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Incoterms 2020

In international trade, Incoterms® rules define the shipping responsibilities of the buyer and the seller. Short for INternational COmmercial Terms, they establish who pays for what, where responsibility for a shipment begins and ends and how both sides manage risk. See how they've been updated for 2020.

What does Incoterms mean and what are Incoterms rules?

Incoterms, or INternational COmmercial TERMS, are a set of rules that define—in a shipping contract—who is responsible for covering insurance, freight and transportation costs, as well as when these cost responsibilities and the assumption of risk shift from the buyer to the seller. They help facilitate international trade by providing common reference points. For more information, see our Incoterms FAQs below.

What do Incoterms cover?

  • Delivery points
  • Transfer of risk
  • Obligations like insurance and customs duties
  • Separation of costs
  • Mode of transportation

Incoterms rules are revised every 10 years by the International Chamber of Commerce Commission (ICC).

Major Incoterms changes for 2020

  • DAT is now DPU

    In order to broaden the scope to allow a delivery location other than just a terminal, DAT (Delivered at Terminal) has been replaced by DPU (Delivered at Place Unloaded). This means the goods are delivered once unloaded at the agreed-upon place.

  • Allocation of cost has been clarified

    Due to increasing disputes about the allocation of costs, especially those in or around the port or place of delivery, the precise allocation of costs between seller and buyer has been improved. The broad principle is that the seller is responsible for costs incurred up to the point of delivery, and the buyer is responsible for costs beyond that.

  • Security obligations are better defined

    New transport security requirements (e.g. mandatory screening of containers) have become more prevalent. These requirements can add cost and risk delay if not fulfilled. The 2020 Incoterms rules make security obligations more prominent; these are covered in A4/A7 in each Incoterm.

  • Responsibilities when seller/buyer uses their own transport

    Previous Incoterms assumed the transport of the goods between seller and buyer would be handled by a third-party carrier. They did not deal with situations where transport was provided by the seller or buyer (e.g. the seller's own truck). That position is now clarified in the FCA (Free Carrier) Incoterm: the buyer is required to "contract or arrange, at its own cost, for the carriage of the goods from the named place of delivery."

  • Overall usability has been improved

    • Explanatory notes for each Incoterm are more detailed and pictures are more useful.
    • Each Incoterm has been reordered so the delivery obligation (the key part) is more prominent, now in A2.
    • A new tool lets you compare each Incoterm element across all Incoterms. (e.g. you can view the delivery in A2 across all Incoterms.)
    • Multimodal Incoterms are now separate from maritime-only Incoterms, which reduces the risk of using the wrong one.

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Rules for Sea and Inland Waterway Transport

There are four Incoterm rules specific to sea and waterway modes of transportation.

Graphic demonstrating the Free Alongside Ship Incoterm rule

FAS (Free Alongside Ship)

FAS is when the seller delivers the goods to the buyer when goods are placed alongside (e.g. on a quay or barge) the ship named by the buyer at the named port of shipment, or when the seller procures goods already so delivered. Risk of loss or damage transfers to buyer when goods are alongside the ship

Modes of transport: Used only for sea or inland waterway transport where the parties intend to deliver the goods by placing the goods alongside a vessel.

Graphic demonstrating the Free on Board Incoterm rule

FOB (Free on Board)

FOB is when the seller delivers the goods to the buyer onboard the vessel chosen by the buyer at the named port of shipment, or procures the goods already so
delivered. The risk of loss or damage to the goods transfers when goods are on board the vessel. Buyer assumes all risk from that point.

Modes of transport: Used only for sea or inland waterway transport where the parties intend to deliver the goods by placing the goods on board a vessel.

Graphic demonstrating the Cost and Freight Incoterm rule

CFR (Cost and Freight)

CFR is when the seller delivers goods to the buyer on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods transfers to the buyer when the goods are on board the vessel.

Modes of transport: Used only for sea or inland waterway transport. (If more than one mode is required, use the CPT incoterm.)

