ICC releases new Incoterms guide to help businesses understand tariff risk

In response to the growing uncertainty in global trade policy, the International Chamber of Commerce (ICC) has released a new guidance note, Using the Incoterms® 2020 Rules to Manage Tariff Risk in International Trade. The publication provides practical insights for importers and exporters seeking to mitigate the financial risks associated with sudden changes in tariffs.

The 3-page guide helps businesses understand how to leverage the Incoterms® 2020 rules to define which party is responsible for costs such as import duties on an overseas transaction. Knowing this information ahead of time can help prevent surprise costs that can eat into profit margins or strain business relationships.

Under all Incoterms® 2020 rules, with the exception of DDP (Delivery Duty Paid), the buyer in a transaction will be responsible for paying tariffs on a shipment. It is also the buyer in all cases (again, except for DDP) who is responsible for handling all import customs clearance. When it comes to the export clearance, under all terms except for EXW (Ex Works) it is the seller that bears responsibility.

The practical advice for businesses from the guide is that they can strategically use (or avoid) certain Incoterms to help protect themselves against tariff volatility.

For example, A seller could protect themselves against exposure to sudden tariff changes by using DAP (Delivered at Place) rather than DDP (Delivered Duty Paid). It also encourages businesses to integrate these considerations into pricing models and risk assessments to ensure that trade contracts remain resilient to disruption.

The full guidance note is now available to download via the ICC’s website.

What Are Incoterms®?

For readers less familiar with the term, Incoterms® (short for International Commercial Terms) are a set of trade rules published by the International Chamber of Commerce. They’re designed to clarify international contracts by defining exactly who is responsible for what during the shipment of goods.

In essence, Incoterms® lay out who covers the costs, who manages the logistics, and at what point risk transfers from the seller to the buyer. They don’t deal with pricing, payment terms, or ownership rights, but they do set the framework for who handles transport, insurance, customs clearance, and duties.

The current version, Incoterms® 2020, includes 11 terms that cover a range of scenarios, from goods collected at the seller’s premises (EXW) to those delivered fully cleared and duty paid at the buyer’s location (DDP). By using the right Incoterm, businesses can reduce friction in contract negotiations, minimise misunderstandings, and better allocate operational risk.