Defining Incoterms 2020

Incoterms are standard three letter trade terms published by the International Chamber of Commerce. They explain, for each deal, who is responsible for transport, customs and risk at every stage of the journey.

There are 11 Incoterms. Incoterms 2020 splits them into two groups based on the type of transport.

Group 1: Any mode of transport (road, air, sea, rail, courier)

These 7 can be used for almost any shipment, including containerised cargo.

• EXW
• FCA
• CPT
• CIP
• DAP
• DPU
• DDP

Group 2: Sea and inland waterway only

These 4 are only meant for bulk or non container sea and river shipments, where the condition of the goods can be checked as they go on the vessel. They are not recommended for container shipments.

• FAS
• FOB
• CFR
• CIF

Simple definitions of each Incoterm

1. Terms for any mode of transport

EXW - Ex Works
The seller makes the goods available at their place, for example their warehouse. The buyer handles everything from there.

• Seller: packs the goods and has them ready to collect.
• Buyer: loads the truck, arranges all transport, export customs, import customs and duties.
• Risk: moves to the buyer as soon as the goods are available for collection at the seller’s place.

FCA - Free Carrier
The seller hands the goods, cleared for export, to the carrier chosen by the buyer at an agreed place.

• Seller: packs, loads (if the place is the seller’s premises), clears export, delivers to the named place.
• Buyer: arranges main transport from that point onward, plus import customs and duties.
• Risk: moves to the buyer once the goods are handed over to the carrier at the named place.

CPT - Carriage Paid To
The seller pays for the transport to a named place, but the risk passes earlier.

• Seller: packs, clears export, pays the freight up to the named destination.
• Buyer: handles import customs, duties and any onward movement after the named place.
• Risk: moves to the buyer when the goods are handed to the first carrier, not when they arrive.

CIP - Carriage and Insurance Paid To
Same basic idea as CPT, but the seller must also buy transport insurance for the buyer’s benefit, and under Incoterms 2020 that insurance must be a high level of cover.

• Seller: packs, clears export, pays freight up to named place, takes out insurance that covers the journey.
• Buyer: handles import customs, duties and any onward movement after the named place.
• Risk: still moves to the buyer once the goods are handed to the first carrier, even though the seller is paying for insurance.

DAP - Delivered At Place
The seller brings the goods to the agreed place in the destination country, ready for unloading.

• Seller: packs, clears export, pays all transport to the named place, carries the risk all the way there.
• Buyer: unloads, handles import customs and pays duties and local taxes.
• Risk: moves to the buyer when the goods are placed at the buyer’s disposal at the named place, ready to be unloaded.

DPU - Delivered At Place Unloaded
The seller delivers the goods at the agreed place in the destination country and also unloads them. This term replaced the older term DAT in Incoterms 2020.

• Seller: packs, clears export, pays all transport, carries the risk, and unloads at the named place.
• Buyer: handles import customs and pays duties and taxes after delivery.
• Risk: moves to the buyer once the goods are unloaded at the named place.

DDP - Delivered Duty Paid
The seller does almost everything. This is maximum obligation for the seller.

• Seller: packs, clears export, pays for all transport, handles import customs, pays duties and taxes, delivers to the named place ready for unloading.
• Buyer: usually only unloads the goods.
• Risk: moves to the buyer when the goods are placed at the buyer’s disposal at the named place, ready for unloading.

2. Terms for sea and inland waterway only

FAS - Free Alongside Ship
The seller delivers the goods alongside the vessel at the named port.

• Seller: packs, clears export, moves goods to the port and places them alongside the vessel.
• Buyer: arranges loading on the ship, main sea freight, insurance if wanted, and all import formalities.
• Risk: moves to the buyer once the goods are placed alongside the vessel at the export port.

FOB - Free On Board
The seller delivers the goods on board the vessel at the named port.

• Seller: packs, clears export, delivers and loads the goods on the vessel.
• Buyer: pays for main sea carriage, insurance if wanted, and all import formalities and onward transport.
• Risk: moves to the buyer once the goods are on board the vessel at the export port.

CFR - Cost and Freight
The seller pays the cost of getting the goods to the named destination port, but the risk moves earlier.

• Seller: packs, clears export, delivers on board, pays freight to destination port.
• Buyer: arranges insurance if needed, handles import customs, duties and local delivery after the destination port.
• Risk: moves to the buyer once the goods are on board the vessel at the export port, not when they arrive.

CIF - Cost, Insurance and Freight
Like CFR, but the seller must also arrange and pay for marine insurance up to the destination port.

• Seller: packs, clears export, delivers on board, pays freight to destination port, takes out marine insurance.
• Buyer: handles import customs, duties and onward delivery after the destination port.
• Risk: still moves to the buyer once the goods are on board the vessel, even though the seller pays for insurance.

Visual breakdown of responsibilities

Use this table as the core visual. You can style it in your CMS, but the logic is here.

Key

• "Seller" means the seller arranges and pays.
• "Buyer" means the buyer arranges and pays.
• "Usually buyer" means it can be negotiated, but this is the most common practice.

1. Any mode of transport

2. Sea and inland waterway only