Incoterms® 2020

A KODEX container moved by crane from a ship onto a truck

The basics

What Incoterms® rules decide

Incoterms® rules are three-letter trade terms published by the International Chamber of Commerce (ICC). Written into a sales contract, a rule says who arranges and pays the transport, who clears the goods for export and import, who must insure, and where the goods are delivered: the point at which the risk of loss or damage passes from the seller to the buyer.

The current edition is Incoterms® 2020, in force since 1 January 2020. Earlier editions can still be agreed, so always name the edition.

They decide

Where the seller delivers the goods
Where the risk passes to the buyer
Who arranges and pays which part of the transport
Who clears the goods for export and for import
Who must insure the goods, and for how much

They do not decide

The price, and how and when it is paid
When ownership of the goods passes
What happens if a party breaks the contract
Which law applies to the contract

At a glance

Where the costs and the risk pass

Each rule ends the seller's part at a different point on the way. Under the four C rules the seller pays the transport further than it carries the risk.

Seller's premises
Carrier or terminal in the seller's country
Alongside the ship
On board the ship
Named place of destination

The seller pays the transport up to here The risk passes to the buyer here

Rule	On the way	Export clearance	Import clearance	Insurance
Rules for any mode of transport
EXWEx Works	The seller pays the transport up to here: Seller's premises. The risk passes to the buyer here: Seller's premises.	Buyer	Buyer	Not required
FCAFree Carrier	The seller pays the transport up to here: Carrier or terminal in the seller's country. The risk passes to the buyer here: Carrier or terminal in the seller's country. FCA: also at the seller's premises, loaded on the buyer's vehicle	Seller	Buyer	Not required
CPTCarriage Paid To	The seller pays the transport up to here: Named place of destination. The risk passes to the buyer here: Carrier or terminal in the seller's country.	Seller	Buyer	Not required
CIPCarriage and Insurance Paid To	The seller pays the transport up to here: Named place of destination. The risk passes to the buyer here: Carrier or terminal in the seller's country.	Seller	Buyer	Seller, all risks
DAPDelivered at Place	The seller pays the transport up to here: Named place of destination. The risk passes to the buyer here: Named place of destination.	Seller	Buyer	Not required
DPUDelivered at Place Unloaded	The seller pays the transport up to here: Named place of destination. The risk passes to the buyer here: Named place of destination (unloaded by the seller). unloaded by the seller	Seller	Buyer	Not required
DDPDelivered Duty Paid	The seller pays the transport up to here: Named place of destination. The risk passes to the buyer here: Named place of destination.	Seller	Seller	Not required
Rules for sea and inland waterway transport
FASFree Alongside Ship	The seller pays the transport up to here: Alongside the ship. The risk passes to the buyer here: Alongside the ship.	Seller	Buyer	Not required
FOBFree On Board	The seller pays the transport up to here: On board the ship. The risk passes to the buyer here: On board the ship.	Seller	Buyer	Not required
CFRCost and Freight	The seller pays the transport up to here: Named place of destination. The risk passes to the buyer here: On board the ship.	Seller	Buyer	Not required
CIFCost, Insurance and Freight	The seller pays the transport up to here: Named place of destination. The risk passes to the buyer here: On board the ship.	Seller	Buyer	Seller, minimum cover

EXW · FCA · CPT · CIP · DAP · DPU · DDP

Rules for any mode of transport

For sea, air, road and rail, and for transport that combines them, including containers.

EXW Ex WorksThe seller makes the goods ready at its own premises; the buyer takes care of everything from there.

Delivery and risk: When the goods are placed at the buyer's disposal at the named place, usually the seller's premises, not loaded on any vehicle.
Transport: Arranged and paid by the buyer, including loading at the seller's premises.
Insurance: Not required of either party; the buyer bears the risk from delivery.
Customs: The buyer clears the goods for export and import; the seller provides the information needed.
Good to know: The buyer must be able to complete the export formalities in the seller's country. Where it cannot, FCA at the seller's premises is usually the better choice.

FCA Free CarrierThe seller hands the goods, cleared for export, to the carrier the buyer has chosen.

Delivery and risk: At the seller's premises, once the goods are loaded on the buyer's vehicle; or at another named place, such as a terminal, once they arrive there on the seller's vehicle, ready for unloading.
Transport: The seller pays to get the goods to the named place; the buyer arranges and pays the main carriage.
Insurance: Not required of either party.
Customs: Export clearance by the seller, import clearance by the buyer.
Good to know: The rule the ICC recommends for containers handed over at a terminal. Since 2020 the parties can agree that the buyer's carrier issues the seller a bill of lading with an on-board notation, as letters of credit often require.

CPT Carriage Paid ToThe seller pays the transport to the named destination, but the risk passes to the buyer when the goods are handed to the first carrier.

Delivery and risk: When the goods are handed over to the carrier the seller has contracted, in the seller's country.
Transport: Arranged and paid by the seller up to the named place of destination.
Insurance: Not required of either party; the buyer bears the risk during the main carriage.
Customs: Export clearance by the seller, import clearance by the buyer.
Good to know: The risk and the costs pass at different places: goods damaged on the way are the buyer's risk, although the seller paid the freight. Name both the place of delivery and the destination in the contract.

