Incoterms 2020: which rule to choose
Incoterms are international trade terms that define who pays for what between seller and buyer and when risk passes. Writing the right Incoterm in a freight price request is the first condition for comparing offers correctly.
The 11 rules in one table
| Term | Transport | In short |
|---|---|---|
| EXW Ex Works | Any | The seller makes the goods available at their own premises. Loading, export clearance and all carriage are on the buyer. |
| FCA Free Carrier | Any | The seller clears the goods for export and hands them to the carrier named by the buyer at the agreed place. |
| CPT Carriage Paid To | Any | The seller pays carriage to the destination. Risk passes to the buyer when the goods are handed to the first carrier. |
| CIP Carriage and Insurance Paid To | Any | Like CPT, and the seller also insures the goods (Incoterms 2020 requires broad cover). |
| DAP Delivered at Place | Any | The seller delivers to the named place, ready for unloading. Import clearance and duties are on the buyer. |
| DPU Delivered at Place Unloaded | Any | Like DAP, but the seller also unloads. It replaced the former DAT term. |
| DDP Delivered Duty Paid | Any | The seller is responsible for everything including import clearance and duties. The most obligations for the seller. |
| FAS Free Alongside Ship | Sea only | The goods are placed alongside the ship at the named port of loading. |
| FOB Free On Board | Sea only | Risk passes to the buyer when the goods are on board. The seller handles export clearance. |
| CFR Cost and Freight | Sea only | The seller pays freight to the destination port. Risk passes on loading; insurance is the buyer's. |
| CIF Cost, Insurance and Freight | Sea only | Like CFR, and the seller also buys minimum insurance. |
The table is a short overview. In a specific contract the exact wording of the rule and the agreed place apply.
Two groups: any mode and sea only
EXW, FCA, CPT, CIP, DAP, DPU and DDP suit any mode of transport, including multimodal. FAS, FOB, CFR and CIF are for sea and inland waterway only. For containerised cargo that the seller hands to the carrier before it reaches the port, FCA is usually the more suitable choice than FOB.
How to choose
- You want to control the transport: EXW or FCA. You choose the carrier.
- The seller should arrange transport: CPT, CIP, CFR, CIF.
- Leave everything to the seller up to the door: DAP, DPU, DDP. With DDP the seller also handles import clearance.
- If insurance matters: CIP (broad cover) and CIF (minimum cover) require the seller to insure.
How to write the Incoterm in an RFQ
Write the rule with a named place: «FCA Shanghai factory», «FOB Ningbo», «DAP Baku, warehouse». A bare «FOB» or «DAP» does not tell the carrier up to which point to price. Do not compare offers that came with different Incoterms directly: they cover different costs.
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Sign upFrequently asked questions
Why is there no DAT?
In Incoterms 2020 the DAT rule was replaced by DPU (Delivered at Place Unloaded).
What is the difference between FOB and FCA?
FOB is sea only and risk passes when the goods are loaded on board. FCA works with any mode and risk passes where the goods are handed to the carrier; for containers it is often more suitable.
Which rule puts the most obligations on the seller?
DDP: the seller is responsible for everything up to delivery, including import clearance and duties.