Incoterms 2020 Explained | All 11 Rules

Incoterms® are the standard trade terms published by the International Chamber of Commerce (ICC). They define who arranges carriage and insurance, who bears cost, and, most importantly, the exact point at which risk passes from seller to buyer. They do not transfer title, do not set the price, and do not replace the sale contract.

The current edition is Incoterms® 2020, in force since 1 January 2020, and it contains 11 rules. Always state the edition and a named place in your contract, for example "FCA Nhava Sheva, Incoterms® 2020". Without a named place the term is ambiguous, and most disputes we see start there.

Rules for any mode of transport (7)

Use these for air, road, rail, courier, container cargo, and any multimodal movement. They work for sea freight too, provided the cargo is containerised and handed over at a terminal rather than loaded across the ship's rail.

Rule	Full name	Risk passes to buyer when
EXW	Ex Works	Goods are placed at the buyer's disposal at the seller's premises, not loaded. Maximum obligation on the buyer.
FCA	Free Carrier	Goods are handed to the carrier nominated by the buyer at the named place. The recommended rule for containerised cargo.
CPT	Carriage Paid To	Goods are handed to the first carrier. Seller pays carriage to the named destination but risk has already passed.
CIP	Carriage and Insurance Paid To	As CPT, plus the seller must insure. Under Incoterms® 2020 CIP requires Institute Cargo Clauses (A), all-risks cover.
DAP	Delivered At Place	Goods arrive at the named place ready for unloading. Seller bears risk to that point; buyer clears import.
DPU	Delivered At Place Unloaded	Goods are unloaded at the named place. The only rule requiring the seller to unload. Replaced DAT in 2020.
DDP	Delivered Duty Paid	Goods arrive cleared for import with duty paid. Maximum obligation on the seller.

Rules for sea and inland waterway transport only (4)

These four are for bulk, break bulk and conventional cargo loaded on board a vessel. They should not be used for containers. A container is handed over at a terminal days before it is loaded, so "on board" no longer reflects where risk actually transfers. For containerised cargo use FCA, CPT, CIP, DAP, DPU or DDP instead.

Rule	Full name	Risk passes to buyer when
FAS	Free Alongside Ship	Goods are placed alongside the vessel at the named port of shipment.
FOB	Free On Board	Goods are on board the vessel at the named port of shipment.
CFR	Cost and Freight	Goods are on board. Seller pays freight to destination, but risk passed at loading.
CIF	Cost, Insurance and Freight	As CFR, plus insurance. CIF requires only minimum cover, Institute Cargo Clauses (C), unless you agree otherwise.

Terms that no longer exist

If a contract or a template you have been sent still uses these, it is running on an obsolete edition and should be updated:

DAF (Delivered At Frontier), DES (Delivered Ex Ship), DEQ (Delivered Ex Quay) and DDU (Delivered Duty Unpaid) were withdrawn in Incoterms® 2010. In most cases DAP now covers what DAF, DES and DDU were used for, and DPU covers DEQ.
DAT (Delivered At Terminal) existed only in Incoterms® 2010 and was renamed DPU in 2020, so that delivery is no longer restricted to a "terminal".

What changed in Incoterms® 2020

DAT became DPU, and the delivery point widened from a terminal to any agreed place.
Insurance levels split. CIP now requires all-risks cover (Clauses A); CIF still requires only minimum cover (Clauses C).
FCA gained an on-board bill of lading option, which matters when a letter of credit demands one but the sale is on FCA terms.
Security-related obligations and costs are set out more explicitly across the rules.
Own means of transport is now recognised under FCA, DAP, DPU and DDP, rather than assuming a third-party carrier.

Choosing the right term

Importing in containers? Prefer FCA over FOB. FOB on a container shipment leaves a gap between handover at the terminal and loading on board, during which it is unclear who carries the risk.
Buying DDP? The overseas seller must handle Indian import clearance and duty. Many cannot, because they need an IEC and Indian GST registration to do it properly. DAP is usually the safer term.
Selling EXW? The buyer is responsible for export clearance from India, which a foreign buyer often cannot do. FCA is usually more workable.
Relying on CIF insurance? Minimum cover under Clauses C is narrow. If the cargo is valuable or fragile, agree wider cover expressly or arrange your own.
Always name the place and always state the edition.

Source: International Chamber of Commerce (ICC), Incoterms® 2020. "Incoterms" is a registered trademark of the ICC. This page is a practical summary for importers and exporters and is not a substitute for the official ICC publication or for legal advice on a specific contract. Last reviewed: August 2026.

Not sure which term suits your shipment, or inherited a contract using an obsolete one? Send us the details and we will tell you what it means for your cost, risk and clearance. See also our customs clearance service, container dimensions and unit conversions.