Incoterms 2020 Explainer & Picker
All eleven rules side by side — who clears the export, who books the main carriage, who insures, who clears the import, and exactly where risk transfers. Answer three questions to narrow the field.
Which Incoterm fits your shipment?
The most widely quoted sea term, so it is the easiest to benchmark between suppliers. Gives you control of the ocean leg without taking on export formalities.
Risk transfers: When the goods are on board the vessel at the named port of shipment.
Let the seller book the freight if their rates are better, but note that risk still passes at origin — insure the ocean leg yourself.
Risk transfers: When the goods are on board the vessel at the port of shipment — even though the seller pays the freight to destination.
The simplest to administer if you would rather receive a delivered price and only handle the customs entry at your end.
Risk transfers: At the named destination, with the goods ready for unloading from the arriving vehicle.
Suggestions are a starting point for negotiation, not legal advice. The published ICC rules and your sales contract govern.
Incoterms 2020 comparison table
Obligations under each rule. "Buyer" and "Seller" indicate which party arranges and bears the cost of that item.
| Rule | Mode | Export clearance | Main carriage | Insurance | Import clearance & duty | Risk transfers |
|---|---|---|---|---|---|---|
| EXW Ex Works | Any mode | Buyer | Buyer | Neither party is obliged | Buyer | At the seller’s premises, once the goods are placed at the buyer’s disposal — before loading. |
| FCA Free Carrier | Any mode | Seller | Buyer | Neither party is obliged | Buyer | At the named place: when loaded onto the buyer’s collecting vehicle at the seller’s premises, or when placed at the carrier’s disposal, ready for unloading, elsewhere. |
| FAS Free Alongside Ship | Sea and inland waterway only | Seller | Buyer | Neither party is obliged | Buyer | When the goods are placed alongside the vessel at the named port of shipment. |
| FOB Free On Board | Sea and inland waterway only | Seller | Buyer | Neither party is obliged | Buyer | When the goods are on board the vessel at the named port of shipment. |
| CFR Cost and Freight | Sea and inland waterway only | Seller | Seller | Neither party is obliged | Buyer | When the goods are on board the vessel at the port of shipment — even though the seller pays the freight to destination. |
| CIF Cost, Insurance and Freight | Sea and inland waterway only | Seller | Seller | Seller must insure — minimum cover, equivalent to Institute Cargo Clauses (C), for 110% of the contract value | Buyer | When the goods are on board the vessel at the port of shipment. |
| CPT Carriage Paid To | Any mode | Seller | Seller | Neither party is obliged | Buyer | When the goods are handed to the first carrier — not at the destination the seller is paying to. |
| CIP Carriage and Insurance Paid To | Any mode | Seller | Seller | Seller must insure — all-risks level cover, equivalent to Institute Cargo Clauses (A), for 110% of the contract value | Buyer | When the goods are handed to the first carrier. |
| DAP Delivered at Place | Any mode | Seller | Seller | Neither party is obliged (the seller carries the risk, so usually insures its own interest) | Buyer | At the named destination, with the goods ready for unloading from the arriving vehicle. |
| DPU Delivered at Place Unloaded | Any mode | Seller | Seller | Neither party is obliged (the seller carries the risk to the destination) | Buyer | At the named destination, once the goods have been unloaded from the arriving vehicle. |
| DDP Delivered Duty Paid | Any mode | Seller | Seller | Neither party is obliged (the seller carries the risk to the destination) | Seller | At the named destination, with the goods ready for unloading. |
Import duty sits with the buyer under every rule except DDP. Estimate yours with the free U.S. tariff simulator, and see how entries are filed through our licensed customs broker network.
The eleven rules, one by one
EXW — Ex Works
Any mode · Delivery: Seller’s named premises
The seller does the least of any rule: make the goods available at their own factory or warehouse, packed and identified, and nothing more. The buyer arranges collection, export formalities, main carriage, and import clearance, and carries the risk from the moment the goods are placed at their disposal. It is administratively awkward for exports because the buyer, who is usually not established in the seller’s country, has to handle export declarations there. Many exporters quote EXW for simplicity and then in practice help with loading and export paperwork, which blurs where responsibility sits. FCA at the seller’s premises usually expresses the same commercial intent with far less ambiguity.
- Risk transfers: At the seller’s premises, once the goods are placed at the buyer’s disposal — before loading.
- Insurance: Neither party is obliged
- Export clearance: Buyer · Import clearance and duty: Buyer
- Typically used for: Domestic sales, or buyers with their own agent at origin. Prefer FCA for exports.
