Artificial trade terms rarely make headlines, but 2025 is a big year for how Incoterms interact with EU rules. While the Incoterms themselves have not changed, several EU regulatory milestones are reshaping who files what, when risk passes, and how costs are apportioned on EU lanes. For shippers and forwarders, the practical question this year is not “Which term is best in theory?” but “Which term aligns with new EU customs security filings, VAT obligations, and carbon-cost compliance?”
Incoterms: Still 2020, Not “New for 2025”
Incoterms are private rules published by the International Chamber of Commerce that define delivery obligations, risk transfer, and the division of transport-related costs between seller and buyer. They do not govern ownership transfer, price, or payment terms, and they do not override national customs law. Crucially for 2025 planning, the current edition remains Incoterms 2020; there is no new 2025 edition. The ICC continues to distribute and explain the 2020 rules and tools.
Headline Change: ICS2 Extends to Road and Rail
The EU’s Import Control System 2 moved beyond air and maritime to cover road and rail flows entering or transiting the EU. From 1 April 2025, road and rail carriers must file complete Entry Summary Declarations before arrival. After a transitional period, compliance becomes mandatory for all road and rail economic operators on 1 September 2025. This makes pre-arrival safety and security data a day-to-day planning item for cross-border trucking and combined transport into the EU.
Why this matters for Incoterms: Under EXW and FCA, the buyer typically takes on export and main-carriage responsibilities, which may include providing data to the carrier for ENS. Under DAP and DDP, the seller is more involved in transport arrangements and may be better positioned to ensure timely, accurate safety data flows. Whatever term you pick, contracts should clarify who supplies the granular data elements that ICS2 demands, and by when. The Commission’s own guidance stresses the need for complete, mode-specific ENS data before arrival.
VAT in the Digital Age Is Adopted
On 11 March 2025, the EU adopted the VAT in the Digital Age package. ViDA will be rolled out progressively up to 2035 and will, among other changes, allow broader use of mandatory e-invoicing at Member State level and refine the Import One-Stop Shop framework. The Council also approved related rules in July 2025 that emphasize shifting VAT collection to platforms for certain imports and reinforcing upfront VAT collection via IOSS. For logistics planners, this affects how DDP versus DAP plays out on small-parcel e-commerce into the EU.
Practical takeaway: If a seller promises DDP into the EU, it inherits VAT and customs-related responsibilities, which must now align with ViDA’s e-invoicing and platform-liability features. Under DAP, by contrast, the consignee bears import VAT at the border unless IOSS or another arrangement applies. Incoterms don’t allocate VAT per se, but the choice of term determines who practically has to manage the fiscal workflow.
EU Customs Reform Advances
Separately from ICS2, the EU is overhauling its customs framework. In June 2025, Member States adopted a common position on elements of the new Union Customs Code, moving the reform into the trilogue phase. The reform aims to simplify and digitalize customs, with a new EU Customs Data Hub at its core. While the legal text is not final, the policy direction is clear: more centralized data, more advance information, and more risk-based controls. Contractually, that favors Incoterms choices and clauses that identify the “data owner” and “importer of record” early and unambiguously.
CBAM: 2025 Is the Last Full Year Before Certificates Start
The Carbon Border Adjustment Mechanism remains in its transition phase throughout 2025, with reporting duties already in force for covered goods such as steel, cement, fertilizers, aluminum, and electricity. From 1 January 2026, authorised CBAM declarants must begin purchasing and surrendering CBAM certificates based on embedded emissions. The Commission is urging importers or their indirect customs representatives to secure authorised status now. Meanwhile, proposals to simplify and partly exempt low-volume importers are under discussion, but they are not yet final – companies should monitor negotiations closely.
Incoterms impact: CBAM costs sit with the “importer” – in a DDP sale into the EU, that will typically be the seller or its indirect representative; under DAP, the EU buyer usually bears the obligation. Contract language should state who will act as importer of record and who will handle CBAM reporting/certificates once the definitive period starts in 2026.
Choosing Terms in 2025: What European Shippers Are Optimizing For
Data readiness under ICS2. With rail and road now in scope, parties must confirm who will file ENS and who will feed item-level data to the filer. FCA and CIP/CPT sales where the seller books carriage remain popular for EU inbound flows because the seller can orchestrate data handoffs to the carrier. If buyers insist on EXW, they should be contractually obliged to supply valid data points in time for ICS2 pre-arrival checks.
VAT handling on B2C parcels. For low-value consignments, coordination between Incoterms and VAT flows matters more than ever under ViDA. Sellers offering DDP must ensure that their invoicing, platform arrangements, and IOSS use are consistent with what the term implies – namely, that the consumer is not confronted with border charges or courier disbursement fees upon delivery.
Carbon-cost exposure on industrial imports. In sectors covered by CBAM, European buyers are already seeking transparency on embedded emissions. Where sellers propose DDP, they should budget the future certificate cost and proof obligations into their 2026-forward pricing and state how default values versus specific emissions data will be used if the EU finalizes simplification measures.
Risk allocation stays central. None of the EU changes alter the core Incoterms logic: risk transfers where the rule says it does. But with more pre-arrival vetting, digital reporting, and environmental compliance, the cost of a documentation mistake has risen. 2025 contracts therefore increasingly pair the chosen Incoterm with annexes that set data SLAs, name the importer of record, and detail who will handle ENS filings, VAT clearance/IOSS, and CBAM certificates. The ICC itself continues to publish guidance on using Incoterms 2020 to manage tariff and compliance risks – a reminder that the rules are stable, but their application must track regulatory change.
Bottom line for 2025: Incoterms 2020 remain the language of delivery and risk, but EU security, VAT, and carbon policies are rewriting the practical script. Align your chosen rule with who owns the data, who is the importer, and who pays the environmental and fiscal charges – and spell those answers out in the contract.