Incoterms 2020

Incoterms is an abbre­vi­a­tion of the expres­sion “Inter­na­tion­al Com­mer­cial Terms” and rep­re­sents spe­cif­ic com­mer­cial terms orig­i­nal­ly pub­lished by the Inter­na­tion­al Cham­ber of Com­merce (ICC). These terms are pri­mar­i­ly intend­ed to com­mu­ni­cate a clear set of rules to par­ties engaged in inter­na­tion­al trade.

Though the incoterms them­selves do not con­clude a con­tract, the under­stand­ing of these terms is intend­ed to inform inter­na­tion­al sales con­tracts by clear­ly com­mu­ni­cat­ing the costs, risks and respon­si­bil­i­ties of each par­ty asso­ci­at­ed with the inter­na­tion­al sales and trans­porta­tion of goods.

The Inter­na­tion­al Cham­ber of Com­merce (ICC) pub­lished the first Incoterms rules in 1936, and has been main­tain­ing and devel­op­ing them ever since. As of this writ­ing, the most cur­rent ver­sion is the Incoterms^® 2020. The Incoterms 2020 Eng­lish ebook is avail­able for pur­chase from the ICC by using the link pro­vid­ed, and the Incoterms prac­ti­cal free wallchart poster below is includ­ed in this arti­cle for visu­al reference.

Offi­cial­ly in the Incoterms^® 2020 are the fol­low­ing eleven (11) incoterms divid­ed into two sec­tions. By click­ing on the rel­e­vant link, each of the incoterms is described in more detail. Each incoterm is defined by the respon­si­bil­i­ty that each par­ty has with respect to cost, risk, and insurance. 

This sec­ond info­graph­ic makes clear who is respon­si­ble for both the cost and the risk dur­ing each step of the trans­ac­tion for each of the 11 incoterms.

Rules for any mode of transport

1. EXW – Ex Works (named place of deliv­ery)
2. FCA – Free Car­ri­er (named place of deliv­ery)
3. CPT – Car­riage Paid To (named place of des­ti­na­tion)
4. CIP – Car­riage and Insur­ance Paid to (named place of des­ti­na­tion)
5. DPU – Deliv­ered At Place Unloaded (named place of des­ti­na­tion)
6. DAP – Deliv­ered At Place (named place of des­ti­na­tion)
7. DDP – Deliv­ered Duty Paid (named place of destination)

Rules for sea and inland waterway transport

8. FAS – Free Along­side Ship (named port of ship­ment)
9. FOB – Free on Board (named port of ship­ment)
10. CFR – Cost and Freight (named port of des­ti­na­tion)
11. CIF – Cost, Insur­ance & Freight (named port of destination)

1. EXW – Ex Works (named place of delivery)

With EXW incoterms, the buy­er has the max­i­mum oblig­a­tions and the sell­er has min­i­mum oblig­a­tions. The term Ex Works is often used when mak­ing an ini­tial quote for the sale of goods with­out any charges includ­ed. This way the buy­er can under­stand the cost of the goods before any trans­port, duty, levy, insur­ance or oth­er charges are applied.

EXW implies that the sell­er has the goods ready for col­lec­tion at its loca­tion (office, ware­house, fac­to­ry) on the agreed date. EXW is suit­able for all forms of trans­port but is not rec­om­mend­ed for inter­na­tion­al trans­port due to cus­toms formalities.

Features of CPT incoterms 

Deliv­ery
The sell­er must make the goods avail­able to the buy­er at the agreed place of deliv­ery. He does not have to load the goods on the vehi­cle with which the goods are col­lect­ed. If he does this any­way, the sell­er may charge at the buy­er’s expense and risk. Anoth­er pos­si­bil­i­ty is that a judge decides after­ward that, for exam­ple, FCA has been agreed.

Trans­port risk
The risk of dam­age to or loss of the goods dur­ing trans­port is borne by the buy­er from delivery.

Trans­porta­tion costs
The costs are borne by the buy­er from delivery.

Cus­toms for­mal­i­ties
The buy­er arranges all cus­toms for­mal­i­ties and bears the costs there­of. Please note, that this is prob­lem­at­ic for export out­side the EU.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. At EXW this is indi­cat­ed by: «named place of delivery».

2. FCA – Free Carrier (named place of delivery)

With FCA incoterms, the sell­er pays for car­riage (trans­port) to the named point of deliv­ery and the risk pass­es when the goods are hand­ed over to the first car­ri­er. FCA is suit­able for all modes of transport.