FCA — Free Carrier
Any mode · Delivery: Named place at origin — seller’s premises or a terminal
The seller clears the goods for export and hands them to a carrier the buyer nominates, at a named place. It is the most flexible of the buyer-controlled rules and the one best suited to containerised cargo, because delivery happens where the container is actually handed over rather than at the ship’s rail. Incoterms 2020 added an option under FCA for the parties to agree that the buyer instructs the carrier to issue an on-board bill of lading to the seller, which resolves the long-standing problem of FCA sellers needing an on-board document for a letter of credit.
- Risk transfers: At the named place: when loaded onto the buyer’s collecting vehicle at the seller’s premises, or when placed at the carrier’s disposal, ready for unloading, elsewhere.
- Insurance: Neither party is obliged
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Containerised exports where the buyer books the freight. The modern replacement for FOB on containers.
FAS — Free Alongside Ship
Sea and inland waterway only · Delivery: Alongside the vessel at the port of shipment
The seller delivers by placing the goods alongside the ship — on the quay or in a barge — at the named port, having cleared them for export. The buyer takes over from that point, including loading, main carriage, and import formalities. It exists for cargo that is loaded as a unit from the quayside: bulk commodities, project cargo, heavy lift. It makes little sense for containers, which are handed over at a terminal days before the vessel arrives.
- Risk transfers: When the goods are placed alongside the vessel at the named port of shipment.
- Insurance: Neither party is obliged
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Bulk and breakbulk cargo loaded directly from the quay.
FOB — Free On Board
Sea and inland waterway only · Delivery: On board the vessel at the port of shipment
The most quoted rule in international trade, and the most frequently misapplied. The seller clears the goods for export and delivers them on board the vessel the buyer has nominated; risk passes at that point. It fits bulk and breakbulk cargo the seller can actually watch cross the rail. For containers the seller loses physical control at the terminal gate, often several days before loading, which leaves a gap where the seller carries risk over cargo they cannot see — FCA is the cleaner fit. FOB remains ubiquitous in Asian export contracts and in letters of credit, so expect to negotiate rather than assume.
- Risk transfers: When the goods are on board the vessel at the named port of shipment.
- Insurance: Neither party is obliged
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Bulk and breakbulk sea shipments, and buyers who want to control the ocean carrier.
CFR — Cost and Freight
Sea and inland waterway only · Delivery: On board at the port of shipment; seller pays freight to the named destination port
The seller books and pays the ocean freight to a named destination port, but risk transfers when the goods are loaded at origin. That split — cost to destination, risk from origin — is the single most misunderstood feature of the C rules. A buyer on CFR terms who does not insure the cargo is exposed for the whole ocean leg despite not having paid for the freight. Destination terminal handling and import formalities remain the buyer’s.
- Risk transfers: When the goods are on board the vessel at the port of shipment — even though the seller pays the freight to destination.
- Insurance: Neither party is obliged
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Sea shipments where the seller has better freight rates but the buyer will arrange its own insurance.
CIF — Cost, Insurance and Freight
Sea and inland waterway only · Delivery: On board at the port of shipment; seller pays freight and insurance to the named destination port
CFR plus a cargo insurance obligation. The seller must take out cover for the buyer’s benefit for at least 110% of the contract value, and under Incoterms 2020 the CIF minimum stayed at the restricted, named-perils level rather than moving to all-risks. Buyers who want broad cover should specify a higher level in the contract instead of relying on the default. Risk still passes at the origin port, and import clearance stays with the buyer.
- Risk transfers: When the goods are on board the vessel at the port of shipment.
- Insurance: Seller must insure — minimum cover, equivalent to Institute Cargo Clauses (C), for 110% of the contract value
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Sea shipments where the buyer wants the seller to bundle freight and a basic insurance policy.
CPT — Carriage Paid To
Any mode · Delivery: Handover to the first carrier; seller pays carriage to the named destination
The multimodal equivalent of CFR. The seller contracts and pays carriage to a named destination, which can be an inland point rather than a port, but risk passes far earlier — when the goods are given to the first carrier in the chain. Naming both the place of delivery and the destination in the contract avoids arguments about where risk actually moved.
- Risk transfers: When the goods are handed to the first carrier — not at the destination the seller is paying to.
- Insurance: Neither party is obliged
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Air, road, rail, or multimodal moves where the seller arranges transport to an agreed destination.
CIP — Carriage and Insurance Paid To
Any mode · Delivery: Handover to the first carrier; seller pays carriage and insurance to the named destination
CPT with insurance, and the rule the 2020 revision changed most: the CIP insurance default was raised to all-risks level cover, while CIF stayed at the restricted level. That makes CIP the stronger choice for manufactured and high-value goods where the buyer wants meaningful protection built into the seller’s obligations. Risk still passes at the first carrier, and import clearance remains the buyer’s.
