Incoterms 2020: the 11 trade terms every importer and exporter should know

Incoterms (International Commercial Terms), published by the International Chamber of Commerce (ICC), define who pays which costs, who bears the risk, and where risk passes between seller and buyer. The current version is Incoterms 2020, with 11 rules.

Rules for any mode of transport

Rule	In short
EXW – Ex Works	Seller makes goods available at its premises; buyer handles almost everything.
FCA – Free Carrier	Seller delivers to the carrier nominated by the buyer.
CPT – Carriage Paid To	Seller pays freight to destination; risk passes on handover to the first carrier.
CIP – Carriage and Insurance Paid To	Like CPT, plus insurance (maximum cover – ICC A).
DAP – Delivered at Place	Seller delivers at destination, not unloaded.
DPU – Delivered at Place Unloaded	Seller delivers and unloads at destination.
DDP – Delivered Duty Paid	Seller bears all costs, including import duties.

Rules for sea and inland waterway only

Rule	In short
FAS – Free Alongside Ship	Delivered alongside the vessel at the port of loading.
FOB – Free On Board	Delivered on board the vessel at the port of loading.
CFR – Cost and Freight	Seller pays freight to the destination port; risk passes once on board.
CIF – Cost, Insurance and Freight	Like CFR, plus insurance (minimum cover – ICC C).

Which one should you choose?

• Containerized sea freight: consider FCA rather than FOB, as sellers usually hand containers over at the container yard rather than loading them onto the vessel.
• Want to control freight rates and schedules: buyers choose E/F terms (EXW, FCA, FOB) and book through their own forwarder.
• Want door delivery to the buyer’s warehouse: consider DAP or DDP — note that DDP requires the seller to clear customs and pay duties in the importing country.

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