Incoterms 2020: The 11 Rules Explained

Incoterms are the 11 trade rules that say who pays for transport, insurance and customs, and where risk passes from seller to buyer. Pick a rule for a full guide with a cost and risk chart.

12 tools

EXW: Ex WorksUnder EXW the seller makes the goods available at its premises, packed but not loaded or cleared for export. The buyer takes on every cost and risk from there.FCA: Free CarrierUnder FCA the seller clears the goods for export and hands them to the buyer's carrier at a named place. The buyer pays the main transport and takes the risk from that point.FAS: Free Alongside ShipUnder FAS the seller clears the goods for export and places them alongside the buyer's ship at the named port. The buyer pays loading, ocean freight and everything after.FOB: Free On BoardUnder FOB the seller clears the goods for export and loads them on board the ship the buyer nominated. Risk passes once they are on board; the buyer pays the ocean freight.CFR: Cost and FreightUnder CFR the seller pays the ocean freight to the named destination port, but the risk passes to the buyer once the goods are on board at the port of shipment.CIF: Cost, Insurance and FreightUnder CIF the seller pays the ocean freight and minimum cargo insurance to the named destination port. Risk passes to the buyer once the goods are on board at origin.CPT: Carriage Paid ToUnder CPT the seller pays the transport to the named place of destination, but the risk passes to the buyer when the goods are handed to the first carrier at origin.CIP: Carriage and Insurance Paid ToUnder CIP the seller pays the transport and all risks cargo insurance to the named destination. Risk passes to the buyer when the goods are handed to the first carrier.DAP: Delivered at PlaceUnder DAP the seller delivers the goods to the named destination, ready for unloading, at its own cost and risk. The buyer unloads and handles import clearance, duties and taxes.DPU: Delivered at Place UnloadedUnder DPU the seller delivers the goods to the named destination and unloads them there, at its own cost and risk. The buyer clears import and pays duties and taxes.DDP: Delivered Duty PaidUnder DDP the seller delivers the goods to the named destination cleared for import, with duties and taxes paid. It is the most the seller can take on under any Incoterms rule.Incoterms Chooser and ChartAnswer four questions about transport, freight and insurance to get the Incoterms rule that fits your deal, with a full chart of all 11 rules below.

What are Incoterms?

Incoterms® are standard trade terms published by the International Chamber of Commerce (ICC). Written into a sales contract as three letters and a place, such as "FCA Shanghai Incoterms® 2020", they tell both sides who arranges and pays for each part of the journey, who handles export and import customs, and at which point 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. There is no Incoterms 2025: the 2020 rules remain current until the ICC publishes a new edition, and a contract can still name an older edition such as 2010 if both parties agree.

The 11 Incoterms 2020 rules at a glance

Rule	Name	Transport	Risk passes to the buyer	Main freight paid by
EXW	Ex Works	Any	At the seller's premises, not loaded	Buyer
FCA	Free Carrier	Any	Handed to the buyer's carrier	Buyer
FAS	Free Alongside Ship	Sea	Alongside the ship at the port of shipment	Buyer
FOB	Free On Board	Sea	On board at the port of shipment	Buyer
CFR	Cost and Freight	Sea	On board at the port of shipment	Seller
CIF	Cost, Insurance and Freight	Sea	On board at the port of shipment	Seller (plus insurance)
CPT	Carriage Paid To	Any	Handed to the first carrier	Seller
CIP	Carriage and Insurance Paid To	Any	Handed to the first carrier	Seller (plus insurance)
DAP	Delivered at Place	Any	At the named destination, ready for unloading	Seller
DPU	Delivered at Place Unloaded	Any	At the named destination, unloaded	Seller
DDP	Delivered Duty Paid	Any	At the named destination, import cleared	Seller (plus duties)

To see every step side by side, or to get a recommendation from four questions, open the Incoterms chooser and comparison chart.

The four groups: E, F, C and D

E (departure): EXW. The seller only makes the goods available.
F (main carriage unpaid): FCA, FAS, FOB. The seller delivers to the buyer's carrier; the buyer pays the main freight.
C (main carriage paid): CFR, CIF, CPT, CIP. The seller pays the main freight, but risk passes at origin. These rules have two critical points: where risk passes and where costs end.
D (arrival): DAP, DPU, DDP. The seller carries the risk until the goods reach the destination.

Sea only or any transport?

Four rules are for sea and inland waterway transport only: FAS, FOB, CFR and CIF. They suit bulk and break bulk cargo loaded straight onto a ship. For containers, the ICC recommends the "any mode" rules instead: FCA rather than FOB, and CPT or CIP rather than CFR or CIF, because a container is handed to the carrier at a terminal, often days before it is loaded.

What changed in Incoterms 2020

DAT (Delivered at Terminal) became DPU, Delivered at Place Unloaded, so the place of unloading no longer has to be a terminal.
CIP now requires all risks insurance (Institute Cargo Clauses A). CIF still requires only minimum cover (Clauses C).
Under FCA, buyer and seller can agree that the buyer's carrier issues an on board bill of lading to the seller, which helps with letters of credit.
Seller and buyer may use their own transport under FCA, DAP, DPU and DDP.
Security related costs and duties are now listed in each rule's cost allocation.

What Incoterms do not cover

Incoterms do not decide when ownership of the goods passes, the price or how it is paid, or what happens if the contract is breached. Those belong in the sales contract. They also do not fix the transport contract itself: the bill of lading or air waybill does that. Always write the rule with a precise named place and the edition, for example "DAP 12 Harbour Road, Felixstowe, UK, Incoterms® 2020".

Tools in Incoterms 2020