Incoterms 2020

International commercial terms defining responsibilities for shipping, insurance, and customs between buyers and sellers.

Updated 2025-12-16

Incoterms 2020

Overview

Incoterms (International Commercial Terms) are a set of internationally recognized terms published by the International Chamber of Commerce (ICC) that define the responsibilities of sellers and buyers for the delivery of goods. The Incoterms 2020 version introduced significant updates aimed at simplifying international trade operations.

All Transport Mode Terms

EXW - Ex Works

• Seller: Minimum obligation (goods at premises)
• Buyer: All transportation, export clearance
• Risk transfer: At seller's premises

FCA - Free Carrier

• Seller: Delivers to carrier or named place with an option for an on-board bill of lading
• Buyer: Main carriage
• Risk transfer: Upon delivery to carrier
• Example: A supplier in Germany selling machinery to a business in France, chooses FCA and delivers the machinery to a carrier at their warehouse.

CPT - Carriage Paid To

• Seller: Pays freight to destination
• Buyer: Risk after delivery to first carrier
• Insurance: Buyer's responsibility

CIP - Carriage and Insurance Paid To

• Seller: Pays for freight and insurance to destination
• Buyer: Risk after delivery to first carrier
• Insurance: All-risk minimum required
• Example: A furniture manufacturer in Italy uses CIP to ensure their goods are insured while in transit to a retailer in the UK.

DAP - Delivered at Place

• Seller: Delivers goods ready for unloading
• Buyer: Responsible for unloading and import clearance
• Risk transfer: At destination, before unloading
• Real-World Application: A company shipping electronics from Asia to the U.S. using DAP ensures they manage all logistical aspects up until delivery.

DPU - Delivered at Place Unloaded

• Seller: Unloads at destination
• Buyer: Responsible for import clearance
• Risk transfer: After unloading

DDP - Delivered Duty Paid

• Seller: Maximum obligation (cleared for import)
• Buyer: Minimum obligation
• Risk transfer: At destination
• Example: An online retailer offering DDP terms allows customers to avoid unexpected charges upon delivery, improving customer satisfaction.

Sea/Inland Waterway Terms

FAS - Free Alongside Ship

• Seller: Delivers alongside vessel
• Buyer: Responsible for loading and main carriage

FOB - Free on Board

• Seller: Loads goods onto the vessel
• Buyer: Responsible for main carriage and insurance
• Example: A grain exporter using FOB terms means they handle the loading of goods onto the ship, passing responsibility to the buyer afterward.

CFR - Cost and Freight

• Seller: Covers main carriage to destination
• Buyer: Risk after on board, must procure insurance

CIF - Cost, Insurance and Freight

• Seller: Responsible for main carriage and insurance
• Buyer: Risk after goods are loaded on board

Key Changes in 2020

1. FCA now allows on-board bill of lading, facilitating smoother documentation.
2. CIF and CIP insurance requirements have been differentiated to suit various levels of operations.
3. DPU replaces DAT (Delivered at Terminal), clarifying responsibilities around unloading.
4. Security-related requirements have been clarified to adapt to modern supply chain challenges.

Choosing the Right Term

• Consider risk appetite: If you're risk-averse, terms like DDP might offer peace of mind.
• Evaluate control requirements: Companies may prefer terms like FCA where they can manage transportation.
• Assess cost implications: Understand total shipping costs under various terms to maintain profitability.
• Match to trade relationship: Building trust with suppliers may lead to more favorable terms.

Etymology and Origins

First Documented Usage: The term Incoterms was first introduced in 1936 by the International Chamber of Commerce.