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      Incoterms 2020 - Complete Guide

      Find out which Incoterms you should use for your shipment

      A short introduction to Incoterms

      Incoterms (International Commercial Terms), are a set of 11 internationally recognised pre-defined commercial terms, published by the International Chamber of Commerce (ICC) and widely used in international and domestic trade contracts. Incoterms are used to clearly define the responsibilities of the buyer and seller in an international sales contract.

      The most commonly used Incoterms in 2020 for ocean freight transportation are: Free on Board (FOB), Ex-Works (EXW), Free Carrier (FCA), Cost & Freight (CFR), and Cost Insurance & Freight (CIF).

      Once you figured out which Incoterms you want to apply, our network of freight forwarders and carriers can help you and your business to ship your goods.

      What do the Incoterms determine for buyer and seller?

      Most importantly, the Incoterms determine 3 things:

      • Obligations: Outlining the tasks, such as organising carriage or insurance for the goods, or obtaining shipping documents and export or import licences, to be completed by the buyer and the seller.
      • Risk: Defining where and when the seller "delivers" the goods, which determines where the risk transfers from seller to buyer.
      • Costs: Identifying which party is responsible for the various costs, such as transport, packaging, loading or unloading costs, and checking or security-related costs.

      Incoterms are not a substitute for a sales contract, but become part of the contract when incorporated by the buyer and seller. You can think of them as the terms and conditions that businesses apply.

      The use of Incoterms facilitates global trade by reducing the potential for misunderstandings and costly disputes that may occur when contracts are not adequately drafted. Incoterms are updated periodically to reflect the evolution of international trade. The current version, Incoterms® 2020, came into effect on January 1, 2020, replacing the 2010 Incoterms. However, it is not prohibited to use a prior version, for example Incoterms® 2010, if both the buyer and seller agree.

      List of Incoterms

      Below is an overview and short explanation of the various incoterms:

      • EXW (Ex Works): The seller's only responsibility is to make the goods available at their premises (factory or warehouse) for the buyer to collect.
      • FCA (Free Carrier): The seller delivers the goods, cleared for export, to the carrier specified by the buyer at a named place.
      • CPT (Carriage Paid To): The seller is responsible for the costs of carriage to the named place of destination, but risk passes to the buyer when the goods are handed over to the first carrier.
      • CIP (Carriage and Insurance Paid To): The same as CPT, but the seller is also responsible for arranging and paying for insurance for the carriage to the named place of destination.
      • DAP (Delivered at Place): The seller delivers when the goods are placed at the disposal of the buyer, ready for unloading at the named place of destination.
      • DPU (Delivered at Place Unloaded): The seller delivers the goods, unloaded, at the disposal of the buyer, at the named place or point of destination.
      • DDP (Delivered Duty Paid): The seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import, on the arriving means of transport, ready for unloading at the named place of destination.
      • FAS (Free Alongside Ship): The seller delivers when the goods are placed alongside the buyer's vessel at the named port of shipment.
      • FOB (Free On Board): The seller delivers when the goods are on board the buyer's vessel at the named port of shipment.
      • CFR (Cost and Freight): The seller delivers when the goods are on board the vessel at the port of shipment and pays the cost of carriage to the named port of destination.
      • CIF (Cost, Insurance and Freight): The same as CFR, but the seller also arranges and pays for insurance for the carriage to the named port of destination.
      Interactive Incoterms Guide

      Interactive Incoterms Guide: Find the Right Trade Term

      Answer a few questions to determine the appropriate Incoterm for your shipment:

      1. Which Mode of Transport?

      Step-by-step Guide for Choosing the Right Incoterms

       

      Incoterms are a set of rules that define the responsibilities of buyers and sellers in international trade. Choosing the right Incoterm is crucial for avoiding misunderstandings and unexpected costs. Follow the below steps to figure out which Incoterms you should use.

      Question: 1. Which Mode of Transport?

      • If your goods can be shipped using any mode of transportation** (truck, air, rail, or sea), proceed to question 2.
      • If your goods will be shipped exclusively by ocean or inland waterway, skip to question 5.

      Question 2: Responsibility for Cost & Risk:

      • If the buyer will be responsible for the cost and risk of international shipping, the relevant Incoterms are DAP (Delivered at Place), DDP (Delivered Duty Paid), or DPU (Delivered at Place Unloaded). You can stop here.
      • If the seller will be responsible for the cost and risk, proceed to question 3.

      Question 3. Transfer Point of Cost & Risk:

      • If the cost and risk transfer at the seller's premises, the Incoterm is EXW (Ex Works).
      • If the cost and risk transfer at a named place of export, the Incoterms to consider are FCA (Free Carrier) or FAS (Free Alongside Ship). Proceed to question 5.
      • If the cost and risk transfer at a named place of import, the Incoterms to consider are CIP (Carriage and Insurance Paid To), CPT (Carriage Paid To), or CFR (Cost and Freight). Proceed to question 4.
      • If the cost and risk transfer at the buyer's premises, the Incoterms to consider are DAP (Delivered at Place), DDP (Delivered Duty Paid), or DPU (Delivered at Place Unloaded).

