Incoterms 2020 Reference Guide
A practical reference for all 11 Incoterms 2020 rules — who pays for what, where risk transfers, and which Incoterm is right for your shipment.
Incoterms 2020 Reference Guide
Incoterms (International Commercial Terms) define the responsibilities of buyers and sellers in international trade transactions.
What are Incoterms?
Incoterms (International Commercial Terms) are a set of 11 globally recognized rules published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers for: the delivery of goods from seller to buyer; the division of costs (freight, insurance, customs, etc.); the transfer of risk from seller to buyer; and the required documentation. Incoterms do NOT cover: payment terms, title transfer, or remedies for breach of contract. The current version is Incoterms 2020, effective January 1, 2020. Always specify the version and the named place: 'FOB Shanghai, Incoterms 2020'.
Incoterms for Any Mode of Transport
EXW — Ex Works: Seller makes goods available at their premises. Buyer handles everything from pickup. Maximum responsibility for the buyer. FCA — Free Carrier: Seller delivers to a named place (can be seller's premises or a carrier terminal). Risk transfers when carrier takes possession. Best alternative to FOB for container shipments. CPT — Carriage Paid To: Seller pays freight to named destination. Risk transfers when carrier takes first possession at origin. CIP — Carriage and Insurance Paid To: Like CPT but seller also provides insurance. Minimum Institute Cargo Clause A (all-risk) under Incoterms 2020. DAP — Delivered at Place: Seller delivers to named destination, ready for unloading. Buyer handles import customs. DPU — Delivered at Place Unloaded: Like DAP but seller unloads the goods. DDP — Delivered Duty Paid: Maximum responsibility for the seller. Seller handles everything including import customs and duties.
Incoterms for Sea and Inland Waterway Only
These four terms should ONLY be used for non-containerized bulk or breakbulk cargo: FAS — Free Alongside Ship: Seller delivers goods alongside the vessel at the named port. Risk transfers at the ship's side. FOB — Free on Board: Seller loads goods onto the vessel. Risk transfers when goods are on board. Commonly (but incorrectly) used for containerized cargo — use FCA instead. CFR — Cost and Freight: Seller pays freight to destination port. Risk transfers on board at origin port. CIF — Cost, Insurance and Freight: Like CFR but seller provides minimum insurance (Institute Cargo Clause C). Note: For containerized cargo, CIF/CFR are contractually complex — consider CIP/CPT instead.
Choosing the Right Incoterm
For inexperienced importers: DDP gives the buyer maximum simplicity (seller handles everything) but the seller must have good knowledge of destination country import procedures. For experienced importers: FOB or FCA gives the buyer maximum control and transparency over freight costs. For Letter of Credit transactions: CIF is traditionally used in L/C trade, especially for bulk commodities. For container shipments: Avoid FOB/CFR/CIF — use FCA/CPT/CIP instead, as risk transfer for FOB is technically when cargo is on board, not when it enters the container (which can be days earlier). Our advisory team can help you evaluate which Incoterm minimizes your total landed cost and risk exposure.
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