INCOTERMS 2020: The Complete Guide for Importers & Exporters

Learn about the 11 Incoterms rules and how they affect your international shipping responsibilities and costs.

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Incoterms in Plain English: The Incoterms Guide for Freight Shipping

Incoterms (International Commercial Terms) are a set of internationally recognized rules that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts. They are essential for international trade as they clarify tasks, costs, and risks involved in the global movement of goods.

What are Incoterms?

Incoterms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They are widely used in international commercial transactions and procurement processes and their use is encouraged by trade councils, courts, and international lawyers.

How Incoterms Impact Your Shipping Cost

You can use our freight rate calculator to help you decide how different incoterms will impact your freight cost. For example, when shipping EXW, you'll be responsible for the added cost of getting your goods from your supplier to the seaport or airport. Simply choose container, box, or pallet shipping, enter your dimensions and weight, and you'll get an instant estimate of freight shipping costs.

List of All 11 Incoterms

  • EXW – Ex Works: The seller makes the goods available for pickup at the warehouse or factory. The buyer assumes all costs and risks from that point.
  • FCA – Free Carrier: The seller delivers the goods to the carrier at a named place (e.g., a terminal or warehouse). Risk transfers to the buyer upon handover.
  • CPT – Carriage Paid To: The seller covers transportation costs to the named destination. The buyer assumes responsibility upon delivery.
  • CIP – Carriage and Insurance Paid To: Same as CPT, but the seller also arranges and pays for insurance against loss or damage during transit.
  • DAP – Delivered at Place: The seller handles the shipment up to the named place. The buyer is responsible for import duties, fees, and taxes.
  • DPU – Delivered at Place Unloaded: The seller arranges shipping and unloading. Risk transfers to the buyer after unloading.
  • DDP – Delivered Duty Paid: The seller is responsible for the entire shipment, including customs clearance and fees, and delivers the goods to the buyer's premises.
  • FAS – Free Alongside Ship: The seller delivers goods to the ship loading dock. Risk transfers to the buyer once the goods are alongside the ship.
  • FOB – Free On Board: The seller is responsible for packaging, pickup, and delivery onto a vessel at the origin port. Liability transfers to the buyer once onboard.
  • CFR – Cost and Freight: The seller transports the goods to the destination port but does not bear liability after loading. Risk transfers to the buyer once onboard.
  • CIF – Cost, Insurance, and Freight: Similar to CFR, but the seller also pays for insurance coverage until the goods reach the destination port.

2020 Incoterms

The 2020 Incoterms, updated from the 2010 Incoterms, are a set of international trade terms that define the responsibilities and obligations of buyers and sellers when shipping goods. They are designed to facilitate smooth and efficient international trade by providing standardized rules for the delivery of goods, payment, risk transfer, and other key aspects of international transactions.The 2020 Incoterms, updated from the 2010 Incoterms, are a set of international trade terms that define the responsibilities and obligations of buyers and sellers when shipping goods. They are designed to facilitate smooth and efficient international trade by providing standardized rules for the delivery of goods, payment, risk transfer, and other key aspects of international transactions.

2020 Incoterms Rules for Any Mode of Transport

Whatever mode of transport you use – sea, air, road, or rail – you'll need to choose your Incoterm. However, not every Incoterm can be used for every mode.

The following seven Incoterms can be used for both ocean and air shipping:

  • EXW – Ex Works: Seller makes goods available at their premises. The buyer handles all transportation.
  • FCA – Free Carrier: Seller delivers goods to the carrier at a named place. Risk transfers after handover.
  • CPT – Carriage Paid To: Seller pays for transport to the destination, but risk transfers earlier.
  • CIP – Carriage and Insurance Paid To: Same as CPT, but seller also pays for insurance coverage.
  • DAP – Delivered at Place: Seller handles shipment up to a named place. Buyer handles import duties.
  • DPU – Delivered at Place Unloaded: Seller handles shipping and unloading. Risk transfers after unloading.
  • DDP – Delivered Duty Paid: Seller is responsible for the full shipment, including customs and fees.

2020 Incoterms for Sea and Inland Waterway Transport

These four incoterms can be used for sea and inland waterway shipments only:

  • FAS - Free Alongside Ship Seller delivers goods to the port alongside the vessel. Buyer assumes risk from that point.
  • FOB - Free On Board Seller is responsible for loading goods onto the vessel. Risk transfers once goods are on board.
  • CFR - Cost and Freight Seller pays for shipping to destination port, but risk transfers once goods are loaded.
  • CIF - Cost, Insurance, and Freight Same as CFR, but seller also provides insurance until goods reach destination port.

2010 Incoterms

The International Chamber of Commerce (ICC) updates incoterms every ten years or so. Prior to 2020, the last update was in 2010. The 2010 version was largely similar to the 2020 version.

However, in 2020 some changes and clarifications were made to better reflect modern trade practices and technology.