A Comprehensive Guide to Incoterms®

Trading goods in the international market is often complex, requiring clear definition of responsibilities, costs, and risks for all parties involved. The International Chamber of Commerce (ICC) introduced International Commercial Terms (Incoterms®), a set of standardized rules used globally in goods trade. Whether you're finalizing a purchase order, labeling goods, or preparing a certificate of origin, these rules have become part of our daily trade language, providing essential guidance.

Evolution of Incoterms®

The first edition was published in 1936, and ICC has continuously maintained and updated it since then. To support global trade for the next century, Incoterms® 2020 came into effect on January 1, 2020, and should be referenced accordingly.

Rules for All Transport Modes

Term	Full Name	Key Points
EXW	Ex Works (named place)	Seller delivers goods at their premises (e.g., factory, warehouse). No loading or export clearance required.
FCA	Free Carrier (named place)	Two delivery scenarios: (a) at seller’s premises or (b) at a different named place. Export clearance completed by seller.
CPT	Carriage Paid To (named destination)	Seller pays for carriage to the named destination.
CIP	Carriage and Insurance Paid To (named destination)	Same as CPT, plus seller provides minimum transport insurance.
DAP	Delivered At Place (named destination)	Seller delivers goods ready for unloading at the destination; bears all risks until arrival.
DPU	Delivered at Place Unloaded (named destination)	Seller unloads goods at the destination and pays all transport costs (export fees, freight, unloading, port charges).
DDP	Delivered Duty Paid (named destination)	Seller pays all costs including import duties, delivers goods to the buyer’s country (excluding unloading).

Sea and Inland Waterway Transport Rules

Term	Full Name	Key Points
FAS	Free Alongside Ship (named port of shipment)	Seller delivers goods alongside the buyer’s vessel at the port; risk transfers when goods are at the ship’s side.
FOB	Free on Board (named port of shipment)	Seller delivers goods on board the buyer’s vessel; risk transfers when goods are on board.
CFR	Cost and Freight (named port of destination)	Seller pays for carriage to the destination port; risk transfers when goods are on board the ship.
CIF	Cost, Insurance and Freight (named port of destination)	Same as CFR, plus seller provides minimum marine insurance.

Key Differences Between Incoterms® 2020 and 2010

• FCA allows an optional on-board notation for maritime transport.
• Cost clauses are consolidated in A9/B9 across all rules.
• CIP requires insurance covering Institute Cargo Clauses (A) (all risks except exclusions).
• CIF requires insurance covering Institute Cargo Clauses (C) (specified risks).
• Rules for FCA, DAP, DPU, and DDP now include self-arranged transport (no third-party carrier).
• DAT renamed to DPU to clarify that the destination can be any location (not just terminals).
• Safety-related requirements and costs are explicitly the seller’s responsibility in 2020.

How to Use Incoterms®

Format: [Incoterm®] [Named Place] Incoterms® Year

If no year is specified:
- Prior to January 1, 2020: Incoterms® 2010 applies.
- On/after January 1, 2020: Incoterms® 2020 applies.

Official Resources

Visit the ICC Website for detailed information.

Download Official Incoterms® Wallchart

Note: Incoterms® form part of a sales contract, not the entire agreement. Always refer to your contract for full terms.