Incoterms 2020, in full: all eleven rules and who bears what

Incoterms are eleven three-letter rules published by the ICC, and they answer a narrow but essential question. At each point in a shipment, who pays for what, who carries the risk if something goes wrong, and who handles the export and import formalities. They do not set price, quality or payment, and they are not the whole contract. They are the shorthand that tells both sides exactly where one party's responsibility ends and the other's begins. This is all eleven, grouped, plus what changed in 2020 and where they most often go wrong.

Read any Incoterm as three questions at once. Where does the risk pass from seller to buyer, so that a loss after that point falls on the buyer even if it has not paid yet. Who pays the carriage, the loading, the insurance and the terminal charges along the way. And who is responsible for export clearance at origin and import clearance at destination. The named place is not a detail. FCA at the seller's plant and FCA at a named port are different deliveries, and a rule written without a precise place is a rule waiting for an argument.

The eleven rules split into two groups, and choosing from the wrong group is the most common mistake in the whole system. Seven rules work for any mode of transport, including containers, road, rail and air: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four rules are only for sea and inland waterway transport, where the goods are handed over at or alongside the ship: FAS, FOB, CFR and CIF. The trap is that most cargo now moves in containers, and a container is handed to the carrier at a terminal, not lifted over a ship's rail. So for containerised cargo the ICC recommends FCA, CPT, CIP or DAP, not FOB. Using FOB for a container is a habit, not a correct choice, and it can leave a gap over who bears the risk between the terminal and the vessel.

1. 01EXW

   Ex Works

   The seller only makes the goods available at its premises. The buyer does everything else, including loading and export clearance. Maximum responsibility on the buyer, and rarely ideal for a cross-border deal.

2. 02FCA

   Free Carrier

   The seller delivers, cleared for export, to a carrier the buyer names, at the seller's premises or another named place. Risk passes on that handover. In 2020 FCA gained an option for the buyer's carrier to issue an on-board bill of lading to the seller, which matters when a letter of credit needs one.

3. 03CPT

   Carriage Paid To

   The seller pays carriage to a named destination, but risk passes to the buyer when the goods are handed to the first carrier, not at destination.

4. 04CIP

   Carriage and Insurance Paid To

   As CPT, and the seller also buys insurance. Under 2020 the default cover is the broad Institute Cargo Clauses A. Risk still passes at the first carrier.

5. 05DAP

   Delivered at Place

   The seller delivers, ready for unloading, at a named destination and bears the risk until then. Import clearance is the buyer's.

6. 06DPU

   Delivered at Place Unloaded

   The only rule where the seller unloads. The seller delivers and unloads at the named place and carries the risk through unloading. New in 2020, it replaced DAT and now works for any place, not just a terminal.

7. 07DDP

   Delivered Duty Paid

   The seller delivers to destination and clears import, paying duties and taxes. Maximum responsibility on the seller, and a rule to accept only when you can actually handle the buyer's import formalities.

8. 08FAS

   Free Alongside Ship

   The seller delivers alongside the vessel at the named port. Suited to bulk cargo loaded by the port, not to containers.

9. 09FOB

   Free On Board

   The seller delivers on board the vessel at the named port and clears export. The buyer arranges and pays the ocean freight and insurance. The workhorse of bulk commodity sales.

10. 10CFR

    Cost and Freight

    As FOB, and the seller pays the freight to the destination port. Risk still passes on board at the load port, so the buyer carries the sea risk and needs its own insurance.

11. 11CIF

    Cost, Insurance and Freight

    As CFR, and the seller also buys marine insurance for the buyer. Note the default cover is the minimum Institute Cargo Clauses C unless the contract asks for more. Risk still passes on board at the load port.

• DAT became DPU. The old Delivered at Terminal was renamed Delivered at Place Unloaded, and it now covers unloading at any agreed place, not only a terminal.
• CIP insurance went up. Its default cover rose to the broad Institute Cargo Clauses A, while CIF stayed at the minimum Clauses C, so the two are no longer symmetrical.
• FCA gained an on-board bill of lading option, so an FCA sale can still produce the on-board document a letter of credit often demands.
• Costs were listed together in each rule, and security-related obligations were made explicit, so who pays for what is easier to read.

Four mistakes recur. Using a sea rule, usually FOB, CFR or CIF, for containerised cargo that is actually handed over at a terminal, which the ICC specifically advises against. Naming a country or a port without the precise point, so the exact place of delivery and risk transfer is left vague. Agreeing DDP without confirming you can register for and pay the destination's import duties and taxes, which can be impossible for a foreign seller. And assuming CIF insurance is comprehensive, when its default is the minimum cover and a serious buyer specifies more. None of these is exotic. Each is a line in the contract that was left loose.