Features of FCA incoterms

Deliv­ery
The sell­er deliv­ers the goods to the buy­er in one of two ways:
1. If the agreed place is the sell­er’s busi­ness premis­es, the goods will be deliv­ered as soon as they have been loaded onto the vehi­cle orga­nized by the buy­er.
2. If the agreed place is anoth­er place, the goods will be deliv­ered as soon as the goods are made avail­able to the car­ri­er or anoth­er par­ty des­ig­nat­ed by the buy­er, on the sell­er’s vehi­cle and ready for unloading.

It is not nec­es­sary to name either option 1 or option 2, as the named place of deliv­ery will auto­mat­i­cal­ly assume either of the two options. In both FCA 1 and FCA 2, the agreed place deter­mines where the risk and costs pass from sell­er to buyer.

Trans­port risk
The risk of dam­age dur­ing trans­port is borne by the buy­er from delivery.

Trans­porta­tion costs
The costs of trans­port from the agreed place of deliv­ery are for the account of the buy­er. Until deliv­ery, the costs are borne by the seller.

Cus­toms for­mal­i­ties
The sell­er must take care of all cus­toms for­mal­i­ties aris­ing from the export. He shall also bear the costs, duties, and levies aris­ing these cus­toms for­mal­i­ties. Cus­toms for­mal­i­ties, costs, duties and levies are borne by the buy­er in tran­sit through oth­er coun­tries and import into the des­ti­na­tion country.

Trans­port insur­ance
Nei­ther the sell­er, nor the buy­er are required to take out trans­port insur­ance for the goods for the buy­er. It is the buy­er’s respon­si­bil­i­ty to have trans­port insur­ance for the goods if they want to insure that the goods arrive in the same con­di­tion as they left CAPLIN­Q’s facilities. 

Addi­tion of place of deliv­ery
The place of deliv­ery of the goods must be stat­ed in the deliv­ery con­di­tion. At FCA this is indi­cat­ed with «named place of delivery». 

3. CPT – Carriage Paid To (named place of destination) 

With CPT incoterms, the sell­er pays for the trans­port. Risks are trans­ferred to the buy­er when hand­ing over goods to the first con­tract­ed car­ri­er. Ter­mi­nal Han­dling Charges (THC) are charges charged by the ter­mi­nal oper­a­tor. These charges may or may not be includ­ed by the car­ri­er in their freight rates — the buy­er should inquire whether the CPT price includes THC, to avoid sur­pris­es. CFR is the coun­ter­part of CPT when mar­itime trans­port is used. CPT on the oth­er hand is a non-mar­itime con­di­tion and can be applied to all modes of transport. 

Features of CPT incoterms

Deliv­ery
The sell­er must deliv­er the goods to the con­tract­ed carrier.

Trans­port risk
The risk of dam­age dur­ing trans­port is borne by the buy­er from trans­fer to the car­ri­er. Before deliv­ery, the sell­er bears the risk. This risk includes the risk that the dry ice has melt­ed and/or that the tem­per­a­ture con­di­tions are not main­tained dur­ing transport.

Trans­porta­tion costs
The costs of trans­port to the agreed place of des­ti­na­tion are for the account of the sell­er. Fur­ther trans­port is at the buy­er’s expense. IMPORTANT NOTE: The trans­fer of costs does not take place at the same time as the trans­fer of risk for trans­port dam­age. As shown in the image above and explained in the para­graph above, the trans­fer of costs remains with the sell­er until deliv­ery, but the trans­fer of risk takes place the moment the goods are with the con­tract­ed carrier.

Cus­toms for­mal­i­ties
The sell­er must take care of the cus­toms for­mal­i­ties aris­ing from the export. He is also respon­si­ble for the asso­ci­at­ed costs, duties, and levies. Cus­toms for­mal­i­ties and costs relat­ed to tran­sit are usu­al­ly borne by the buy­er. All cus­toms for­mal­i­ties and the asso­ci­at­ed costs, duties and levies aris­ing from impor­ta­tion into the coun­try of des­ti­na­tion are for the account and risk of the buyer.

Trans­port insur­ance
The sell­er does not have to take out trans­port insur­ance for the goods for the buy­er. It is the buy­er’s respon­si­bil­i­ty to have trans­port insur­ance for the goods if they want to insure that the goods arrive in the same con­di­tion as they left CAPLIN­Q’s facilities.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. With CPT this is indi­cat­ed by: «named place of destination».

4. CIP – Carriage and Insurance Paid to (named place of destination)

Under CIP incoterms, the sell­er pays for car­riage (trans­port) and insur­ance to the named des­ti­na­tion point, but the risk pass­es when the goods are trans­ferred to the first car­ri­er. The Ter­mi­nal Han­dling Charges (THC) are charges charged by the ter­mi­nal oper­a­tor and these charges may or may not be includ­ed by the car­ri­er in their freight rates.

