Incoterms® 2020 Explained: EXW, FCA, FOB, CIF, DDP and the Rest

Incoterms® rules are three-letter trade terms published by the International Chamber of Commerce (ICC). They give buyers and sellers a shared shorthand for who arranges transport, who pays for each part of the journey, who handles export and import clearance, and at what point the risk of loss or damage moves from seller to buyer. Incoterms® is a registered trademark of the ICC, and the official text is available from the ICC at iccwbo.org. This guide is a practical summary; for contracts, rely on the official publication.

What Incoterms do and do not cover

Incoterms cover the delivery obligations between seller and buyer: delivery point, transfer of risk, allocation of costs, export and import clearance, transport and insurance contracts, and the related documents. They do not cover the price, payment terms, when legal ownership passes, what happens if the contract is breached, or the terms of your contract with the carrier. Those belong in your sales contract.

The two groups of rules

Rules for any mode of transport

• EXW – Ex Works: the seller makes goods available at its premises. The buyer does almost everything else, including loading and, in principle, export clearance.
• FCA – Free Carrier: the seller clears goods for export and delivers them to the buyer’s carrier at a named place. If that place is the seller’s premises, the seller loads the goods.
• CPT – Carriage Paid To: the seller pays transport to the named destination, but risk passes when goods are handed to the first carrier.
• CIP – Carriage and Insurance Paid To: as CPT, plus the seller buys cargo insurance for the buyer’s benefit.
• DAP – Delivered at Place: the seller delivers to the named destination, ready for unloading. The buyer handles import clearance and duties.
• DPU – Delivered at Place Unloaded: as DAP, but the seller also unloads the goods at destination.
• DDP – Delivered Duty Paid: the seller delivers to the destination, cleared for import with duties and taxes paid.

Rules for sea and inland waterway only

• FAS – Free Alongside Ship: the seller places goods alongside the vessel at the named port of shipment.
• FOB – Free on Board: the seller loads goods on board the vessel nominated by the buyer.
• CFR – Cost and Freight: the seller pays sea freight to the destination port; risk passes once goods are on board at origin.
• CIF – Cost, Insurance and Freight: as CFR, plus the seller buys minimum cargo insurance for the buyer.

Incoterms 2020 summary table

“None” means neither party is obliged to insure under the rule. The party carrying the risk will usually want to insure anyway. For an interactive version, use our Incoterms 2020 tool.

What changed in Incoterms 2020

• DAT became DPU. The old Delivered at Terminal rule was renamed Delivered at Place Unloaded, making clear that the unloading place does not have to be a terminal.
• Higher insurance under CIP. CIP now requires broader cover, in line with Institute Cargo Clauses (A), while CIF keeps the minimum Clauses (C) cover. The parties can still agree otherwise.
• FCA and on-board bills of lading. The parties can agree that the buyer instructs its carrier to issue an on-board bill of lading to the seller, which helps sellers who need one for a letter of credit.
• Own means of transport. FCA, DAP, DPU and DDP now recognise that the buyer or seller may carry the goods with its own vehicles rather than hiring a carrier.
• Clearer costs and security. Costs are listed in one place for each rule, and security-related requirements are allocated more explicitly.

Common mistakes and how to avoid them

Using FOB for containers

FOB was designed for cargo loaded directly over the ship’s rail. Containers are usually handed to the carrier at a container yard or terminal days before loading, so under FOB the seller carries risk for goods it no longer controls. FCA at the terminal or the seller’s warehouse matches how container shipping actually works. FOB remains extremely common in practice, so if you use it, understand the gap.

EXW when the buyer cannot clear exports

Under EXW the buyer is responsible for export clearance in the seller’s country, which a foreign buyer often cannot legally do. The seller ends up doing it informally, and the buyer may lack the export evidence it needs. FCA at the seller’s premises is usually the better choice.

DDP without understanding import taxes

Under DDP the seller must act as or appoint the importer of record, pay duty and often import VAT or GST, and may be unable to recover that tax. Some countries make it hard for a foreign company to import at all. Sellers should confirm they can do it legally before agreeing; buyers should check the price genuinely includes these costs.

Vague named places

“FOB China” or “DAP USA” invites disputes. Name a specific port, terminal or address, and refer to the version, such as Incoterms® 2020.

Your choice of rule changes which costs appear in your landed cost. See landed cost explained, and if you are buying on FCA or FOB you will need your own forwarder — you can request a freight quote here.

Frequently asked questions

This guide is general education, not legal, tax or customs advice. Rules change and vary by country — confirm details with your customs authority or a licensed broker before you ship. Spotted something out of date? Tell us.