Incoterms 2020 Explained
Incoterms 2020 are the 11 standard trade-term rules from the International Chamber of Commerce that define who pays for and bears the risk of goods at each stage of an international shipment. Pick a term below to see exactly who is responsible for freight, insurance, customs and duties, and where risk passes from seller to buyer.
EXW , Ex Works
Any transport modeThe seller only makes the goods available at its own premises. The buyer arranges and pays for everything else, including export clearance.
Who is responsible
- Origin haulage & export packagingBuyer
- Export customs clearanceBuyer
- Main carriage (international freight)Buyer
- Insurance obligationBuyer
- Import customs, duties & taxesBuyer
- Delivery to final destination & unloadingBuyer
Risk transfer point
Transfers when the goods are made available at the seller's premises. The buyer carries risk and cost from the factory door.
Best for: Buyers with strong logistics in the seller's country who want maximum control. Minimum seller obligation.
All 11 Incoterms at a glance
Who pays for and arranges each stage. S = seller, B = buyer.
| Rule | Mode | Origin haulage & export packaging | Export customs clearance | Main carriage (international freight) | Insurance obligation | Import customs, duties & taxes | Delivery to final destination & unloading |
|---|---|---|---|---|---|---|---|
| EXWEx Works | Any | B | B | B | B | B | B |
| FCAFree Carrier | Any | S | S | B | B | B | B |
| FASFree Alongside Ship | Sea | S | S | B | B | B | B |
| FOBFree On Board | Sea | S | S | B | B | B | B |
| CFRCost and Freight | Sea | S | S | S | B | B | B |
| CIFCost, Insurance and Freight | Sea | S | S | S | S | B | B |
| CPTCarriage Paid To | Any | S | S | S | B | B | B |
| CIPCarriage and Insurance Paid To | Any | S | S | S | S | B | B |
| DAPDelivered at Place | Any | S | S | S | B | B | S |
| DPUDelivered at Place Unloaded | Any | S | S | S | B | B | S |
| DDPDelivered Duty Paid | Any | S | S | S | B | S | S |
Where risk transfers, by rule
- EXW, Ex Works
- Transfers when the goods are made available at the seller's premises. The buyer carries risk and cost from the factory door.
- FCA, Free Carrier
- Transfers when the goods are handed to the carrier the buyer nominates, at the named place. Recommended for containerised cargo.
- FAS, Free Alongside Ship
- Transfers when the goods are placed alongside the vessel at the named port of shipment.
- FOB, Free On Board
- Transfers once the goods are loaded on board the vessel at the origin port.
- CFR, Cost and Freight
- Transfers when goods are on board at origin, even though the seller pays freight to the destination port. Cost and risk split here.
- CIF, Cost, Insurance and Freight
- Transfers when goods are on board at origin. The seller must also buy minimum marine insurance for the buyer.
- CPT, Carriage Paid To
- Transfers when goods are handed to the first carrier, even though the seller pays carriage to the named destination.
- CIP, Carriage and Insurance Paid To
- Transfers at the first carrier. The seller must buy all-risks (high level) insurance for the buyer through to destination.
- DAP, Delivered at Place
- Transfers when the goods arrive at the named destination, ready for unloading. The buyer handles import clearance.
- DPU, Delivered at Place Unloaded
- Transfers once the goods are unloaded at the named destination. The only rule where the seller unloads.
- DDP, Delivered Duty Paid
- Transfers at the named destination after the seller has cleared import and paid all duties and taxes. Maximum seller obligation.
Frequently asked questions
How many Incoterms are there?
There are 11 Incoterms in the current Incoterms 2020 set. Seven apply to any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and four apply only to sea and inland waterway transport (FAS, FOB, CFR, CIF).
What is the difference between FOB and FCA?
Under FOB the seller's risk ends only when the goods are loaded on board the vessel, and it is meant for non-containerised sea freight. FCA ends the seller's risk earlier, when the goods are handed to the buyer's carrier, and it works for any transport mode. For containerised cargo, FCA is the recommended choice.
Which Incoterm is best for the buyer?
DDP places the most obligation on the seller: the seller handles freight, insurance, import clearance and duties, and delivers to the buyer's door. It gives the buyer a single landed price with no customs work. EXW is the opposite, placing nearly all cost and risk on the buyer.
What changed in Incoterms 2020?
Incoterms 2020 replaced DAT with DPU (Delivered at Place Unloaded), raised the insurance cover the seller must buy under CIP to all-risks level, and clarified FCA so a bill of lading with an on-board notation can be issued. The number of rules stayed at 11.
Next step: work out your real cost
Your Incoterm decides which of these costs you carry. Add them up with the landed cost calculator, read the buyer's guide, or browse verified manufacturers and distributors.