Incoterms® 2020: what they are and how to choose the right one
The 11 rules explained leg by leg: who pays, who carries the risk, and what fits your shipment.
Reviewed November 2026 · Current edition: Incoterms® 2020
What is an Incoterm?
The Incoterms® rules are published by the International Chamber of Commerce (ICC) and are incorporated into a sales contract to define which delivery obligations, costs and risks fall on the seller and which on the buyer. Each rule is identified by three letters, such as FCA, FOB or DAP.
They were first published in 1936, and the current edition, Incoterms® 2020, entered into force on 1 January 2020. It has 11 rules: seven for any mode of transport and four for sea and inland waterway transport only. They are used in international and domestic contracts alike.
What an Incoterm does not define
- When ownership of the goods transfers
- The price, or the method and timing of payment
- The description or specifications of the goods
- What happens if goods arrive late or do not conform
- The governing law or how disputes are resolved
Compare the 11 rules
Pick a rule to see who pays for each leg of the journey and where the risk of loss or damage passes from seller to buyer.
FCA
Free CarrierAny mode of transport- Export packagingSeller
- Loading at the seller's premisesSeller
- Export clearanceSeller
- Transport to the port, airport or terminal of departureDependsRisk passes to the buyer here
- Origin handling and loading onto the main transportBuyer
- Main carriage (sea, air or land)Buyer
- Unloading and handling at the destination port or terminalBuyer
- Import clearance, duties and taxesBuyer
- Inland transport to the final destinationBuyer
- Unloading at the final destinationBuyer
"Depends" means it varies with the named place or with what the contract of carriage includes. The column shows who pays; the red line shows where risk passes. They do not always coincide.
- Delivery and risk
- The seller delivers the goods, cleared for export, to the carrier nominated by the buyer. If the named place is the seller's premises, delivery happens when the goods are loaded onto the buyer's transport; if it is elsewhere, when they arrive on the seller's transport ready for unloading.
- Insurance
- Neither party is obliged to the other to take out insurance. Whoever carries the risk on each leg decides whether to insure it.
- When it fits
- Works for any transport and is the appropriate rule for containerised cargo. Since 2020 the parties can agree that the buyer instructs its carrier to issue the seller a bill of lading with an on-board notation.
The 11 rules at a glance
| Rule | Transport | Where the seller delivers and risk passes |
|---|---|---|
| EXWEx Works | Any mode of transport | The seller places the goods at the buyer's disposal at its premises or another named place, not loaded and not cleared for export. From that moment, costs and risk are the buyer's. |
| FCAFree Carrier | Any mode of transport | The seller delivers the goods, cleared for export, to the carrier nominated by the buyer. If the named place is the seller's premises, delivery happens when the goods are loaded onto the buyer's transport; if it is elsewhere, when they arrive on the seller's transport ready for unloading. |
| CPTCarriage Paid To | Any mode of transport | The seller contracts and pays for carriage to the named destination, but risk passes to the buyer once the goods are handed to the first carrier at origin. |
| CIPCarriage and Insurance Paid To | Any mode of transport | Same as CPT: the seller pays carriage to the named destination and risk passes on handover to the first carrier. In addition, the seller takes out cargo insurance for the buyer's benefit. |
| DAPDelivered at Place | Any mode of transport | The seller delivers when the goods arrive at the named place of destination, ready for unloading. The seller carries the risk for the whole journey; the buyer unloads and clears import. |
| DPUDelivered at Place Unloaded | Any mode of transport | The seller delivers once the goods have been unloaded at the named place of destination. It is the only rule that requires the seller to unload at destination. |
| DDPDelivered Duty Paid | Any mode of transport | The seller delivers at the named place of destination, with the goods ready for unloading, cleared for import, and duties and taxes paid. |
| FASFree Alongside Ship | Sea and inland waterway only | The seller delivers when the goods are placed alongside the vessel (on the quay or a barge) at the named port of shipment, cleared for export. |
| FOBFree On Board | Sea and inland waterway only | The seller delivers when the goods are on board the vessel nominated by the buyer at the named port of shipment. From there, risk and freight are the buyer's. |
| CFRCost and Freight | Sea and inland waterway only | The seller pays freight to the named port of destination, but risk passes to the buyer once the goods are on board the vessel at the port of shipment. |
| CIFCost, Insurance and Freight | Sea and inland waterway only | Same as CFR: the seller pays freight to the port of destination and risk passes on board at the port of shipment. In addition, the seller takes out cargo insurance for the buyer's benefit. |
How to write it in the contract
State the rule, the exact place (port, terminal or address) and the edition. Without a precise place or an edition, the rule is open to interpretation.
