An Interactive Guide to Incoterms® 2020
Navigating the Rules of Global Trade
What are Incoterms®?
Incoterms® are the world's essential terms for the sale of goods. They are a set of internationally recognized rules that define the responsibilities of sellers and buyers, clarifying who manages and pays for shipment, insurance, documentation, and customs clearance.
to define global transactions.
The 11 rules are divided into two distinct categories based on the method of delivery, providing clarity for any shipping scenario.
The Spectrum of Responsibility
Incoterms® arrange the transfer of cost and risk on a spectrum, from the buyer taking almost all responsibility (EXW) to the seller taking almost all (DDP). This chart visualizes how the seller's obligation increases across key terms.
Rules for Any Mode of Transport (7 Rules)
🏢EXW – Ex Works
Seller's Role: Makes goods available at their premises. This is the minimum obligation.
Buyer's Role: Bears all costs and risks from the seller's door to the destination, including loading.
🚚FCA – Free Carrier
Seller's Role: Delivers goods to the buyer's nominated carrier at a named place.
Buyer's Role: Contracts for main carriage and assumes risk once goods are with the carrier.
📦CPT – Carriage Paid To
Seller's Role: Pays for carriage to the destination. Risk transfers to buyer when goods are handed to the first carrier.
Buyer's Role: Assumes risk during main transit.
🛡️CIP – Carriage & Insurance Paid To
Seller's Role: Same as CPT, but must also purchase 'All Risks' insurance cover for the buyer.
Buyer's Role: Assumes risk during transit, but is the beneficiary of the seller-paid insurance.
📍DAP – Delivered at Place
Seller's Role: Bears all costs and risks to bring goods to the destination, ready for unloading.
Buyer's Role: Responsible for unloading and import customs clearance.
📥DPU – Delivered at Place Unloaded
Seller's Role: Bears all costs and risks to bring goods to destination AND unload them.
Buyer's Role: Responsible for import customs clearance after unloading.
✅DDP – Delivered Duty Paid
Seller's Role: Maximum obligation. Bears all costs and risks, including import duties and taxes, to the final destination.
Buyer's Role: Minimal obligation, typically just unloading.
Rules for Sea and Inland Waterway Transport (4 Rules)
⚓FAS – Free Alongside Ship
Seller's Role: Delivers goods alongside the vessel at the named port of shipment.
Buyer's Role: Bears all costs and risks from the moment goods are alongside the ship.
🚢FOB – Free On Board
Seller's Role: Delivers goods on board the vessel. Risk transfers once goods are on board.
Buyer's Role: Bears all costs and risks once goods are on board the ship.
🌊CFR – Cost and Freight
Seller's Role: Delivers goods on board and pays costs and freight to the destination port.
Buyer's Role: Assumes risk once goods are on board at the port of origin.
📜CIF – Cost, Insurance & Freight
Seller's Role: Same as CFR, but must also procure minimum insurance cover against buyer's risk.
Buyer's Role: Assumes risk once goods are on board at origin, but is beneficiary of insurance.
Obligation at a Glance
This radar chart compares key Incoterms® across major responsibility points. A higher value means the seller has greater responsibility for that task. This reveals the distinct profiles of each term.
Clarity is Key
Choosing the right Incoterm® is crucial for smooth transactions. Always specify your chosen rule clearly in your sales contract, including the location and the version.
"CIF Port of Hamburg Incoterms® 2020"