Guide
Incoterms 2020, explained.
Incoterms are three-letter rules published by the International Chamber of Commerce that decide who arranges transport, who pays for it, who insures the cargo, and — most importantly — the exact point where risk passes from seller to buyer.
All eleven terms at a glance
| Term | Pays main carriage | Risk passes at | Notes |
|---|---|---|---|
| EXWEx Works | Buyer | Seller's premises | Cheapest headline price, most work for the buyer — including export clearance. |
| FCAFree Carrier | Buyer | Named place at origin | Modern replacement for FOB in containerised trade. |
| FASFree Alongside Ship | Buyer | Quay at origin port | Bulk and break-bulk cargo only. |
| FOBFree On Board | Buyer | On board vessel at origin | The most common term worldwide; strictly for sea freight. |
| CFRCost and Freight | Seller (freight) | On board vessel at origin | Seller pays main carriage but risk already passed. |
| CIFCost, Insurance & Freight | Seller (freight + min. insurance) | On board vessel at origin | Insurance is minimum cover only — buyers often top it up. |
| CPTCarriage Paid To | Seller (freight) | First carrier at origin | Any mode; the multimodal version of CFR. |
| CIPCarriage & Insurance Paid To | Seller (freight + all-risk insurance) | First carrier at origin | Under 2020 rules, requires all-risk (Clause A) cover. |
| DAPDelivered At Place | Seller | Buyer's named place, not unloaded | Buyer clears import and pays duty. |
| DPUDelivered at Place Unloaded | Seller | Buyer's place, unloaded | The only term where the seller must unload. |
| DDPDelivered Duty Paid | Seller | Buyer's door, duty paid | Maximum seller obligation — including import duty and taxes. |
The three mistakes we see most
Using FOB for container shipments. FOB assumes goods cross the ship's rail. Containers are handed over at a terminal days earlier, leaving a gap where nobody is clearly liable. Use FCA instead.
Assuming CIF insurance is enough. CIF requires only minimum (Clause C) cover, which excludes most damage claims. Buy your own all-risk policy or agree CIP.
Agreeing DDP without checking import rules. In many countries a foreign seller cannot be the importer of record, which makes DDP unworkable in practice.
Not sure which term protects you?
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