What Are Incoterms?
Incoterms® (International Commercial Terms) are globally recognized trade rules published by the ICC that define:
- Who pays for freight transport, insurance, customs duties, and terminal charges
- Who is responsible for loading, unloading, and export/import formalities
- When risk transfers from seller to buyer during shipment
- Which documents the seller must provide (Bill of Lading, commercial invoice, etc.)
Current version: Incoterms® 2020 (effective January 1, 2020). Always specify the year when using Incoterms in contracts (e.g., "FOB Rotterdam Incoterms® 2020").
All 11 Incoterms® 2020 Explained
Ex Works (named place)
Any ModeSeller's responsibility: Make goods available at their premises (factory, warehouse). Goods are not loaded onto vehicle.
Buyer's responsibility: Everything — loading, export customs, main carriage, import customs, delivery to final destination.
Risk transfer: When goods are placed at buyer's disposal at seller's premises.
When to use: Seller wants minimal responsibility. Buyer has full logistics control. Common for local pickups but risky for international trade (buyer must handle export formalities in seller's country).
Free Carrier (named place)
Any ModeSeller's responsibility: Load goods onto buyer's carrier OR deliver to terminal (if named place is terminal). Export customs clearance.
Buyer's responsibility: Main carriage, insurance, import customs, delivery to final destination.
Risk transfer: When goods are handed over to the carrier nominated by buyer.
When to use: Balanced responsibility split. Seller handles export, buyer handles everything after pickup. Recommended for air freight and containerized ocean freight.
Carriage Paid To (named destination)
Any ModeSeller's responsibility: Export customs, freight to named destination, loading onto carrier.
Buyer's responsibility: Insurance (risk transfers earlier), unloading at destination, import customs.
Risk transfer: When goods are handed to first carrier (before main journey begins).
When to use: Seller arranges transport but buyer bears risk during transit. Buyer should arrange insurance. Common for air freight and multimodal shipments.
Carriage and Insurance Paid To (named destination)
Any ModeSeller's responsibility: Export customs, freight to named destination, insurance (minimum ICC(A) coverage).
Buyer's responsibility: Unloading at destination, import customs.
Risk transfer: When goods are handed to first carrier (but seller provides insurance).
When to use: Similar to CPT but seller provides insurance. Incoterms 2020 requires seller to provide Institute Cargo Clauses (A) "all risks" coverage — broader than CIF.
Delivered At Place (named destination)
Any ModeSeller's responsibility: Everything until goods arrive at named destination ready for unloading. Export customs, main carriage, insurance (optional but recommended).
Buyer's responsibility: Unloading, import customs, duties and taxes.
Risk transfer: When goods are placed at buyer's disposal (ready for unloading) at named destination.
When to use: Seller wants to control logistics until destination. Buyer handles import formalities. Very common for door-to-door quotes.
Delivered at Place Unloaded (named destination)
Any ModeSeller's responsibility: Everything including unloading at named destination. Export customs, main carriage, unloading.
Buyer's responsibility: Import customs, duties and taxes, onward delivery from unloading point.
Risk transfer: When goods are unloaded at named place of destination.
When to use: Only Incoterm where seller is responsible for unloading. Use when seller has equipment/capability to unload (e.g., container terminal, warehouse with forklift). Replaced DAT in Incoterms 2020.
Delivered Duty Paid (named destination)
Any ModeSeller's responsibility: Everything — export customs, main carriage, import customs, duties, taxes, delivery to final destination.
Buyer's responsibility: Only unloading (unless DPU used).
Risk transfer: When goods are placed at buyer's disposal at named destination (after import clearance).
When to use: Maximum seller responsibility. Seller handles all logistics and customs. Risky for seller (import duties can be unpredictable). Common in e-commerce and Amazon FBA shipments.
Free Alongside Ship (named port of loading)
Sea/Inland Waterway OnlySeller's responsibility: Deliver goods alongside vessel at named port. Export customs.
Buyer's responsibility: Loading onto ship, ocean freight, insurance, unloading, import customs.
Risk transfer: When goods are placed alongside the ship at port.
When to use: Rarely used. Mostly for bulk cargo (grain, coal) or break-bulk. Buyer arranges vessel and loading.
Free On Board (named port of loading)
Sea/Inland Waterway OnlySeller's responsibility: Load goods onto vessel at named port. Export customs, loading costs.
Buyer's responsibility: Ocean freight, insurance, unloading, import customs.
Risk transfer: When goods pass the ship's rail (loaded onto vessel).
When to use: Very common for ocean freight. Seller delivers to vessel, buyer arranges sea freight. ⚠️ Do NOT use FOB for air freight or containerized shipments (use FCA instead).
Cost and Freight (named port of destination)
Sea/Inland Waterway OnlySeller's responsibility: Export customs, loading, ocean freight to named port.
Buyer's responsibility: Insurance (risk transfers at loading port), unloading, import customs.
Risk transfer: When goods pass ship's rail at port of loading (but seller pays freight).
When to use: Seller arranges ocean freight but buyer bears risk during sea transit. Buyer should arrange marine insurance.
Cost, Insurance and Freight (named port of destination)
Sea/Inland Waterway OnlySeller's responsibility: Export customs, loading, ocean freight, marine insurance (minimum ICC(C) coverage).
Buyer's responsibility: Unloading at destination port, import customs.
Risk transfer: When goods pass ship's rail at port of loading (but seller provides insurance).
When to use: Most common ocean freight Incoterm. Seller arranges shipping and insurance, buyer handles import. ⚠️ Incoterms 2020: seller only required to provide Institute Cargo Clauses (C) minimum coverage — buyer may want additional insurance.
Quick Reference Table
| Incoterm | Export Customs | Loading | Main Carriage | Insurance | Unloading | Import Customs |
|---|---|---|---|---|---|---|
| EXW | Buyer | Buyer | Buyer | Buyer | Buyer | Buyer |
| FCA | Seller | Seller | Buyer | Buyer | Buyer | Buyer |
| CPT | Seller | Seller | Seller | Buyer | Buyer | Buyer |
| CIP | Seller | Seller | Seller | Seller (ICC A) | Buyer | Buyer |
| DAP | Seller | Seller | Seller | Optional | Buyer | Buyer |
| DPU | Seller | Seller | Seller | Optional | Seller | Buyer |
| DDP | Seller | Seller | Seller | Optional | Buyer | Seller |
| FAS | Seller | Buyer | Buyer | Buyer | Buyer | Buyer |
| FOB | Seller | Seller | Buyer | Buyer | Buyer | Buyer |
| CFR | Seller | Seller | Seller | Buyer | Buyer | Buyer |
| CIF | Seller | Seller | Seller | Seller (ICC C) | Buyer | Buyer |
Common Incoterms Mistakes to Avoid
FOB is for ocean freight only. Use FCA for air cargo shipments.
Always write "Incoterms® 2020" in contracts to avoid confusion with older versions.
"FOB China" is meaningless. Use "FOB Shanghai Port Incoterms® 2020" instead.
Only CIF and CIP require seller insurance. All other terms: buyer arranges insurance.
In CPT/CIP/CFR/CIF, risk transfers early (at loading) but seller pays transport costs.
Seller responsible for ALL import duties/taxes. Can be expensive surprise if not calculated properly.
Need Help with Incoterms for Your Shipment?
Choosing the right Incoterm affects your costs, liability, and logistics complexity. Venix Logix advises clients on optimal Incoterms based on commodity, mode of transport, and commercial relationship.
We handle all Incoterms: From EXW factory pickups to DDP door delivery. Air freight via Amsterdam Schiphol, ocean freight via Rotterdam Port, multimodal across Europe.