All 11 Incoterms 2020 Explained
Incoterms 2020, published by the ICC, are 11 standard rules that define who does what in an international sale contract — delivery, risk transfer, loading, main carriage, insurance and customs clearance. This guide explains each of the 11 rules in plain language: what the seller must do, where risk transfers, and when to choose the rule. It is written for importers, exporters, freight forwarders and logistics students who need one page to compare every Incoterm at a glance.
EXW (Ex Works)
- Meaning: The seller makes the goods available at their own premises (factory, warehouse); the buyer collects them.
- Risk transfer: At the seller's premises.
- Costs: The buyer pays everything from pickup onward, including loading and export clearance.
- Use when: Domestic sales, or when the buyer has its own export team at the seller's location.
- Caution: The seller is not obliged to load the goods or clear them for export — most exporters prefer FCA for these reasons.
FCA (Free Carrier)
- Meaning: The seller delivers the goods to a carrier or terminal nominated by the buyer at the named place.
- Risk transfer: When the goods are handed over to the carrier (or loaded at the seller's premises, if that is the named place).
- Costs: The seller pays delivery and export clearance to the named place; the buyer pays the main carriage.
- Use when: Any mode of transport; especially recommended for containerised cargo — including ocean — and for air, rail and road.
CPT (Carriage Paid To)
- Meaning: The seller delivers the goods to a carrier and pays the freight to the named destination.
- Risk transfer: When the goods are handed over to the first carrier.
- Costs: The seller pays the carriage to the destination; the buyer arranges insurance (this rule does not include insurance).
- Use when: Any mode, when the seller controls the main carriage but the buyer prefers to insure its own risk.
CIP (Carriage and Insurance Paid To)
- Meaning: The same as CPT, plus the seller buys insurance for the buyer's benefit.
- Risk transfer: When the goods are handed over to the first carrier.
- Costs: The seller pays carriage and insurance — under Incoterms 2020, insurance to the ICC Institute Cargo Clauses (A) level (all risks cover).
- Use when: Any mode, when the buyer wants the seller to arrange both the carriage and top-level insurance.
DAP (Delivered at Place)
- Meaning: The seller delivers the goods, ready for unloading, at the named destination — a terminal, warehouse or the buyer's premises.
- Risk transfer: At the destination, when the goods are placed at the buyer's disposal.
- Costs: The seller pays carriage and delivery to the named place, including destination terminal charges; the buyer pays unloading, import duties and taxes.
- Use when: Any mode, when the seller wants to manage the door-to-door leg without taking on import clearance.
DPU (Delivered at Place Unloaded)
- Meaning: The same as DAP, but the seller must unload the goods at the named destination.
- Risk transfer: After unloading at the destination.
- Costs: The seller pays carriage, delivery and unloading; the buyer pays import duties and taxes.
- Use when: Any mode, when the seller controls the unloading operation. DPU is the renamed DAT from Incoterms 2010.
DDP (Delivered Duty Paid)
- Meaning: The seller delivers the goods at the named destination, cleared for import, with duties and taxes paid.
- Risk transfer: At the destination.
- Costs: The seller pays everything, including import duties, taxes and clearance (VAT handling can be excluded by explicit agreement).
- Use when: E-commerce and door-to-door sales where the seller wants full control — but check whether a foreign seller can clear imports in the destination country.
FAS (Free Alongside Ship)
- Meaning: The seller places the goods alongside the vessel at the named port of shipment, ready for loading.
- Risk transfer: When the goods are alongside the ship.
- Costs: The seller pays delivery to the quay and export clearance; the buyer pays loading, carriage and insurance.
- Use when: Sea and inland waterway only, mainly for bulk cargo where loading is handled by the ship's tackle or the terminal.
FOB (Free On Board)
- Meaning: The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment.
- Risk transfer: When the goods are on board the vessel.
- Costs: The seller pays delivery to the port, loading and export clearance; the buyer pays the ocean freight and insurance.
- Use when: Sea and inland waterway, for bulk and breakbulk cargo. For containers, FCA is usually safer because risk transfers earlier.
CFR (Cost and Freight)
- Meaning: The seller pays the freight to the named destination port; risk passes when the goods are on board.
- Risk transfer: On board the vessel at the port of shipment.
- Costs: The seller pays the freight to the destination; the buyer arranges insurance.
- Use when: Sea and inland waterway, when the seller controls the freight contract but the buyer insures its own risk.
CIF (Cost, Insurance and Freight)
- Meaning: The same as CFR, plus the seller buys marine insurance for the buyer's benefit.
- Risk transfer: On board the vessel at the port of shipment — even though the seller pays freight and insurance, its risk ends at the loading port.
- Costs: The seller pays freight and insurance — under Incoterms 2020, minimum cover under ICC Institute Cargo Clauses (C).
- Use when: Sea and inland waterway only; traditional in bulk commodity trades and when a letter of credit requires it.
Quick Reference
| Term | Full name | Risk transfer point | Who pays main freight | Who arranges insurance |
|---|---|---|---|---|
| EXW | Ex Works | Seller's premises | Buyer | Buyer |
| FCA | Free Carrier | Handover to carrier | Buyer | Buyer |
| CPT | Carriage Paid To | Handover to first carrier | Seller | Buyer |
| CIP | Carriage and Insurance Paid To | Handover to first carrier | Seller | Seller (Clauses A) |
| DAP | Delivered at Place | At destination | Seller | Seller |
| DPU | Delivered at Place Unloaded | After unloading at destination | Seller | Seller |
| DDP | Delivered Duty Paid | At destination, duty paid | Seller | Seller |
| FAS | Free Alongside Ship | Alongside the vessel | Buyer | Buyer |
| FOB | Free On Board | On board the vessel | Buyer | Buyer |
| CFR | Cost and Freight | On board the vessel | Seller | Buyer |
| CIF | Cost, Insurance and Freight | On board the vessel | Seller | Seller (Clauses C) |
FAQ
What changed between Incoterms 2010 and 2020?
DAT was renamed DPU; FCA gained an option for on-board bills of lading; CIP now requires insurance at Institute Cargo Clauses (A) level while CIF keeps the minimum cover (C); and security-related clearance obligations were clarified.
Which Incoterm is best for containers?
FCA, CPT and CIP. Containerised goods are handed over at a terminal rather than over a ship's rail, so FOB and CIF fit bulk and breakbulk cargo better.
Does the Incoterm decide who pays customs duties?
Only partially. DDP puts import duties and taxes on the seller; under every other rule the buyer clears import, while the seller clears export under FCA and the later rules.
Should I write "Incoterms 2020" in my contract?
Yes — always name the edition, for example "FOB (Incoterms 2020)". Writing only "FOB" leaves room for dispute, especially against the different U.S. UCC meaning of FOB.