Incoterms® 2020

Rules for any mode or modes of transport

Seven rules apply to any mode or modes of transport. They are the preferred options for B2B multi-modal shipments.

• EXW – Ex Works (seller’s minimum obligations)
  Delivery: Goods are placed at the buyer’s disposal at the seller’s premises. The seller is not responsible for loading the goods.
  Risk transfer: Upon delivery of the goods at the seller’s factory or warehouse.
  Customs: The buyer performs export and import customs clearance formalities.
  Costs: The buyer bears all transportation, insurance and duty expenses.
  Application: The buyer collects the goods on-site. Caution: not recommended for export-controlled goods, as export declaration is the buyer’s responsibility.
• FCA – Free Carrier (preferred primary option for B2B transactions)
  Delivery: Goods are delivered to the carrier at the named place.
  Risk transfer: When the goods are handed over to the carrier.
  Customs: The seller completes export customs clearance; the buyer completes import customs clearance.
  Costs: The buyer arranges the main carriage and insurance coverage.
  Application: Air freight, courier shipment and multi-modal transport; substitutes FOB for non-maritime shipments.
• CPT – Carriage Paid To
  Delivery: Goods are delivered to the first carrier.
  Risk transfer: Upon handover of goods to the first carrier (risk passes before the goods reach the destination).
  Customs: The seller handles export clearance; the buyer handles import clearance.
  Costs: The seller pays the main carriage to the named destination; insurance is procured at the buyer’s discretion.
  Application: B2B multi-modal shipments where the seller arranges carriage while the risk of loss transfers at an earlier stage.
• CIP – Carriage and Insurance Paid To
  Delivery: Goods are delivered to the first carrier.
  Risk transfer: Upon handover of goods to the first carrier.
  Customs: The seller handles export clearance; the buyer handles import clearance.
  Costs: The seller pays the main carriage and minimum insurance cover (ICC C). Enhanced cover may be agreed by both parties.
  Application: Cross-border B2B shipments where the seller arranges both carriage and insurance.
• DAP – Delivered At Place
  Delivery: Goods are made available to the buyer on the arriving means of transport, ready for unloading at the named destination.
  Risk transfer: When the goods arrive at the named destination and are placed at the buyer’s disposal.
  Customs: The seller handles export clearance; the buyer performs import customs clearance and bears import duties.
  Costs: The seller bears all carriage costs to the destination; unloading is for the buyer’s account.
  Application: Door-to-door delivery: the goods arrive at the buyer’s premises on the conveyance and the buyer unloads.
• DPU – Delivered at Place Unloaded (formerly DAT, renamed under Incoterms® 2020)
  Delivery: Goods are delivered and unloaded from the arriving means of transport at the named destination.
  Risk transfer: Upon completion of unloading.
  Customs: The seller handles export clearance; the buyer performs import customs clearance and bears import duties.
  Costs: The seller bears carriage and unloading costs; import duties are for the buyer’s account.
  Application: B2B bulk cargo where the seller delivers and unloads goods at the buyer’s warehouse.
• DDP – Delivered Duty Paid (seller’s maximum obligations)
  Delivery: Goods are made available to the buyer at the named destination.
  Risk transfer: Upon delivery at the named destination.
  Customs: The seller undertakes both export and import customs clearance, and bears import duties and value-added tax.
  Costs: The seller bears full carriage, insurance and all import taxes. High risk: the seller must be familiar with the customs law of the importing jurisdiction; avoid DDP where local law prohibits foreign entities from filing import declarations.
  Application: Turn-key delivery to the buyer’s address with all import formalities completed by the seller.

Rules for sea and inland waterway transport

Four rules apply only to sea and inland waterway transport.

• FAS – Free Alongside Ship
  Delivery: Goods are placed alongside the vessel at the named port of shipment.
  Risk transfer: When the goods are placed alongside the vessel.
  Customs: The seller completes export customs clearance (a material change under Incoterms® 2020).
  Costs: The buyer arranges sea carriage and insurance.
  Application: Bulk commodities; rarely used for containerized B2B cargo.
• FOB – Free On Board
  Delivery: Goods are loaded on board the vessel at the named port of shipment.
  Risk transfer: Once the goods are on board the vessel.
  Customs: The seller handles export clearance; the buyer handles import clearance.
  Costs: The buyer pays ocean freight and insurance. Caution: FOB is not recommended for container cargo — use FCA, as risk passes when the containers are handed to the carrier, before vessel loading.
  Application: Port-to-port sea shipments of break-bulk or bulk cargo.
• CFR – Cost and Freight
  Delivery: Goods are loaded on board the vessel at the named port of shipment.
  Risk transfer: Once the goods are on board the vessel.
  Customs: The seller handles export clearance; the buyer handles import clearance.
  Costs: The seller pays ocean freight; the buyer procures insurance.
  Application: Sea-only bulk shipments.
• CIF – Cost, Insurance and Freight
  Delivery: Goods are loaded on board the vessel at the named port of shipment.
  Risk transfer: Once the goods are on board the vessel.
  Customs: The seller handles export clearance; the buyer handles import clearance.
  Costs: The seller pays ocean freight and minimum insurance cover (ICC C). Common misconception: risk transfers when the goods are loaded on board, not on arrival at the destination port.
  Application: Sea shipments where the seller arranges freight and minimum insurance.

Selecting a rule for B2B shipments

• Air freight, express or multi-modal transport: FCA, for a clear point of risk transfer.
• Seller arranges carriage and insurance is required: CIP.
• Sea bulk cargo port to port: FOB / CFR / CIF; avoid FOB for container cargo.
• Delivery to the buyer’s address with import duties for the buyer’s account: DAP (no unloading) or DPU (unloading included).
• Delivery to the buyer’s warehouse with import duties borne by the seller: DDP — use with extreme caution.

Key contract stipulations

• Always name the place, e.g. FCA Shenzhen Incoterms® 2020. A rule without a named place is incomplete.
• Incoterms® rules do not cover title to goods, payment terms, letter of credit arrangements or quality claims; stipulate these separately in the sales contract.
• CIP and CIF provide minimum insurance cover only (ICC C). For high-value goods agree enhanced cover expressly.