Incoterms 2020 guide: the 11 rules and how to choose
The delivery term decides what the price covers, when risk passes and who handles freight, insurance and customs. This guide walks through the 11 Incoterms used in raw material trade, from the least seller obligation (EXW) to the most (DDP), and explains what to watch for in each. Use FCA/CPT/CIP for containers and FOB/CFR/CIF for bulk sea cargo.
Updated October 14, 2026
In this guide
- Incoterms 2020
- Named place (point of delivery)
- Ex Works (EXW)
- Free Carrier (FCA)
- Free Alongside Ship (FAS)
- Free On Board (FOB)
- Cost and Freight (CFR)
- Cost, Insurance and Freight (CIF)
- Carriage Paid To (CPT)
- Carriage and Insurance Paid To (CIP)
- Delivered at Place (DAP)
- Delivered at Place Unloaded (DPU)
- Delivered Duty Paid (DDP)
Incoterms 2020
The eleven standard delivery terms published by the International Chamber of Commerce (ICC) that define where the seller delivers, when risk passes to the buyer and who pays for freight, insurance and customs formalities. Incoterms do not set the price, the payment method or the transfer of ownership; those must be written separately in the contract. A rule should always be quoted with a named place and the version, e.g. “FOB Mersin Port, Incoterms 2020”.
Full entry and related terms in the glossary →
Named place (point of delivery)
The city, port, terminal or premises written after the Incoterm abbreviation, marking where costs and risk change hands. The more precisely it is stated (e.g. “FCA Gebze, seller’s warehouse, 4 Yeni St.”), the lower the risk of dispute. Writing only a country, or no place at all, is a common mistake that leaves the transfer of risk and the split of costs unclear.
Full entry and related terms in the glossary →
Ex Works (EXW)
The Incoterm with the least obligation for the seller: goods are made available at the seller’s factory or warehouse, not loaded on the collecting vehicle. Loading, export clearance, freight and all risks are the buyer’s. Because a foreign buyer usually cannot file the export declaration itself, FCA is often the better choice for international sales.
Full entry and related terms in the glossary →
Free Carrier (FCA)
The seller delivers export-cleared goods to the carrier nominated by the buyer at the named place. If the place is the seller’s premises the seller loads the goods; elsewhere (e.g. a port terminal) they are delivered on the arriving vehicle ready for unloading. Suitable for any transport mode; under Incoterms 2020 the buyer can instruct its carrier to issue an on-board bill of lading to the seller, which helps with letters of credit.
Full entry and related terms in the glossary →
Free Alongside Ship (FAS)
Used only for sea and inland-waterway transport. The seller places export-cleared goods alongside the vessel nominated by the buyer (on the quay or a barge); risk passes there, and loading onto the ship and freight are for the buyer. Common for bulk and project cargo such as grain, timber, scrap and heavy lifts; for containerised goods FCA should be used instead.
Full entry and related terms in the glossary →
Free On Board (FOB)
One of the most common terms in raw material trade, used only for sea and inland-waterway transport. The seller loads export-cleared goods onto the vessel nominated by the buyer at the port of shipment, and risk passes once the goods are on board. The buyer arranges freight and insurance; for bulk cargo the loading rate, laytime and demurrage must be agreed separately. For containerised goods FCA is the more accurate choice.
Full entry and related terms in the glossary →
Cost and Freight (CFR)
Used only for sea and inland-waterway transport. The seller loads the goods on board at the port of shipment and pays freight to the named destination port, but risk passes to the buyer when the goods are on board at loading, exactly as under FOB. The buyer therefore carries the transit risk and should arrange its own cargo insurance. Prices are quoted with the destination port, e.g. “CFR Iskenderun”.
Full entry and related terms in the glossary →
Cost, Insurance and Freight (CIF)
A sea-transport term that adds, to CFR, cargo insurance taken out by the seller in the buyer’s favour. Under Incoterms 2020 the minimum cover for CIF is Institute Cargo Clauses (C) for 110 % of the contract value; if broader “all risks” (A) cover is wanted it must be written into the contract. Risk still passes when the goods are loaded on board at the port of shipment, so the seller pays freight and insurance but does not carry the voyage risk.
Full entry and related terms in the glossary →
Carriage Paid To (CPT)
The multimodal counterpart of CFR, usable with any mode of transport. The seller contracts and pays carriage to the named destination, but risk passes to the buyer as soon as the goods are handed to the first carrier. Because the point where costs transfer differs from the point where risk transfers, the buyer should insure the transit. Common for road, rail, air and container shipments.
Full entry and related terms in the glossary →
Carriage and Insurance Paid To (CIP)
A term for any mode of transport that adds, to CPT, transit insurance bought by the seller in the buyer’s favour. Incoterms 2020 raised the minimum cover under CIP to Institute Cargo Clauses (A) – “all risks” – whereas CIF stays at (C); the insured amount is 110 % of the contract value. Risk passes when the goods are handed to the first carrier.
Full entry and related terms in the glossary →
Delivered at Place (DAP)
The seller places the goods at the buyer’s disposal on the arriving means of transport, ready for unloading, at the named destination, bearing all costs and risks up to that point. Unloading, import clearance, duties and VAT are for the buyer. Widely used for delivered truck sales; the contract should say who pays waiting charges if import formalities cause delays.
Full entry and related terms in the glossary →
Delivered at Place Unloaded (DPU)
The only Incoterms rule that obliges the seller to unload the goods at destination; it replaced the former DAT in Incoterms 2020. The seller bears all risks and costs up to and including unloading at the named place, while import clearance and duties remain with the buyer. If the seller has no control over unloading equipment at destination, the rule is risky and DAP is usually safer.
Full entry and related terms in the glossary →
Delivered Duty Paid (DDP)
The Incoterm with the greatest obligation for the seller: the goods are delivered in the buyer’s country, cleared for import with duties and import taxes paid, ready for unloading. It is hard to apply if the seller has no tax registration or authorised representative in the importing country, and costs such as non-recoverable import VAT can arise. Because of these risks, raw material trade usually prefers DAP with the buyer handling import clearance.