- Risk transfers: When the goods are handed to the first carrier.
- Insurance: Seller must insure — all-risks level cover, equivalent to Institute Cargo Clauses (A), for 110% of the contract value
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: High-value manufactured goods on any mode where broad cargo insurance matters.
DAP — Delivered at Place
Any mode · Delivery: Named destination — often the buyer’s door
The seller carries cost and risk all the way to a named place in the buyer’s country and delivers the goods ready to be unloaded. Unloading is the buyer’s job, as is import clearance and payment of duties and taxes. DAP is the natural choice when a seller wants to offer delivered-to-door service without taking on the buyer’s import obligations, which usually require a locally established entity.
- Risk transfers: At the named destination, with the goods ready for unloading from the arriving vehicle.
- Insurance: Neither party is obliged (the seller carries the risk, so usually insures its own interest)
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Door delivery where the buyer is the importer of record.
DPU — Delivered at Place Unloaded
Any mode · Delivery: Named destination, unloaded
The only rule under which the seller must unload at destination. Renamed in the 2020 revision from DAT (Delivered at Terminal) so that the destination is no longer restricted to a terminal — it can be any agreed place with unloading capability. The seller should only commit to DPU where it can actually organise unloading; otherwise DAP is the safer expression of the same deal. Import clearance and duties stay with the buyer.
- Risk transfers: At the named destination, once the goods have been unloaded from the arriving vehicle.
- Insurance: Neither party is obliged (the seller carries the risk to the destination)
- Export clearance: Seller · Import clearance and duty: Buyer
- Typically used for: Deliveries to terminals, warehouses, or sites where the seller controls the unloading.
DDP — Delivered Duty Paid
Any mode · Delivery: Named destination, duties and import formalities settled
The maximum obligation on the seller: everything through to the buyer’s door, including import clearance and the duties and taxes owed there. It is the only Incoterms rule that moves import duty off the buyer. In the United States that means the seller acts as importer of record, which generally requires a customs bond and either a domestic presence or an arrangement with a party willing to take that role — one reason many DDP quotes quietly fall apart at the border. Where the buyer simply wants door delivery without customs work, DAP plus a clearance service is usually the cleaner structure.
- Risk transfers: At the named destination, with the goods ready for unloading.
- Insurance: Neither party is obliged (the seller carries the risk to the destination)
- Export clearance: Seller · Import clearance and duty: Seller
- Typically used for: Samples, small parcels, and buyers who cannot or will not act as importer of record.
Incoterms 2020 are the eleven three-letter trade terms that divide the work, the cost, and the risk of an international shipment between seller and buyer. Compare all eleven in the table below, answer three questions in the picker to narrow the field, or jump to any rule for a plain-English explanation. Descriptions here are our paraphrase of the published ICC rules; your sales contract and the ICC text govern.
What Incoterms rules do — and what they leave out
An Incoterms rule answers three questions: who arranges and pays for each leg of transport and the associated formalities, where delivery happens, and at what point risk of loss or damage passes from seller to buyer. Agreeing the rule and, critically, the named place that goes with it — "FCA Ningbo CFS" rather than a bare "FCA" — removes most of the ambiguity from a shipment.
They deliberately do not cover the things people most often assume they do. Incoterms rules say nothing about when title or ownership passes, nothing about payment terms, nothing about what happens if a party breaches the contract, and nothing about which law governs the sale. Those belong in the contract itself. They also do not, by themselves, decide the customs value of your goods — although the term you choose shapes what costs are inside the invoice price, which in turn affects how the entry is prepared.
The four groups, in one paragraph each
E — departure. EXW alone. The seller makes the goods available at their own premises and does nothing else. Everything after that, export formalities included, is the buyer’s.
F — main carriage unpaid. FCA, FAS, and FOB. The seller clears the export and delivers to a carrier or a point at origin nominated by the buyer, who books and pays the international leg.
C — main carriage paid. CPT, CIP, CFR, and CIF. The seller books and pays the main carriage to a named destination, but risk still passes at origin. Cost and risk part company here, which is where most disputes start.
D — arrival. DAP, DPU, and DDP. The seller carries both cost and risk through to a named place in the buyer’s country. DPU adds unloading; DDP adds import clearance and duty.