      Question 4. Transport Insurance (If Seller Responsible):

      • If the seller will arrange and pay for transport insurance, the Incoterms to consider are CIF (Cost, Insurance, and Freight) or CIP (Carriage and Insurance Paid To).
      • If the seller will not arrange transport insurance, the Incoterms to consider are FOB (Free on Board), CFR (Cost and Freight), or CPT (Carriage Paid To).

      Question 5. Responsibility for Loading (Ocean/Water Transport):

      • If the buyer is responsible for loading the goods onto the ship, the Incoterm is FOB (Free on Board).
      • If the seller is responsible for loading the goods onto the ship, the Incoterm is FAS (Free Alongside Ship).

      Question 6. Responsibility for Unloading (Ocean/Water Transport):

      • If the seller is responsible for unloading the goods at the named terminal, the Incoterm is DPU (Delivered at Place Unloaded).
      • If the buyer is responsible for unloading the goods, the Incoterm is DAP (Delivered at Place).

      Question 7. Responsibility for Import Customs Clearance:

      • If the buyer is responsible for import customs clearance, the Incoterms to consider are EXW, FCA, FAS, FOB, CFR, CIF, CPT, or CIP.
      • If the seller is responsible for import customs clearance, the Incoterms to consider are DAP, DPU, or DDP.

      By answering these questions, you can determine the most appropriate Incoterm for your shipment.

      Incoterms are a complex set of rules, so we always recommend you to request information and quotes at several freight forwarders to understand the full picture and consequences.

      Who pays for what in the different Incoterms?

      The table below shows which party (buyer, seller or both) bears the costs of which part of the transaction.

      Incoterm 2020 Loading at origin Export customs declaration Carriage to port of export Unloading of truck in port of export Loading on vessel/airplane in port of export Carriage (sea/air) to port of import Insurance Unloading in port of import Loading on truck in port of import Carriage to place of destination Import customs clearance Import duties and taxes Unloading at destination
      EXWBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyer
      FCASellerSellerBuyer/SellerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyer
      FASSellerSellerSellerSellerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyer
      FOBSellerSellerSellerSellerSellerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyer
      CPTSellerSellerSellerSellerSellerSellerBuyerBuyer/SellerBuyer/SellerSellerBuyerBuyerBuyer
      CIPSellerSellerSellerSellerSellerSellerSellerBuyer/SellerBuyer/SellerSellerBuyerBuyerBuyer
      CFRSellerSellerSellerSellerSellerSellerBuyerBuyerBuyerBuyerBuyerBuyerBuyer
      CIFSellerSellerSellerSellerSellerSellerSellerBuyerBuyerBuyerBuyerBuyerBuyer
      DAPSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerBuyerBuyerBuyer
      DPUSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerBuyerBuyerSeller
      DDPSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerBuyer

      Receive mutiple quotes from freight forwarders

      Incoterms app

      If you are using Incoterms on a regular basis, it can be wise to install the Incoterms app for Android of iOS.

      With this app you unlock the power of Incoterms 2020.

      The app offers:

      • Comprehensive Incoterms® Rule Descriptions: Delve into detailed explanations of all 11 Incoterms® rules, gaining a clear understanding of the responsibilities and costs allocated to buyers and sellers in each scenario. Make informed decisions that align with your business goals and risk tolerance.
      • Tailored Guidance for Your Mode of Transport: Whether you're shipping by air, rail, road, sea, or a combination, we'll help you determine the most suitable Incoterms rule for your specific transportation needs. Navigate the complexities of international trade with confidence and ease.
      • Expert Advice from ICC's Global Network: Connect with a worldwide network of seasoned Incoterms professionals who can address your most pressing questions and provide invaluable insights tailored to your unique business challenges.
      • Engaging Podcasts with Real-World Perspectives: Gain a deeper understanding of how Incoterms® rules are applied in various industries and regions through captivating podcasts featuring experts and practitioners from around the globe.
      • Free Resources to Fuel Your Global Expansion: Access a wealth of complimentary resources, including guides, tools, and templates, designed to empower your business to navigate international trade successfully and accelerate growth.

      Don't let uncertainty hold you back. Unlock the full potential of your international trade ventures with Incoterms 2020. Your journey to global success starts here.

      Download for Android and iOS.

      screenshots of the incoterms app for android and iphone

      Incoterms for any transport mode

      Incoterms for sea and inland waterway transport

      What is the price difference between the Incoterms?

      The choice of Incoterms have a major impact on what seller and buyer need to pay in a transaction.

      For instance, under EXW (Ex Works), the buyer bears all costs, including loading at origin, export customs declaration, carriage, insurance, import customs clearance, import duties and taxes, and unloading at the destination. In contrast, under DDP (Delivered Duty Paid), the seller is responsible for all costs, except for unloading at the destination. The other Incoterms fall between these two extremes, with varying degrees of cost allocation between buyer and seller.

      To figure out the exact price difference, we recommend you to request quotes at multiple freight forwarders.

      Further reading on Incoterms

      Incoterms 2020 - Download full text PDF

      FOB, Ex Works, CFR or something else?

      Our freight forwarder network will help you make the right decision. Compare Quote today.

      Knowledge base

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