Incoterms (International Commercial Terms) are a set of 11 standardized trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international trade transactions. They specify who pays for shipping, insurance, duties, and where risk transfers from seller to buyer.

Which Incoterm is best for beginners?

DDP (Delivered Duty Paid) is best for beginner importers because the seller handles everything including customs clearance and import duties. For beginner exporters, EXW (Ex Works) is simplest as it places minimal responsibility on the seller.

What is the difference between FOB and CIF?

In FOB (Free On Board), the buyer pays for freight and insurance from the port of shipment. In CIF (Cost, Insurance and Freight), the seller pays for freight and minimum insurance to the destination port. However, in both terms, risk transfers when goods are loaded on the vessel at the port of shipment.

Why is FCA recommended over FOB for containers?

FOB was designed for bulk cargo loaded directly onto ships. Containerized cargo is typically sealed at the seller's premises and delivered to a container terminal before loading. FCA (Free Carrier) is more appropriate because it transfers risk when goods are delivered to the carrier at the named place, which better reflects actual container shipping practices.

When does risk transfer in C-terms (CFR, CIF, CPT, CIP)?

This is a critical point often misunderstood: In C-terms, the seller pays freight to the destination, but risk transfers much earlier. In CFR and CIF, risk transfers when goods are loaded on board the vessel. In CPT and CIP, risk transfers when goods are handed to the first carrier. The seller paying freight does NOT mean they bear the risk during transit.

What are the 11 Incoterms 2020?

The 11 Incoterms 2020 are: EXW (Ex Works), FCA (Free Carrier), FAS (Free Alongside Ship), FOB (Free On Board), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), CFR (Cost and Freight), CIF (Cost, Insurance and Freight), DAP (Delivered at Place), DPU (Delivered at Place Unloaded), and DDP (Delivered Duty Paid).

What is the difference between DAP, DPU, and DDP?

All three are D-terms (arrival terms). DAP: Seller delivers to buyer's premises, buyer handles import clearance and unloading. DPU: Same as DAP but seller also unloads the goods. DDP: Seller handles everything including import duties - maximum seller obligation.

Who created Incoterms?

Incoterms were created by the International Chamber of Commerce (ICC), a global business organization founded in 1919. The first version was published in 1936, with major revisions in 1953, 1980, 1990, 2000, 2010, and 2020.

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Incoterms 2020 Complete Guide

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11 TermsICC OfficialUpdated 2020

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Seller Buyer

Term	Full Name	Mode	Seller %	Risk Transfer	Export	Freight	Import	Insurance	Level
EXWE	Ex Works	Any transport mode	10%	Risk transfers when goods are placed at buyer's disposal at the named place	Buyer pays export customs	Buyer pays freight	Buyer pays import duties	- No insurance required	Simple
FCAF	Free Carrier	Any transport mode	25%	Risk transfers when goods are delivered to the carrier at the named place	Seller pays export customs	Buyer pays freight	Buyer pays import duties	- No insurance required	Moderate
FASF	Free Alongside Ship		35%	Risk transfers when goods are placed alongside the vessel at the named port of shipment	Seller pays export customs	Buyer pays freight	Buyer pays import duties	- No insurance required	Moderate
FOBF	Free On Board		40%	Risk transfers when goods are loaded on board the vessel at the named port of shipment	Seller pays export customs	Buyer pays freight	Buyer pays import duties	- No insurance required	Moderate
CPTC	Carriage Paid To	Any transport mode	50%	Risk transfers when goods are handed to the FIRST carrier - not at destination	Seller pays export customs	Seller pays freight	Buyer pays import duties	- No insurance required	Complex
CIPC	Carriage and Insurance Paid To	Any transport mode	55%	Risk transfers when goods are handed to the FIRST carrier	Seller pays export customs	Seller pays freight	Buyer pays import duties	A All Risks (ICC A)	Complex
CFRC	Cost and Freight		50%	Risk transfers when goods are loaded on board at origin - NOT at destination	Seller pays export customs	Seller pays freight	Buyer pays import duties	- No insurance required	Complex
CIFC	Cost, Insurance and Freight		55%	Risk transfers when goods are loaded on board at origin - NOT at destination	Seller pays export customs	Seller pays freight	Buyer pays import duties	C Minimum coverage (ICC C)	Complex
DAPD	Delivered at Place	Any transport mode	75%	Risk transfers when goods are placed at buyer's disposal at the named destination	Seller pays export customs	Seller pays freight	Buyer pays import duties	- No insurance required	Moderate
DPUD	Delivered at Place Unloaded	Any transport mode	80%	Risk transfers when goods are UNLOADED at the named destination	Seller pays export customs	Seller pays freight	Buyer pays import duties	- No insurance required	Moderate
DDPD	Delivered Duty Paid	Any transport mode	100%	Risk transfers when goods are placed at buyer's disposal at destination	Seller pays export customs	Seller pays freight	Seller pays import duties	- No insurance required	Simple

Seller pays

Buyer pays

Any mode

Sea only

CMin. insurance

AAll Risks

Cost Responsibility Matrix

Who pays for each cost component

Cost Item	EXW	FCA	FAS	FOB	CPT	CIP	CFR	CIF	DAP	DPU	DDP
Export Packaging
Loading at Origin
Export Customs
Main Carriage/Freight
Insurance
Import Customs
Import Duties
Unloading at Dest.

Seller pays

Buyer pays

Risk Transfer Journey

Visual map of where risk transfers from seller to buyer

🏭 Seller's Premises🚚 In Transit📍 Destination

EXW10%S

FCA25%S

FAS35%S

FOB40%S

CPT50%S

CIP55%S

CFR50%S

CIF55%S

DAP75%S

DPU80%S

DDP100%S

Seller Risk

Buyer Risk

Risk Transfer Point

🏭E-Terms

Seller makes goods available at their premises

🚚F-Terms

Seller delivers to carrier nominated by buyer

🚢C-Terms

Seller pays for carriage but risk transfers early

📍D-Terms

Seller bears all costs and risks to destination

Frequently Asked Questions

Incoterms® is a registered trademark of the International Chamber of Commerce (ICC).

This guide is for educational purposes. Consult ICC official publications for definitive rules.