Reference

Incoterms 2020

Eleven three letter codes that decide who pays for transport, who carries the risk and who deals with customs. Choosing the wrong one is one of the most expensive mistakes in international trade.

Incoterms are published by the International Chamber of Commerce and revised roughly every ten years. The current edition is Incoterms 2020. They do not transfer ownership, they do not set payment terms and they are not a contract. What they do is define, precisely, the point at which responsibility moves from seller to buyer.

Two distinctions matter more than the rest. First, cost and risk do not always transfer at the same place, and the C rules exist precisely to separate them. Second, four of the eleven rules can only be used for sea and inland waterway transport, and using them for containerised cargo, as people constantly do with FOB, describes something that never actually happens.

The eleven rules at a glance

Code	Name	Mode	Risk passes
EXW	Ex Works	Any mode of transport	When the goods are placed at the buyer’s disposal at the named place, before loading.
FCA	Free Carrier	Any mode of transport	On delivery to the nominated carrier, either loaded at the seller’s premises or ready for unloading elsewhere.
FAS	Free Alongside Ship	Sea and inland waterway only	When the goods are placed alongside the vessel at the named port.
FOB	Free on Board	Sea and inland waterway only	When the goods are on board the vessel at the named port of shipment.
CPT	Carriage Paid To	Any mode of transport	When the goods are handed to the first carrier, not at the destination.
CIP	Carriage and Insurance Paid To	Any mode of transport	When the goods are handed to the first carrier, as with CPT.
CFR	Cost and Freight	Sea and inland waterway only	When the goods are on board at the port of shipment.
CIF	Cost, Insurance and Freight	Sea and inland waterway only	When the goods are on board at the port of shipment.
DAP	Delivered at Place	Any mode of transport	When the goods arrive at the named destination ready for unloading, still on the vehicle.
DPU	Delivered at Place Unloaded	Any mode of transport	Once the goods are unloaded at the named place.
DDP	Delivered Duty Paid	Any mode of transport	When the goods arrive at the named destination ready for unloading.

Rules for any mode of transport

These seven work for road, rail, air, sea and multimodal shipments, including containers.

EXW Group E

Ex Works

Minimum seller obligation. Buyer collects from the seller’s premises and handles everything.

FCA Group F

Free Carrier

Seller clears for export and hands over to the buyer’s carrier. The sensible default.

CPT Group C

Carriage Paid To

Seller pays freight to destination, but risk passes at the first carrier.

CIP Group C

Carriage and Insurance Paid To

CPT plus all risks insurance cover, arranged and paid for by the seller.

DAP Group D

Delivered at Place

Seller delivers to destination at their own risk. Buyer clears the import.

DPU Group D

Delivered at Place Unloaded

Like DAP, but the seller must also unload the goods at the destination.

DDP Group D

Delivered Duty Paid

Maximum seller obligation, including import clearance, duty and taxes.

Rules for sea and inland waterway only

These four assume the goods are loaded directly onto a vessel. For containers, use FCA, CPT, CIP or a D rule instead.

FAS Group F

Tell us what you need to move.

Send the supplier city or port of loading, the volume and weight, and the date the goods are ready. We will come back with a landed cost and a realistic transit time, usually within one working day.

Request a quotation +40 770 108 111