Incoterms® 2020 are the internationally recognised trade rules, published by the International Chamber of Commerce (ICC), that define the responsibilities of buyers and sellers in a sale of goods. They answer three questions on every shipment: who arranges and pays for transport and insurance, where the risk of loss or damage passes from seller to buyer, and who handles export and import formalities. Used correctly, they prevent costly disputes; used loosely, they cause them. This guide covers all eleven rules in detail.
What Incoterms do — and don't — cover
It's just as important to know the limits of Incoterms as their content. Incoterms 2020 do define:
- The division of costs between buyer and seller along the transport chain.
- The exact point at which risk of loss or damage transfers.
- Responsibility for export and import clearance and related formalities.
- Who arranges carriage and insurance, where applicable.
They do not cover: the price or method of payment; the transfer of ownership or title to the goods; product conformity, warranties or breach remedies; or dispute-resolution and governing law. Those belong in the sales contract itself — Incoterms are incorporated into that contract, not a substitute for it. Always cite the version, for example "CIF Jebel Ali, Incoterms 2020", and name the place as precisely as possible.
The 11 Incoterms 2020 at a glance
The eleven rules fall into two families based on transport mode. Seven apply to any mode of transport (road, rail, air, sea, or multimodal); four apply only to sea and inland-waterway transport.
| Rule | Full name | Mode | Risk passes to buyer when… |
|---|---|---|---|
| EXW | Ex Works | Any | Goods placed at buyer's disposal at seller's premises |
| FCA | Free Carrier | Any | Goods handed to the carrier named by the buyer |
| CPT | Carriage Paid To | Any | Goods handed to the first carrier (origin) |
| CIP | Carriage & Insurance Paid To | Any | Goods handed to the first carrier (origin) |
| DAP | Delivered at Place | Any | Goods ready for unloading at destination |
| DPU | Delivered at Place Unloaded | Any | Goods unloaded at destination |
| DDP | Delivered Duty Paid | Any | Goods ready at destination, import cleared |
| FAS | Free Alongside Ship | Sea / waterway | Goods placed alongside the vessel at origin port |
| FOB | Free On Board | Sea / waterway | Goods loaded on board at origin port |
| CFR | Cost & Freight | Sea / waterway | Goods loaded on board at origin port |
| CIF | Cost, Insurance & Freight | Sea / waterway | Goods loaded on board at origin port |
Notice a crucial detail in the C-rules (CPT, CIP, CFR, CIF): the seller pays carriage to the destination, but risk still passes at origin — when the goods are handed to the carrier or loaded on board. Cost and risk part company. Buyers who assume they're protected until the goods arrive are mistaken.
Group 1 — Rules for any mode of transport
EXW — Ex Works (named place)
Minimum obligation for the seller: they simply make the goods available at their own premises (factory, warehouse). The buyer bears all cost and risk from that point — including loading, export clearance, main carriage and import. EXW gives the buyer maximum control but maximum work, and it can be impractical because the buyer must handle export formalities in the seller's country. For that reason, FCA is often the better choice.
FCA — Free Carrier (named place)
The seller delivers the goods, cleared for export, to a carrier nominated by the buyer at an agreed place. If that place is the seller's premises, the seller loads; if it's another location, the seller delivers ready for unloading. Risk passes on hand-over to the carrier. FCA is the ICC's recommended rule for containerised cargo, because containers are handed over at a terminal long before they're "on board" a vessel.
CPT — Carriage Paid To (named destination)
The seller arranges and pays for carriage to the named destination, but risk transfers to the buyer as soon as the goods are handed to the first carrier at origin. Suitable for any mode, including multimodal.
CIP — Carriage & Insurance Paid To (named destination)
Same as CPT, plus the seller must take out insurance for the buyer's benefit. Under Incoterms 2020, CIP requires the higher, all-risks level of cover (Institute Cargo Clauses A) unless the parties agree otherwise — an important upgrade from 2010.
DAP — Delivered at Place (named destination)
The seller delivers when the goods are placed at the buyer's disposal at the named destination, ready for unloading. The seller bears all risk and cost to that point; the buyer handles unloading and import clearance.
DPU — Delivered at Place Unloaded (named destination)
The only rule that requires the seller to unload the goods at destination. Introduced in 2020 (renamed from the old "DAT"), and broadened so the place can be any location, not just a terminal. The buyer handles import clearance.
DDP — Delivered Duty Paid (named destination)
Maximum obligation for the seller: they deliver the goods at destination, cleared for import, with duties and taxes paid. The buyer simply receives the goods. DDP places the greatest burden — and customs risk — on the seller.
Group 2 — Rules for sea & inland-waterway transport
FAS — Free Alongside Ship (named port)
The seller delivers when the goods are placed alongside the vessel (on the quay or a barge) at the named port of shipment, cleared for export. Common for bulk and break-bulk cargo.