FCA Container Terminal, Manzanillo, Mexico, Incoterms® 2020
Common mistakes when choosing an Incoterm
Using FOB or CIF for containers
FOB, CFR and CIF assume the goods are delivered on board the vessel. A container is handed over earlier, at the terminal, so the seller keeps carrying the risk on a leg it no longer controls. For containers the appropriate rules are FCA, CPT or CIP.
Thinking the seller is responsible to destination under the C rules
Under CPT, CIP, CFR and CIF the seller pays carriage to destination, but risk passes to the buyer at origin. If the goods are damaged in transit, the risk is the buyer's.
Agreeing EXW without being able to export
Under EXW the buyer must load the goods and handle export clearance in the seller's country. If it has no way to do that, the shipment stops at the factory door.
Agreeing DDP without being able to import
Under DDP the seller pays duties and taxes and handles import clearance in the destination country. Before accepting it, confirm the seller can act as importer there.
Leaving out the exact place or the edition
"FOB" or "DAP 2020" is not enough. The named place defines where delivery happens and how far costs are paid, and the edition defines which text of the rules applies.
Assuming insurance is included
Only CIF and CIP oblige the seller to insure the goods, and under CIF the minimum cover is limited. Under the other rules, whoever carries the risk decides whether to insure.
What changed in Incoterms® 2020
- DAT was renamed DPU (Delivered at Place Unloaded): the destination can be any place, not only a terminal.
- CIP now requires insurance cover under Clauses (A); CIF keeps Clauses (C) as the minimum.
- FCA lets the parties agree that the seller receives a bill of lading with an on-board notation, useful in letter-of-credit transactions.
- FCA, DAP, DPU and DDP allow for the seller or buyer using their own means of transport instead of hiring a third party.
- Security obligations in carriage and clearance are spelled out in more detail, and the costs under each rule are listed in a single article.
Incoterms® 2020 remains the most recent edition. The ICC included the start of the revision, aimed at Incoterms® 2030, in its 2026 workplan; there is no new text or publication date yet. Parties may agree to use an earlier edition if they state it expressly.
Incoterms FAQ
What is an Incoterm?
It is a rule published by the International Chamber of Commerce (ICC) that is incorporated into a sales contract to define which delivery obligations, costs and risks fall on the seller and which on the buyer. It is identified by three letters, such as FCA, FOB or DAP.
How many Incoterms are there and which edition is current?
Incoterms® 2020 has 11 rules: seven for any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU and DDP) and four for sea and inland waterway transport only (FAS, FOB, CFR and CIF). It entered into force on 1 January 2020 and is the most recent edition.
What is the difference between FOB and FCA?
Under FOB the seller delivers when the goods are on board the vessel, and it is only for sea or inland waterway transport. Under FCA the seller delivers to the carrier nominated by the buyer at the named place, and it works for any transport. For containerised cargo the appropriate rule is FCA.
What is the difference between DAP and DDP?
Under both, the seller brings the goods to the named destination and carries the risk of the journey. Under DAP the buyer handles import clearance and pays duties and taxes; under DDP that falls on the seller.
Do Incoterms include cargo insurance?
Only CIF and CIP oblige the seller to insure the goods for the buyer's benefit: at least Clauses (C) under CIF and Clauses (A) under CIP. Under the other nine rules neither party is obliged to the other to insure.
Does the Incoterm define when ownership transfers?
No. Incoterms deal with delivery, costs and risk. Transfer of ownership, price and payment terms are agreed in other clauses of the contract.
This guide is an informational summary prepared by Flux Forwarders. It does not replace the official text of the rules and is not legal advice; for a contract, consult the official ICC publication.
The Incoterms® Rules are protected by copyright owned by ICC. Incoterms® is a trademark of ICC; its use here does not imply association with, approval of or sponsorship by ICC. Official source: ICC, Incoterms® 2020