly to consumers overseas, particularly for Indian SMEs and e-commerce businesses, DAP and DDP are preferred. These Incoterms provide key benefits for B2C transactions:

• Simplified customer experience: Consumers receive goods without navigating complex customs procedures.
• Greater predictability: Offering DDP pricing eliminates surprise import fees for buyers, enhancing trust and loyalty.
• Competitive advantage: Handling delivery and customs clearance smoothly can differentiate Indian exporters in crowded international marketplaces.

How to choose the right Incoterm for door-to-door exports 

The right Incoterm helps to define responsibilities, manage shipping risks, and avoid unexpected costs. Here are a series of questions you can ask yourself to guide you in selecting the right one for door-to-door exports: 

What type of goods are you exporting? For fragile or high-value goods, using an Incoterm like DPP will allow you to assume the most responsibility for the delivery, which can be a huge selling point for buyers looking for reassurance. 

Which transport method are you using? If you are utilizing a comprehensive door-to-door logistics service like DHL Express, use FCA if the buyer prefers to have control over the main transport and final delivery arrangements. This can be attractive to buyers with established relationships and their own logistics providers.

Who should handle customs clearance and import duties? For buyers who prefer a completely hands-off experience upon arrival of the goods, DDP is the ideal choice as you manage all customs procedures and costs. This "duties paid" option can be a significant convenience and a strong selling point. If your buyer is comfortable handling import processes, DAP allows them to manage these aspects while you ensure delivery to their door.

How much control do you need over the door-to-door shipping process? If you want to ensure the goods are handled by a carrier you trust all the way to the buyer's door, opting for DAP or DDP gives you this control. If you are comfortable with the buyer managing their leg of the logistics journey, then FCA allows them to make their own arrangements after you hand over the goods locally.

Navigate international trade with confidence

Incoterms are more than just contractual terms; they're essential guidelines that help ensure smooth and clear agreements between sellers and buyers. By defining who is responsible for each aspect of the shipping process, these terms help mitigate risks and foster trust and efficiency between trading partners. 

If you're looking for a reliable courier service in India to help optimize your international trade transactions, DHL Express India is here to help. Our expertise in global logistics and deep knowledge of trade regulations can make navigating international markets smoother and more predictable for your business. Plus, we offer tailored shipping solutions designed to meet the specific needs of your trade activities, ensuring efficient and reliable delivery across the globe. 

Open a business account with DHL Express India today.