It is the buy­er’s respon­si­bil­i­ty to inquire whether the CIP price includes THC, to avoid sur­pris­es. The sell­er is oblig­ed to inform the cus­tomer that the goods are on their way. CIP is a con­di­tion that can be used for all modes of transport. 

Features of CIP incoterms

Deliv­ery
The sell­er must deliv­er the goods to the con­tract­ed carrier.

Trans­port risk
The risk of dam­age dur­ing trans­port is borne by the buy­er from the trans­fer of the goods to the car­ri­er. Before deliv­ery, the sell­er bears the risk.

Trans­porta­tion costs
The costs of trans­port to the agreed place of des­ti­na­tion are for the account of the sell­er. Fur­ther trans­port is at the buy­er’s expense. Please note, the trans­fer of costs does not take place at the same time as the trans­fer of risk for trans­port damage.

Cus­toms for­mal­i­ties
The sell­er must take care of the cus­toms for­mal­i­ties aris­ing from the export. He is also respon­si­ble for the asso­ci­at­ed costs, duties and levies. Cus­toms for­mal­i­ties and costs relat­ed to tran­sit are usu­al­ly borne by the sell­er. All cus­toms for­mal­i­ties and the asso­ci­at­ed costs, duties and levies aris­ing from impor­ta­tion into the coun­try of des­ti­na­tion are for the account and risk of the buyer.

Trans­port insur­ance
The sell­er con­cludes an insur­ance con­tract on behalf of the buy­er from the point of deliv­ery to at least the point of des­ti­na­tion. This insur­ance must com­ply with the exten­sive cov­er­age Insti­tute Car­go Claus­es (A).

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. With CIP this is indi­cat­ed with: «named place of destination».

5. DPU – Delivered At Place Unloaded (named place of destination)

The incoterms DPU mean that the goods are deliv­ered to the des­ti­na­tion and unloaded. The sell­er bears all risks with regard to bring­ing the goods to and unload­ing the goods at the agreed destination.

Features of DPU incoterms 

Deliv­ery
The sell­er must unload the goods from the arriv­ing means of trans­port and then make them avail­able to the buy­er at an agreed place of des­ti­na­tion or agreed point in that place.

Trans­port risk
The risk of dam­age is borne by the buy­er after deliv­ery to the agreed ter­mi­nal. The sell­er runs this risk before deliv­ery.

Trans­porta­tion costs
The costs of trans­port to the agreed place of des­ti­na­tion, includ­ing unload­ing costs, are for the account of the sell­er. Tran­sit is at the expense of the buyer.

Cus­toms for­mal­i­ties
The sell­er must take care of all cus­toms for­mal­i­ties aris­ing from the export. The asso­ci­at­ed costs, duties and levies are also for his account. All cus­toms for­mal­i­ties and the asso­ci­at­ed costs, duties and levies aris­ing from impor­ta­tion into the coun­try of des­ti­na­tion are for the account and risk of the buyer.

Trans­port insur­ance
Nei­ther par­ty is oblig­ed to take out insur­ance for the goods.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. With DPU this is indi­cat­ed with: «named place of destination».

6. DAP – Delivered At Place (named place of destination)

Under DAP incoterms, the sell­er pays for trans­porta­tion (car­riage) to the named place, except for the costs asso­ci­at­ed with import cus­toms clear­ance. In addi­tion, the sell­er assumes all risks pri­or to the goods being ready for unload­ing by the buyer.

Features of DAP incoterms

Deliv­ery
The sell­er must make the goods, unloaded, avail­able to the buy­er on the arriv­ing means of trans­port at the agreed point or place of des­ti­na­tion.

Trans­port risk
The risk of dam­age dur­ing trans­port after reach­ing the place of deliv­ery shall be borne by the buy­er. Before deliv­ery, the sell­er bears the risk.

Trans­porta­tion costs
The costs of trans­port to the agreed point at the place of deliv­ery shall be borne by the sell­er. Fur­ther trans­port is at the expense of the buy­er.

Cus­toms for­mal­i­ties
The sell­er must take care of all cus­toms for­mal­i­ties aris­ing from the export. The asso­ci­at­ed costs, duties and levies are also for his account. All cus­toms for­mal­i­ties and the asso­ci­at­ed costs, duties and levies aris­ing from impor­ta­tion into the coun­try of des­ti­na­tion are for the account and risk of the buy­er.

