What Incoterms do and do not do
An Incoterms rule answers three questions: who bears the costs, at what point risk passes to the buyer, and who handles the export and import formalities.
- It does not determine when title passes; that is governed by the sales contract.
- It does not determine the method or timing of payment.
- It does not govern liability for defective goods.
- It does not replace the contract of carriage.
Always write the rule together with a named place: CIF Mersin, FCA Producer's Works. A rule with no named place is incomplete and invites a dispute.
Rules for any mode of transport
These can be used for road, rail, air, sea and multimodal transport. For containerised cargo this is the correct group.
- EXW — Ex Works
- The seller makes the goods available at its own premises and does not load them. Loading, export formalities, carriage and import are all the buyer's responsibility. It is the lightest rule for the seller and the heaviest for the buyer; because filing an export declaration in the buyer's name can be awkward in practice, FCA is generally preferred in international trade.
- FCA — Free Carrier
- The seller clears the goods for export and delivers them to the carrier nominated by the buyer. If delivery takes place at the seller's premises the seller loads; if elsewhere, unloading is the buyer's responsibility. Incoterms 2020 added the option for the buyer to instruct the carrier to issue an on-board bill of lading.
- CPT — Carriage Paid To
- The seller pays for carriage to the destination, but risk passes to the buyer when the goods are handed to the first carrier. The cost and risk transfer points differ, so both should be written separately into the contract.
- CIP — Carriage and Insurance Paid To
- As CPT, with the seller also taking out insurance. In Incoterms 2020 the minimum cover for CIP was raised to all-risks insurance (Institute Cargo Clauses A or equivalent).
- DAP — Delivered at Place
- The seller delivers the goods at the named destination, ready for unloading on the arriving means of transport. Import clearance and duties are the buyer's responsibility.
- DPU — Delivered at Place Unloaded
- The seller delivers the goods unloaded at the named destination. It is the only rule under which unloading is the seller's obligation. It replaced DAT in Incoterms 2020 and can be used for places other than a terminal.
- DDP — Delivered Duty Paid
- The seller bears everything, including import clearance and duties. It is the most convenient rule for the buyer and the riskiest for the seller; it can create a tax liability for the seller in the importing country.
Rules specific to sea and inland waterway transport
These should be used only for bulk cargo and conventional vessel loading. Using them for containerised cargo creates a gap in risk between the moment the goods are delivered to the terminal and the moment they are loaded on board.
- FAS — Free Alongside Ship
- The seller places the goods alongside the vessel at the port of shipment. Loading and everything after it are the buyer's responsibility.
- FOB — Free On Board
- The seller loads the goods on board; risk passes to the buyer once they are on board. Freight and insurance are the buyer's responsibility. It is among the most widely used rules in raw material purchasing.
- CFR — Cost and Freight
- The seller pays the freight, but risk passes to the buyer once the goods are on board. There is no insurance obligation.
- CIF — Cost, Insurance and Freight
- As CFR, with the seller also taking out insurance. In Incoterms 2020 the minimum cover for CIF is limited-risk insurance (Institute Cargo Clauses C or equivalent); if you want wider cover you must state it separately in the contract.
Which rule to choose
- If you do not want to deal with customs and freight
- Choose DAP or DDP. You get the quote as a single figure, delivered to your plant.
- If you work with your own forwarder
- Choose FOB or FCA. You manage the freight and optimise the cost yourself.
- If you are comparing prices
- Ask every supplier to quote on the same rule. Prices given on different rules are not comparable.
- If you are shipping containers
- Use FCA/CIP rather than FOB/CIF. In container traffic the goods are delivered to the terminal, not to the vessel.
When you request a quote
In our quote form you select the delivery term from the Incoterms 2020 list and write the place of delivery. If you are not sure which suits you, DAP is enough: you get a price delivered to your plant, freight and customs included.
The official and binding text of the rules is published by the ICC. This page is a summary; refer to the official text for any interpretation to be relied on in a contract.