The C-rule trap: paying for freight is not carrying the risk
Under CFR, CIF, CPT, and CIP the seller pays carriage to the destination, yet delivery — and therefore risk — happens at origin, when the goods are loaded on board or handed to the first carrier. A buyer who reads "CIF Los Angeles" as "the seller is responsible until Los Angeles" has misread it. If the container is lost mid-ocean, the goods were already at the buyer’s risk.
That is why the insurance question matters so much on C terms. Only CIF and CIP require the seller to insure at all, and their defaults differ: CIF sits at a restricted, named-perils level, while Incoterms 2020 raised CIP to all-risks cover. Both are for 110% of the contract value, and both can be increased by agreement. Under every other rule, whoever carries the risk should be arranging their own cover.
Duties are the importer’s under every rule except DDP
Ten of the eleven rules leave import clearance, duties, and taxes with the buyer. Only DDP shifts them to the seller — which in the United States means the seller has to act as importer of record, with the customs bond and compliance exposure that carries. Sellers frequently quote DDP without realising this, and the shipment stalls at the border while a workaround is found.
Whichever rule you land on, the duty bill itself is driven by classification, origin, and customs value, not by the trade term. Estimate it up front with our free U.S. tariff simulator so the landed cost comparison between an FOB offer and a DDP offer is like for like. Entries are filed through our licensed customs broker network, and we can act on either side of the term you agree.
Picking terms in practice
Three practical rules of thumb cover most cases. First, if the cargo is containerised, prefer FCA over FOB and CIP over CIF — the F and C sea rules were written around ships’ rails and bulk cargo, not container terminals. Second, take control of the leg you can actually manage: a buyer with a good forwarder gets better visibility and often better all-in cost on FCA or FOB terms, while a buyer new to a lane may be better served by a delivered price. Third, always write the named place in full, and specify the Incoterms version — "Incoterms 2020" — so there is no argument about which edition applies.
Terms are also a negotiating lever rather than a fixed property of a supplier. Suppliers quoting only EXW or only DDP are usually willing to move once the practical objections are raised, and the difference between two terms on the same shipment is often larger than the freight saving people chase elsewhere.
Working out what a term actually costs you? Size the cargo with the chargeable weight and CBM calculator, check the equipment with the container load calculator, and estimate the duty with the tariff simulator. Figures are estimates for planning; the carrier's tariff governs.
Seven apply to any mode of transport — EXW, FCA, CPT, CIP, DAP, DPU, and DDP — and four apply only to sea and inland waterway shipments: FAS, FOB, CFR, and CIF. The comparison table on this page sets out who handles export clearance, main carriage, insurance, and import clearance under each, and where risk transfers.
DAT was renamed DPU (Delivered at Place Unloaded) so the destination is no longer limited to a terminal; the insurance defaults split, with CIP raised to all-risks level cover while CIF stayed at the restricted level; FCA gained an option for an on-board bill of lading to be issued to the seller; and the rules were rewritten with clearer allocation of costs and security-related obligations.
FCA is the better technical fit. Under FOB, risk passes only when the goods are on board, but a container leaves the seller’s control at the terminal gate days earlier, leaving the seller exposed for cargo it can no longer see. FCA sets delivery at the point of actual handover. FOB remains the market convention in much of Asia, so expect to negotiate rather than simply assume FCA.
Only CIF and CIP. CIF requires minimum, restricted cover; CIP requires all-risks level cover. Both are for 110% of the contract value and both can be raised by agreement. Under all the other rules neither party is obliged to insure, so whoever carries the risk at any given point should arrange their own cargo policy.
The buyer, under every rule except DDP. Duties, taxes, and import clearance follow the importer of record, and only Delivered Duty Paid moves that obligation to the seller. Estimate the duty separately with our free tariff simulator — it is driven by HTS classification, origin, and customs value rather than by the trade term.
Because DDP makes the seller responsible for the U.S. import entry, which generally means acting as importer of record with a customs bond and full compliance exposure — difficult for a foreign seller with no U.S. presence. DAP plus a clearance service usually achieves the same commercial outcome with the buyer correctly named as importer. We arrange entries through our licensed customs broker network either way.
No. Incoterms rules govern delivery, cost allocation, and the transfer of risk. Title, payment terms, remedies for breach, and governing law all sit in the sales contract and are unaffected by the rule you choose. It is common — and entirely valid — for risk to have passed while title has not.
Write the three-letter code, the named place in full, and the edition: for example "CIP Chicago O’Hare Airport, Incoterms 2020" or "FCA 14 Industrial Road, Ho Chi Minh City, Incoterms 2020". A bare code without a place is the single most common source of dispute, because the rule cannot tell you where delivery happened.
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