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Incoterms 2020 guide

Pick an Incoterms® 2020 rule to see, stage by stage, who pays for each part of the journey and exactly where the risk moves from seller to buyer. The full chart of all eleven rules follows below.

FOB, Free On Board

Sea and inland waterway only

The seller loads the goods on the vessel nominated by the buyer at the named port of shipment.

  1. Loading at the seller's premisesSeller
  2. Export customs clearanceSeller
  3. Carriage to the export port or terminalSeller
  4. Origin terminal and loading on boardSeller
  5. Risk passes
    Main carriage (sea or air freight)Buyer
  6. Destination terminal chargesBuyer
  7. On-carriage to the named placeBuyer
  8. Unloading at the named placeBuyer
  9. Import clearance, duties and taxesBuyer
  • Seller pays
  • Buyer pays
  • Depends on the contract
  • Where risk passes to the buyer
Risk passes
When the goods are on board the vessel at the port of shipment
Insurance
No obligation
Watch out for
Very common in chemical trade but meant for sea transport. For containers the ICC recommends FCA, because the seller loses control of the box at the terminal.
FOB in the glossary

How Incoterms rules work

Incoterms rules are standard trade terms published by the International Chamber of Commerce (ICC). Written into a contract as a three letter code, a named place and the edition, such as FCA Ankleshwar Incoterms® 2020, a rule settles three things: where the seller delivers, who pays which transport and clearance costs, and when the risk of loss or damage passes.

  • E and F rules (EXW, FCA, FAS, FOB): the buyer arranges and pays the main carriage.
  • C rules (CFR, CIF, CPT, CIP): the seller pays the main carriage, but risk passes at origin. Cost and risk split at different places.
  • D rules (DAP, DPU, DDP): the seller carries cost and risk all the way to the destination.

FAS, FOB, CFR and CIF are for sea and inland waterway transport only. For containers, which are handed over at a terminal before loading, the ICC recommends FCA, CPT or CIP instead. Incoterms do not cover payment, transfer of ownership or the price itself, which belong in the sales contract.

Incoterms® is a registered trademark of the International Chamber of Commerce. This guide is a summary, not the ICC text.

Worked example

A practical case, step by step

An exporter in Gujarat sells 20 drums of solvent in one container to a buyer in Rotterdam and compares three quotes.

  1. 1
    FCA Nhava Sheva: the seller trucks the container to the terminal and clears export. From there the buyer pays the ocean freight and carries the risk.
  2. 2
    CIP Rotterdam: the seller also pays freight to Rotterdam and buys all risks insurance, but the risk still passes when the container is handed to the first carrier in India.
  3. 3
    DAP buyer's warehouse: the seller pays and carries the risk to the door. The buyer only unloads, clears import and pays EU duties and VAT.
  4. 4
    The price rises from FCA to CIP to DAP because the seller carries more costs. Compare quotes on the same rule, or add the missing costs yourself.

Incoterms 2020 chart

Who pays each stage under each rule, in the usual case. Depends means the named place or the contract of carriage decides

StageEXWFCAFASFOBCFRCIFCPTCIPDAPDPUDDP
Loading at the seller's premisesBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Export customs clearanceBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Carriage to the export port or terminalBuyerDependsSellerSellerSellerSellerSellerSellerSellerSellerSeller
Origin terminal and loading on boardBuyerBuyerBuyerSellerSellerSellerSellerSellerSellerSellerSeller
Main carriage (sea or air freight)BuyerBuyerBuyerBuyerSellerSellerSellerSellerSellerSellerSeller
Destination terminal chargesBuyerBuyerBuyerBuyerDependsDependsDependsDependsSellerSellerSeller
On-carriage to the named placeBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSellerSellerSeller
Unloading at the named placeBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSellerBuyer
Import clearance, duties and taxesBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSeller
Insurance by sellerNoNoNoNoNoClauses CNoClauses ANoNoNo
TransportAnyAnySea onlySea onlySea onlySea onlyAnyAnyAnyAnyAny

EXW Ex Works

Risk passes: when the goods are placed at the buyer's disposal at the seller's premises, not loaded.

FCA Free Carrier

Risk passes: when the goods are loaded on the buyer's transport at the seller's premises, or handed to the carrier at another named place.

FAS Free Alongside Ship

Risk passes: when the goods are placed alongside the vessel at the port of shipment.

FOB Free On Board

Risk passes: when the goods are on board the vessel at the port of shipment.

CFR Cost and Freight

Risk passes: when the goods are on board the vessel at the port of shipment, even though the seller pays the freight.

CIF Cost, Insurance and Freight

Risk passes: when the goods are on board the vessel at the port of shipment.

CPT Carriage Paid To

Risk passes: when the goods are handed to the first carrier, usually at origin.

CIP Carriage and Insurance Paid To

Risk passes: when the goods are handed to the first carrier, usually at origin.

DAP Delivered at Place

Risk passes: at the named place of destination, on the arriving transport, ready for unloading.

DPU Delivered at Place Unloaded

Risk passes: at the named place of destination, after unloading.

DDP Delivered Duty Paid

Risk passes: at the named place of destination, cleared for import, ready for unloading.

Frequently asked questions

Which Incoterm is best for chemical exports in containers?
FCA for the seller who wants control only up to the terminal, CPT or CIP when the seller arranges freight, and DAP when the buyer wants a delivered price. FOB and CIF are widely used out of habit but are designed for cargo loaded directly over the ship's rail.
What is the difference between CIF and CIP?
CIF is for sea transport and needs only minimum insurance (Institute Cargo Clauses C). CIP works for any mode and, since Incoterms 2020, needs all risks cover (Clauses A). Both cover 110 % of the contract value.
Does the Incoterm decide who owns the goods?
No. Incoterms deal with delivery, costs and risk. Transfer of ownership and payment terms, such as a letter of credit, must be agreed separately in the sales contract.
Can I still use DAT or older Incoterms?
DAT was replaced by DPU in Incoterms 2020. Older editions can still be used if the contract names them, so always state the edition, for example Incoterms 2020, to avoid disputes.
Who handles dangerous goods documents under each rule?
The shipper of record prepares the dangerous goods declaration, labels and packaging for the carriage it arranges. Whatever the rule, the seller must give the buyer the safety data sheet and the UN number, class and packing group.

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