CIP Carriage and Insurance Paid ToAs CPT, and the seller also insures the goods against all risks for the buyer.

Delivery and risk: When the goods are handed over to the carrier the seller has contracted, in the seller's country.
Transport: Arranged and paid by the seller up to the named place of destination.
Insurance: The seller insures the goods to the destination for at least 110% of the contract price, with all-risks cover (Institute Cargo Clauses (A)), unless agreed otherwise.
Customs: Export clearance by the seller, import clearance by the buyer.
Good to know: Since the 2020 edition CIP requires higher cover than CIF.

DAP Delivered at PlaceThe seller brings the goods to the named place of destination; the buyer unloads them and clears them for import.

Delivery and risk: When the goods are at the buyer's disposal at the named place, on the arriving vehicle, ready for unloading.
Transport: Arranged and paid by the seller up to the named place.
Insurance: Not required, but the seller bears the risk until delivery and usually insures.
Customs: Export clearance by the seller; import clearance, duties and taxes by the buyer.
Good to know: Agree in advance who pays if import clearance is delayed, such as storage at the port and the charges for keeping the container longer (demurrage and detention).

DPU Delivered at Place UnloadedAs DAP, but the seller also unloads the goods at the destination.

Delivery and risk: When the goods have been unloaded at the named place of destination and are at the buyer's disposal.
Transport: Arranged and paid by the seller up to the named place, including the unloading there.
Insurance: Not required, but the seller bears the risk until delivery and usually insures.
Customs: Export clearance by the seller; import clearance, duties and taxes by the buyer.
Good to know: The only rule under which the seller unloads at the destination, so it suits only where the seller can arrange the unloading there. It replaced DAT (Delivered at Terminal) in 2020: the place can be any place, not only a terminal.

DDP Delivered Duty PaidThe seller delivers to the named place, cleared for import with the import duties and taxes paid: the most a seller can take on.

Delivery and risk: When the goods are at the buyer's disposal at the named place, cleared for import, on the arriving vehicle, ready for unloading.
Transport: Arranged and paid by the seller up to the named place.
Insurance: Not required, but the seller bears the risk until delivery and usually insures.
Customs: The seller clears the goods for export and for import and pays the import duties and taxes, including import VAT unless agreed otherwise.
Good to know: The seller must be able to complete the import formalities in the buyer's country. Where it cannot, DAP is usually the better choice.

FAS · FOB · CFR · CIF

Rules for sea and inland waterway transport

For goods delivered at the ship itself, such as bulk and heavy cargo loaded directly on board.

FAS Free Alongside ShipThe seller places the goods, cleared for export, beside the buyer's ship at the port of shipment.

Delivery and risk: When the goods are alongside the ship, for example on the quay or on a barge, at the named port of shipment.
Transport: The buyer arranges and pays the sea freight, including loading on board.
Insurance: Not required of either party.
Customs: Export clearance by the seller, import clearance by the buyer.
Good to know: Meant for bulk and for heavy or oversized cargo. Not suited to containers, which are handed over at the terminal: use FCA.

FOB Free On BoardThe seller loads the goods, cleared for export, on board the ship the buyer has booked.

Delivery and risk: When the goods are on board the ship at the named port of shipment.
Transport: The seller pays until the goods are on board; the buyer books and pays the sea freight.
Insurance: Not required of either party.
Customs: Export clearance by the seller, import clearance by the buyer.
Good to know: Widely used for containers, but a container is usually handed over at the terminal days before it is loaded, while the risk is still the seller's. The ICC recommends FCA for containers.

CFR Cost and FreightThe seller pays the sea freight to the port of destination, but the risk passes once the goods are on board at the port of shipment.

Delivery and risk: When the goods are on board the ship at the port of shipment.
Transport: Arranged and paid by the seller up to the named port of destination.
Insurance: Not required of either party; the buyer bears the risk at sea.
Customs: Export clearance by the seller, import clearance by the buyer.
Good to know: The port named in the contract is the destination, not the place where the risk passes. For containers handed over at a terminal, CPT is the matching rule.

CIF Cost, Insurance and FreightAs CFR, and the seller also insures the goods for the buyer during the sea voyage.

Delivery and risk: When the goods are on board the ship at the port of shipment.
Transport: Arranged and paid by the seller up to the named port of destination.
Insurance: The seller insures the goods for at least 110% of the contract price with minimum cover (Institute Cargo Clauses (C)), unless agreed otherwise.
Customs: Export clearance by the seller, import clearance by the buyer.
Good to know: Minimum cover protects mainly against major accidents; a buyer who wants all-risks cover must agree it or buy it. For containers, CIP is the matching rule.

In the contract

How to write a rule in a contract

Write the rule, the named place as precisely as possible, and the edition:

FCA Jeddah Islamic Port, Saudi Arabia, Incoterms® 2020
CIP Riyadh Dry Port, Saudi Arabia, Incoterms® 2020

Under the C rules the named place is the destination: agree the place of delivery as well, where the risk passes.
Under the D rules name the exact address or terminal: the seller carries the risk up to there.
Make sure the rule matches the other documents, such as the letter of credit, the transport contract and the insurance.

Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This page explains the rules in plain words; it does not replace the ICC's official text.