Trans­port insur­ance
Nei­ther par­ty is oblig­ed to take out insur­ance for the goods.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. At DAP this is indi­cat­ed by: «named place of destination».

7. DDP – Delivered Duty Paid (named place of destination)

Under DDP incoterms, the sell­er has the max­i­mum oblig­a­tions and the buy­er has the min­i­mum oblig­a­tions. The sell­er is respon­si­ble for deliv­er­ing the goods to the named place in the buy­er’s coun­try and pays all costs to bring the goods to the des­ti­na­tion, includ­ing import duties and taxes.

Features of DDP incoterms

Deliv­ery
The sell­er must make the goods, not unloaded, avail­able to the buy­er or anoth­er per­son des­ig­nat­ed by the buy­er on the arriv­ing means of trans­port at the agreed place of des­ti­na­tion.

Trans­port risk
The risk of dam­age dur­ing trans­port is for the account of the sell­er until deliv­ery on the means of trans­port at the agreed place of des­ti­na­tion.

Trans­porta­tion costs
The costs of trans­port to the agreed des­ti­na­tion are for the account of the sell­er.

Cus­toms for­mal­i­ties
The sell­er must take care of all cus­toms for­mal­i­ties asso­ci­at­ed with the export, tran­sit and import to the agreed place of des­ti­na­tion. He shall also bear the costs there­of as well as duties, tax­es and levies asso­ci­at­ed there­with.

Trans­port insur­ance
The sell­er is not oblig­ed to take out insur­ance for the goods.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. With DDP this is indi­cat­ed with: «named place of destination».

8. FAS – Free Alongside Ship (named port of shipment)

Under the incoterms FAS, the sell­er must place the goods along­side the ship in the named port. If the goods are in a con­tain­er, the sell­er usu­al­ly trans­fers the goods at a ter­mi­nal and not along­side a ship. In such sit­u­a­tions, the FAS rule may not be appro­pri­ate and the FCA rule is bet­ter used. This term is usu­al­ly used for gen­er­al car­go or bulk car­go. FAS incoterms are only used with mar­itime transport.

Features of FAS incoterms

Deliv­ery
The sell­er must deliv­er the goods along­side the ship specif­i­cal­ly named by the buy­er, at the load­ing loca­tion in the agreed port of ship­ment and in a man­ner that is cus­tom­ary for this port.

Trans­port risk
The risk of dam­age dur­ing trans­port is borne by the buy­er from deliv­ery. The sell­er runs this risk before deliv­ery.

Trans­porta­tion costs
The costs of trans­port are for the account of the buy­er from deliv­ery. Par­ties are strong­ly advised to indi­cate the point of load­ing at the agreed port of ship­ment as clear­ly as pos­si­ble, because the THC (Ter­mi­nal Han­dling Charges) for this point are for the account of the sell­er.

Cus­toms for­mal­i­ties
The sell­er takes care of all cus­toms for­mal­i­ties aris­ing from the export. He is also respon­si­ble for the result­ing costs, duties and levies. Cus­toms for­mal­i­ties, costs, duties and levies are borne by the buy­er upon impor­ta­tion into the coun­try of des­ti­na­tion.

Trans­port insur­ance
Nei­ther par­ty is oblig­ed to take out insur­ance for the goods.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. At FAS this is indi­cat­ed with: «named place of destination».

9. FOB – Free on Board (named port of shipment)

Under FOB incoterms, the sell­er must load the goods on board the ves­sel des­ig­nat­ed by the buy­er. The costs and the risks are shared when the goods are actu­al­ly on board the ship (tech­ni­cal­ly, when the spe­cif­ic ICC Incoterms® 2020 are applied, this is when the goods pass the ship’s railing).

The FOB incoterms is only used for marine trans­port. FOB may be less appro­pri­ate if the goods are hand­ed over to the car­ri­er before they are on board the ves­sel, such as con­tainer­ized goods already deliv­ered to the ter­mi­nal. In such cas­es, it may be advis­able to use FCA.

Features of FOB incoterms

Deliv­ery
The sell­er must deliv­er the goods placed on board the ship spec­i­fied by the buy­er at the agreed port of ship­ment.

Trans­port risk
The risk of dam­age dur­ing trans­port is borne by the buy­er from deliv­ery. The sell­er bears this risk before deliv­ery.

Trans­porta­tion costs
The costs of trans­port are for the account of the buy­er from deliv­ery.

Cus­toms for­mal­i­ties
The sell­er must take care of all cus­toms for­mal­i­ties aris­ing from the export. The costs, duties and levies aris­ing from this are also at his expense. Cus­toms for­mal­i­ties, costs, duties and levies are borne by the buy­er upon impor­ta­tion into the coun­try of des­ti­na­tion.

