What do Incoterms® actually decide?

They allocate transport, risk, insurance and customs clearance between seller and buyer. They do not transfer ownership, set the price, or replace the sale contract.

Are Incoterms® legally binding?

Only when the contract references them, and only as the parties have agreed. They are a set of rules you choose to adopt, not law that applies automatically.

Which rule suits containers?

FCA and CIP fit containerised cargo better than FOB and CIF, because a container is handed to the carrier at a terminal days before it is loaded aboard. FOB and CIF remain common by habit.

What changed in the 2020 revision?

DAT became DPU and widened beyond terminals, and the insurance levels for CIP and CIF were separated: CIP now requires wide all-risks cover while CIF stays at the minimum.

Can a contract still use Incoterms® 2010?

Yes. Later revisions do not cancel earlier ones. The contract must state which version applies.

Incoterms® 2020 Explained — All 11 Rules

Cost and risk are not the same line. Under CPT, CIP, CFR and CIF the seller pays carriage to the destination but stops bearing risk at origin. A buyer under CIF owns the risk of a voyage the seller is paying for. This is the single most expensive misunderstanding in the set.

Rules for any mode of transport

Use these for containers, air, road, rail and multimodal movements.

EXW — Ex Works

The seller does the least of any rule: it makes the goods available at its own premises and stops there. Everything after that — loading, export formalities, transport, import — is the buyer’s problem.

DeliverySeller’s premises, not loaded
Risk passesAt the seller’s premises
CarriageBuyer
InsuranceNeither party obliged
Export / import clearanceBuyer / Buyer

FCA — Free Carrier

The seller hands the goods, cleared for export, to a carrier the buyer has named. The usual choice for containers, because risk passes when the box is handed over rather than when it is lifted aboard.

DeliveryNamed place — seller’s premises or a carrier’s terminal
Risk passesOn handover to the named carrier
CarriageBuyer
InsuranceNeither party obliged
Export / import clearanceSeller / Buyer

CPT — Carriage Paid To

The seller pays for carriage to a named destination, but stops carrying the risk much earlier — as soon as the goods reach the first carrier. Cost and risk part company here, which surprises people.

DeliveryOn handover to the first carrier
Risk passesOn handover to the first carrier
CarriageSeller, to named destination
InsuranceNeither party obliged
Export / import clearanceSeller / Buyer

CIP — Carriage and Insurance Paid To

CPT with insurance added. Under the 2020 revision the seller must insure at the higher, all-risks level unless the parties agree otherwise — a change from 2010, and the point most often missed.

DeliveryOn handover to the first carrier
Risk passesOn handover to the first carrier
CarriageSeller, to named destination
InsuranceSeller — wide cover, for the buyer’s benefit
Export / import clearanceSeller / Buyer

DAP — Delivered at Place

The seller carries cost and risk all the way to the named place and presents the goods ready for unloading. The buyer unloads and clears them for import.

DeliveryNamed place, ready for unloading
Risk passesAt the named place, before unloading
CarriageSeller
InsuranceNeither party obliged
Export / import clearanceSeller / Buyer

DPU — Delivered at Place Unloaded

DAP, except the seller also unloads. The only rule that obliges the seller to unload — so only agree it where you can actually get the goods off the vehicle. Replaced DAT in the 2020 revision.

DeliveryNamed place, unloaded
Risk passesAt the named place, after unloading
CarriageSeller
InsuranceNeither party obliged
Export / import clearanceSeller / Buyer

DDP — Delivered Duty Paid

The seller’s maximum obligation. Goods arrive at the named destination with import duties and taxes already paid. The seller takes on customs exposure in a country where it may have no presence.

DeliveryNamed destination, cleared for import
Risk passesAt the named destination
CarriageSeller
InsuranceNeither party obliged
Export / import clearanceSeller / Seller

Rules for sea and inland waterway only

These four assume the goods are handed over at the ship’s side or across its rail. They do not suit containerised cargo, which leaves the shipper’s control at an inland terminal long before it reaches the vessel.

FAS — Free Alongside Ship

The seller places the goods alongside the vessel at the named port — on the quay or on a barge. Suited to bulk and project cargo, not to containers.

DeliveryAlongside the vessel at the named port
Risk passesOnce alongside the vessel
CarriageBuyer
InsuranceNeither party obliged
Export / import clearanceSeller / Buyer

FOB — Free on Board

The seller delivers on board the vessel the buyer has nominated. Widely used for containers out of habit, though FCA fits them better: a container is handed over at a terminal days before it is loaded.

DeliveryOn board the vessel at the named port
Risk passesOnce on board
CarriageBuyer
InsuranceNeither party obliged
Export / import clearanceSeller / Buyer

CFR — Cost and Freight

The seller pays the sea freight to the destination port, but risk passes once the goods are on board at origin. The buyer bears the risk of a voyage it is not paying for.