FOB — Free On Board (named port)
The seller delivers when the goods are loaded on board the vessel; risk passes at that point, and the buyer arranges and pays for main sea freight onward. Widely used, but strictly for non-containerised sea cargo.
CFR — Cost & Freight (named destination port)
The seller pays the cost and freight to bring the goods to the destination port, but risk passes to the buyer once the goods are on board at origin. The buyer arranges insurance and handles import.
CIF — Cost, Insurance & Freight (named destination port)
As CFR, plus the seller provides marine insurance to the destination port. Under Incoterms 2020, CIF requires only the minimum level of cover (Institute Cargo Clauses C) unless the parties agree more — a key difference from CIP.
The four (or five) you'll use most
In practice, most sales sit on a handful of rules. For a quick decision:
- EXW — you control everything from the seller's gate. Maximum control, maximum work.
- FCA / FOB — the seller gets the goods to the carrier or on board; you take the main carriage. Use FCA for containers, FOB for bulk/break-bulk.
- CFR / CPT — the seller pays freight to your port/place; you arrange insurance and import.
- CIF / CIP — the seller pays freight and insurance to your port/place; you clear customs and collect. The simplest terms for many buyers (use CIP for containers/multimodal, CIF for bulk sea cargo).
What changed in Incoterms 2020
The 2020 edition refined rather than revolutionised the rules. The main changes:
- DAT became DPU. "Delivered at Terminal" was renamed "Delivered at Place Unloaded" and broadened to any place, emphasising that it's the only rule requiring the seller to unload.
- Different insurance levels for CIF and CIP. CIP now requires all-risks cover (ICC A); CIF keeps minimum cover (ICC C). Previously both defaulted to minimum.
- FCA and the on-board bill of lading. Buyer and seller can now agree that the buyer instructs its carrier to issue an on-board B/L to the seller — helpful when a letter of credit requires one.
- Costs listed in one place. Each rule now consolidates the allocation of costs in a single article, making it easier to see who pays what.
- Security-related obligations and their costs are set out more explicitly.
- Own means of transport allowed. FCA, DAP, DPU and DDP now recognise that the buyer or seller may carry the goods with their own vehicles rather than a third-party carrier.
CIF vs CIP — the insurance trap
Because CIF and CIP both put insurance on the seller, buyers often treat them as interchangeable. They aren't. CIF is sea-only and defaults to minimum cover (ICC C), which excludes many common risks. CIP works for any mode and defaults to all-risks cover (ICC A). If you buy CIF and expect comprehensive protection, you may be under-insured — specify the cover level explicitly, or arrange your own policy.
Common mistakes to avoid
- Using FOB/CFR/CIF for containers. Container cargo is handed over at a terminal, not loaded by the shipper — so risk under FOB can pass at the wrong point. Use FCA, CPT or CIP for containers.
- Assuming C-rules protect you to destination. The seller pays freight to the destination, but risk passed at origin. Insure the leg you're responsible for.
- Choosing EXW without thinking about export clearance. The buyer must clear export in the seller's country, which is often impractical. FCA usually fits better.
- Naming the place vaguely. "CIF Nigeria" is not enough — name the exact port or place, e.g. "CIF Apapa, Lagos".
- Forgetting Incoterms don't transfer title. Ownership and payment are governed by your contract, not the Incoterm.
How to choose the right Incoterm
Match the term to how much of the journey you want to control:
- New importer, want simplicity → CIF (sea/bulk) or CIP (containers/multimodal). The seller delivers freight and insurance to your port; you clear and collect.
- You have a trusted freight forwarder → FCA or FOB. You control the main carriage and can often cut cost.
- You want total control from origin → EXW (with the export-clearance caveat above).
- You want door delivery → DAP, DPU (unloaded) or DDP (duties paid).
For a practical, end-to-end view of buying across borders — HS codes, COA, documentation and compliance — see our buyer's checklist for importing industrial chemicals.
Frequently asked questions
Which Incoterm is best for a first-time importer?
What's the difference between CIF and CIP?
Do Incoterms include customs duties?
What replaced DAT in Incoterms 2020?
Are Incoterms 2020 mandatory?
Which Incoterm should I use for container shipments?
At Ambizent International Trading we ship on EXW, FOB or CIF — by container or bulk vessel — with a Certificate of Analysis and complete export documentation (COA, COO, packing list, B/L and insurance) on every consignment. Tell us your destination port and preferred term, and we'll structure the shipment to suit you.
Ambizent International Trading supplies sulphur, PVC & plasticizers, polyurethane chemicals and premium quartz sand to manufacturers in 30+ countries, shipping on EXW, FOB or CIF with full documentation. Request a quote →