Trans­port insur­ance
Nei­ther par­ty is oblig­ed to take out insur­ance for the goods.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. At FOB this is indi­cat­ed with: «named place of destination». 

10. CFR – Cost and Freight (named port of destination)

Under CFR incoterms, the sell­er must pay the costs and freight to take the goods to the port of des­ti­na­tion. How­ev­er, the risk is trans­ferred to the buy­er once the goods are loaded onto the ship (tech­ni­cal­ly, when the spe­cif­ic ICC Incoterms® 2020 are applied, this is when the goods pass the ship’s railing). 

Insur­ance for the goods is NOT includ­ed. The dis­tinc­tion between the port of des­ti­na­tion and the port of ship­ment is also impor­tant under the CFR incoterms. Ter­mi­nal Han­dling Charges (THC) are charges charged by the ter­mi­nal oper­a­tor. These charges may or may not be includ­ed by the car­ri­er in their freight rates — and it is the buy­er’s respon­si­bil­i­ty to inquire whether the CFR price includes THC, to avoid surprises.

This incoterm used to be called CNF (C&F) but has been changed in the Incoterms 2020 edi­tion. The CFR incoterms are strict­ly used with marine trans­port and may be less suit­able for con­tain­er shipping.

Features of CFR incoterms

Deliv­ery
The sell­er must deliv­er the goods on board the ship spec­i­fied by the buy­er at the agreed port of ship­ment.

Trans­port risk
The risk of dam­age dur­ing trans­port is borne by the buy­er from the time of pass­ing the ship’s rail at the port of ship­ment.

Trans­porta­tion costs
The costs of trans­port to the agreed des­ti­na­tion port are for the account of the sell­er. The sell­er there­fore con­cludes a con­tract of car­riage for trans­port to the port of des­ti­na­tion. When the goods are on the quay of the port of des­ti­na­tion, fur­ther trans­port is at the expense of the buy­er. Please note, the trans­fer of costs does not take place at the same time as the trans­fer of risk for trans­port dam­age.

Cus­toms for­mal­i­ties
The sell­er must take care of all cus­toms for­mal­i­ties aris­ing from the export. The asso­ci­at­ed costs, duties and levies are also for his account. All cus­toms for­mal­i­ties and the asso­ci­at­ed costs, duties and levies aris­ing from impor­ta­tion into the coun­try of des­ti­na­tion are for the account and risk of the buy­er.

Trans­port insur­ance
Nei­ther par­ty is oblig­ed to take out insur­ance for the goods.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. At CFR this is indi­cat­ed with: «named place of destination». 

11. CIF – Cost, Insurance & Freight (named port of destination) 

The CIF incoterms are exact­ly the same as CFR incoterms, except that the sell­er is required to take out and pay for the insur­ance. Ter­mi­nal Han­dling Charges (THC) are charges charged by the ter­mi­nal oper­a­tor. These charges may or may not be includ­ed by the car­ri­er in their freight rates — and it is the buy­er’s respon­si­bil­i­ty to inquire whether the CIF price includes THC, to avoid surprises.

The CIF incoterm is used only with mar­itime trans­port and may be less suit­able for con­tain­er transport.

Features of CIF incoterms

Deliv­ery
The sell­er must deliv­er the goods on board the ship spec­i­fied by the buy­er at the agreed port of shipment.

Trans­port risk
The risk of dam­age dur­ing trans­port is in prin­ci­ple borne by the buy­er from the moment the goods are placed on board at the port of ship­ment. Before deliv­ery, the sell­er bears the risk.

Trans­porta­tion costs
The costs of trans­port to the agreed des­ti­na­tion port are for the account of the sell­er. Fur­ther trans­port is at the expense of the buyer.

Cus­toms for­mal­i­ties
The sell­er must take care of the cus­toms for­mal­i­ties aris­ing from the export. The asso­ci­at­ed costs, duties and levies are also for his account. All cus­toms for­mal­i­ties and the asso­ci­at­ed costs, duties and levies aris­ing from impor­ta­tion into the coun­try of des­ti­na­tion are for the account and risk of the buyer.

Trans­port insur­ance
The sell­er con­cludes an insur­ance con­tract on behalf of the buy­er from the port of ship­ment to at least the port of des­ti­na­tion. The insur­ance must meet the require­ments of the Insti­tute Car­go Clauses ©.

Addi­tion of place of deliv­ery
Where the trans­fer of the goods takes place must always be added to the deliv­ery con­di­tion. With CIF this is indi­cat­ed by: «named place of destination».