DeliveryOn board at the port of shipment
Risk passesOnce on board at origin
CarriageSeller, to destination port
InsuranceNeither party obliged
Export / import clearanceSeller / Buyer

CIF — Cost, Insurance and Freight

CFR with insurance added. The seller must insure, but only at the minimum level unless more is agreed — the opposite of CIP, and a difference worth knowing before you rely on the cover.

DeliveryOn board at the port of shipment
Risk passesOnce on board at origin
CarriageSeller, to destination port
InsuranceSeller — minimum cover, for the buyer’s benefit
Export / import clearanceSeller / Buyer

All eleven, side by side

Rule	Mode	Delivery	Risk passes	Carriage	Insurance	Export	Import
EXW Ex Works	Any mode	Seller’s premises, not loaded	At the seller’s premises	Buyer	Neither party obliged	Buyer	Buyer
FCA Free Carrier	Any mode	Named place — seller’s premises or a carrier’s terminal	On handover to the named carrier	Buyer	Neither party obliged	Seller	Buyer
CPT Carriage Paid To	Any mode	On handover to the first carrier	On handover to the first carrier	Seller, to named destination	Neither party obliged	Seller	Buyer
CIP Carriage and Insurance Paid To	Any mode	On handover to the first carrier	On handover to the first carrier	Seller, to named destination	Seller — wide cover, for the buyer’s benefit	Seller	Buyer
DAP Delivered at Place	Any mode	Named place, ready for unloading	At the named place, before unloading	Seller	Neither party obliged	Seller	Buyer
DPU Delivered at Place Unloaded	Any mode	Named place, unloaded	At the named place, after unloading	Seller	Neither party obliged	Seller	Buyer
DDP Delivered Duty Paid	Any mode	Named destination, cleared for import	At the named destination	Seller	Neither party obliged	Seller	Seller
FAS Free Alongside Ship	Sea / waterway	Alongside the vessel at the named port	Once alongside the vessel	Buyer	Neither party obliged	Seller	Buyer
FOB Free on Board	Sea / waterway	On board the vessel at the named port	Once on board	Buyer	Neither party obliged	Seller	Buyer
CFR Cost and Freight	Sea / waterway	On board at the port of shipment	Once on board at origin	Seller, to destination port	Neither party obliged	Seller	Buyer
CIF Cost, Insurance and Freight	Sea / waterway	On board at the port of shipment	Once on board at origin	Seller, to destination port	Seller — minimum cover, for the buyer’s benefit	Seller	Buyer

Still seeing an older code?

DAT	Delivered at Terminal. Replaced by DPU in the 2020 revision, which widened it beyond terminals.
DAF	Delivered at Frontier. Withdrawn in the 2010 revision; use DAP.
DES	Delivered Ex Ship. Withdrawn in 2010; use DAP.
DEQ	Delivered Ex Quay. Withdrawn in 2010; use DPU.
DDU	Delivered Duty Unpaid. Withdrawn in 2010; use DAP.

Questions

What do Incoterms® actually decide?: They allocate transport, risk, insurance and customs clearance between seller and buyer. They do not transfer ownership, set the price, or replace the sale contract.
Are Incoterms® legally binding?: Only when the contract references them, and only as the parties have agreed. They are a set of rules you choose to adopt, not law that applies automatically.
Which rule suits containers?: FCA and CIP fit containerised cargo better than FOB and CIF, because a container is handed to the carrier at a terminal days before it is loaded aboard. FOB and CIF remain common by habit.
What changed in the 2020 revision?: DAT became DPU and widened beyond terminals, and the insurance levels for CIP and CIF were separated: CIP now requires wide all-risks cover while CIF stays at the minimum.
Can a contract still use Incoterms® 2010?: Yes. Later revisions do not cancel earlier ones. The contract must state which version applies.

Incoterms® is a registered trademark of the International Chamber of Commerce. This page refers to the Incoterms® 2020 revision. It is an independent explanation written by FrateZone and is neither the official rules text nor a substitute for it; the ICC does not sponsor, endorse or have any affiliation with FrateZone. For the authoritative wording, consult the ICC’s own publication.

Provided for convenience and general information only.Figures, definitions and descriptions on these pages are compiled from publicly available sources — published industry standards, official code registers and carriers' own published specifications — and are nominal: actual equipment, regulations and commercial terms vary by manufacturer, carrier, jurisdiction and contract, and change over time. FrateZone is not the issuing authority for any of it, does not warrant that any figure here is correct, current or complete, and makes no representation that a source has not changed since it was read. Where a specification belongs to a specific physical unit or a specific contract — a container's certified plate, an airline's tariff, the wording of your own sale agreement — that document governs, not this page. FrateZone accepts no liability for any error or omission here, nor for any operational, commercial, financial or legal decision taken in reliance on it. Verify against the authoritative source before you act.

Incoterms® 2020