Graphic demonstrating the Cost Insurance and Freight Incoterm rule

CIF (Cost Insurance and Freight)

CIF is when the seller delivers goods to the buyer onboard the vessel or procures the goods already so delivered. Risk of loss of or damage to the goods transfers to the buyer when the goods are on board the vessel. Seller must also contract for insurance coverage against the buyer’s risk of loss or damage to the goods from the port of shipment to at least the port of destination.

Modes of transport: Used only for sea or inland waterway transport. (If more than one mode is required, use the CIP incoterm.)

Rules for Any Mode of Modes of Transport

These Incoterm rules apply to all modes of transportation.

Graphic demonstrating the Ex Works Incoterm rule

EXW (Ex Works)

EXW is when the seller delivers the goods to the buyer when it places the goods at the disposal of the buyer at a named place (ex, a factory or warehouse), which may or may not be the seller’s premises. For delivery to occur, the seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export.

Modes of transport: Rule may be used irrespective of the mode or modes, if any, selected.

Graphic demonstrating the Free Carrier Incoterm rule

FCA (Free Carrier)

FCA is applicable for the following delivery options:

1. When the named delivery place is the seller’s premises, the goods are delivered when they are loaded on the means of transport arranged by the buyer.

2. When the named delivery place is somewhere other than the seller’s premises, the goods are delivered when, having been loaded on the seller’s means of transport, they reach the named other delivery place and are ready for unloading from the seller’s means of transport, and is at the disposal of the carrier named by the buyer.

Whichever of the two is chosen, that place and time identifies where the risk transfers to the buyer.

Modes of transport: Rule may be used irrespective of the mode selected and may also be used where more than one mode is utilized.

Graphic demonstrating the Carriage Paid To and Carriage and Insurance Paid To Incoterm rules

CPT (Carriage Paid To) & CIP (Carriage and Insurance Paid To)

CPT is when the seller delivers the goods—and transfers the risk—to the buyer by handing the goods over to the carrier contracted by the seller, or by procuring the goods so delivered. Seller may do so by giving the carrier physical possession of the goods in the manner, and at the place, appropriate to the means of transport used.

Modes of transport: All modes, even when more than one is employed. 

CIP is when the seller delivers the goods—and transfers the risk—to the buyer by handing the goods over to the carrier contracted by the seller, or by procuring the goods so delivered. Seller may do so by giving the carrier
physical possession of the goods in the manner, and at the place, appropriate to the means of transport used. Seller must also contract for insurance coverage against the buyer’s risk of loss of or damage to the
goods from the point of delivery to at least the point of destination.

Modes of transport: All modes, even when more than one is employed

Graphic demonstrating the Delivered at Place Incoterm rule

DAP (Delivered at Place)

DAP is when the seller delivers the goods—and transfers the risk— to the buyer when the goods are placed at the disposal of the buyer, on the arriving means of transport, ready for unloading at the named place of destination. Seller bears all risk of bringing the goods to the named place of destination (i.e. delivery and arrival at destination are the same). 

Modes of transport: Rule may be used irrespective of the mode selected and may also be used where more than one mode is utilized.

Graphic demonstrating the Delivered at Place Unloaded Incoterm rule

DPU (Delivered at Place Unloaded)

DPU is when the seller delivers the goods—and transfers the risk— to the buyer when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named place of destination. Seller bears all risks in bringing goods to and unloading them at the named place of destination (i.e. delivery and arrival at destination are the same). (This is the only Incoterm that requires the seller to unload the goods at the destination.)

Modes of transport: Rule may be used irrespective of the mode selected and may also be used where more than one mode is utilized.

Graphic demonstrating the Delivery Duty Paid Incoterm rule

DDP (Delivery Duty Paid)

DDP is when the seller delivers the goods to the buyer, cleared for import on the arriving means of transportation, ready for unloading, at the named place of destination. Seller bears all risks involved in bringing the goods to the named destination (i.e. delivery and arrival at destination are the same).

Modes of transport: Rule may be used irrespective of the mode selected and may also be used where more than one mode is utilized.

Incoterms FAQs

Have more questions about Incoterms rules? Here are some common FAQs.

Incoterms is a registered trademark of the International Chamber of Commerce.

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