Incoterms® 2020 Interactive Guide

Choose an Incoterms rule to see, step by step, whether the seller or the buyer pays for each part of the journey, and exactly where the risk of loss or damage passes from one to the other.

 

Seller paysBuyer pays
    Risk passes to the buyer:

    All 11 rules at a glance

    Simplified summary for orientation. Incoterms is a trademark of the International Chamber of Commerce (ICC); the full rules and their exact allocation of costs are in the ICC’s Incoterms® 2020 publication. Terminal handling and other charges can be reallocated by contract, so state your choice precisely, e.g. “FCA Shanghai CY, Incoterms® 2020”.

    What are Incoterms?

    Incoterms® are standard three-letter trade terms published by the International Chamber of Commerce (ICC). Written into a sales contract with a named place — for example “FOB Rotterdam Incoterms® 2020” — they define who arranges and pays for transport, insurance and customs clearance, and the point at which risk transfers from seller to buyer. They do not decide when ownership of the goods passes, or the price and payment terms.

    The 11 rules in two groups

    Any mode of transport

    • EXW Ex Works · FCA Free Carrier · CPT Carriage Paid To · CIP Carriage and Insurance Paid To · DAP Delivered at Place · DPU Delivered at Place Unloaded · DDP Delivered Duty Paid

    Sea and inland waterway only

    • FAS Free Alongside Ship · FOB Free On Board · CFR Cost and Freight · CIF Cost, Insurance and Freight

    How to read the chart

    The interactive guide walks through twelve typical steps from the seller’s warehouse to the buyer’s door. Blue steps are the seller’s cost and orange steps the buyer’s. The dark box shows where risk passes. Notice that in the “C” rules (CFR, CIF, CPT, CIP) cost and risk split at different places: the seller pays freight to the destination, but the buyer carries the risk from the moment the goods are loaded at origin or handed to the first carrier.

    Worked example

    A frozen-food exporter sells a reefer container “CIF Ho Chi Minh City”. The seller packs and loads the goods, clears export customs, pays ocean freight and buys minimum insurance cover to the destination port. Once the container is on board the vessel at the origin port, risk is the buyer’s: if the reefer fails at sea, the buyer claims on the insurance the seller arranged. The buyer pays destination terminal charges, import clearance, duties and VAT, and delivery to its cold store. Had they agreed “CIP” instead, the seller would have had to buy all-risks (ICC A) cover.

    What changed in Incoterms 2020

    • DAT (Delivered at Terminal) was renamed DPU, and the place of delivery can be anywhere, not just a terminal.
    • CIP now requires all-risks (ICC A) insurance, while CIF still requires only minimum (ICC C) cover.
    • FCA allows the parties to agree that the buyer’s carrier issues an on-board bill of lading to the seller, which helps with letters of credit.
    • Sellers and buyers may use their own transport for FCA, DAP, DPU and DDP rather than a third-party carrier.

    Frequently asked questions

    What is the difference between FOB and FCA?

    Under FOB, risk passes when the goods are on board the vessel and the rule is for sea freight only. Under FCA, risk passes when the goods are handed to the buyer’s carrier at a named place, such as a container terminal, and it works for any mode. The ICC recommends FCA for containerised cargo.

    Who pays for insurance under CIF and CIP?

    The seller. Under CIF the seller must buy at least minimum cover (Institute Cargo Clauses C); under CIP the seller must buy all-risks cover (Institute Cargo Clauses A). In both cases cover should be 110% of the contract value.

    Which Incoterm is best for a first-time importer?

    Many new importers prefer DAP or CIP/CPT so the seller handles most of the transport, but this gives up control over freight cost and transit. Experienced importers often buy FCA or FOB and use their own forwarder for better rates and visibility.

    Do Incoterms say when ownership transfers?

    No. Incoterms cover delivery, risk and costs. Transfer of title, payment terms and remedies for breach must be set out elsewhere in the sales contract.

    Is DDP risky for the seller?

    It can be. The seller must clear the goods into the buyer’s country and pay import duties and VAT, which may require a local tax registration and may not be recoverable by a foreign seller. Check the import rules before quoting DDP.