Incoterms® are a set of 11 standard rules, issued by the International Chamber of Commerce (ICC), that define who does what in an international sale: which party arranges carriage, which party insures the cargo, which party handles export and import formalities, and the precise point at which risk of loss or damage passes from seller to buyer. Because they are short, universally recognized three-letter codes, they let a buyer and seller in different countries agree on all of that in a single line of a contract.
The current revision is Incoterms® 2020. As of January 1, 2020, sales contracts should reference the 2020 rules.
Every rule is written with a named place or port attached, for example FCA Savannah, GA or CIF Rotterdam. Without that named place the term is incomplete, and the more precisely it is stated, the less room there is for argument later.
Rules for any mode of transport
These seven rules work for road, rail, air, and sea, including multimodal moves.
| Code | Name | Where the seller’s delivery obligation ends |
|---|---|---|
| EXW | Ex Works | At the seller’s own premises or another named place, without loading the goods. The buyer takes on everything from that point. This is the minimum obligation for a seller. |
| FCA | Free Carrier | When the goods are handed to the carrier the buyer has nominated, at the named place. The seller clears the goods for export. |
| CPT | Carriage Paid To | The seller contracts and pays for carriage to the named destination, but risk passes to the buyer earlier, when the goods are handed to the first carrier. |
| CIP | Carriage and Insurance Paid To | Same as CPT, and the seller must also buy cargo insurance. Under Incoterms® 2020, CIP requires broad all-risk cover. |
| DAP | Delivered at Place | On arrival at the named destination, ready for unloading. The buyer handles import clearance and duties. |
| DPU | Delivered at Place Unloaded | On arrival at the named destination, with the seller also unloading the goods from the arriving vehicle or vessel. |
| DDP | Delivered Duty Paid | At the named destination, cleared for import, with the seller paying duties and taxes. This is the maximum obligation for a seller. |
DPU replaces the old DAT rule, adding the requirement that the seller unload the goods from the arriving means of transport.
Rules for sea and inland waterway transport
These four rules are written around a vessel and a port, and should only be used when the goods actually move by water for the leg the rule governs.
| Code | Name | Where the seller’s delivery obligation ends |
|---|---|---|
| FAS | Free Alongside Ship | Alongside the vessel at the named port of loading, for example on the quay or on a barge. |
| FOB | Free on Board | Once the goods are on board the vessel at the named port of loading. Risk passes at that point. |
| CFR | Cost and Freight | The seller pays freight to the destination port, but risk passes to the buyer earlier, once the goods are on board at the port of loading. |
| CIF | Cost, Insurance and Freight | Same as CFR, and the seller must also buy cargo insurance. Under Incoterms® 2020, CIF requires only minimum cover, so buyers often ask for more. |
Download our responsibility chart
Our one-page chart maps all 11 rules against the real costs and tasks in a shipment, from both the export and the import side: packaging, loading at origin, origin inland freight, export formalities, origin port charges, loading on the vessel or aircraft, ocean or air freight, insurance, destination port charges, import duty and clearance, and transport to final delivery. Every cell tells you whether the exporter or the importer carries it. It is worth keeping in front of you while you are negotiating terms.
Download the 2020 Incoterms Chart (PDF)
A common and expensive mistake
FOB, FAS, CFR, and CIF are written for vessel moves. They are routinely written into contracts for air freight and containerized cargo, where there is no clear moment of loading “on board” a named vessel and the rule no longer describes what actually happens. For containers handed over at a terminal or a carrier’s facility, FCA, CPT, CIP, DAP, DPU, or DDP usually fit the real movement far better. If your contract says FOB and your cargo flies, the term and the shipment disagree, and that gap surfaces exactly when something goes wrong.
What Incoterms do not cover
Incoterms are normally incorporated into the contract of sale, but they settle far less than people assume. They do not:
- Identify the goods being sold, or set the contract price
- Set the method or timing of payment
- Determine when title to the goods passes
- Specify which export documents the seller must provide for customs clearance in the buyer’s country
- Address liability for goods that do not conform to the contract, or for late delivery
- Provide for dispute resolution
- Address every condition of the sale
All of that has to be handled elsewhere in the contract.
Using an earlier revision
A contract that references an older version of the rules is still valid, provided all parties have agreed to it and the version is correctly identified on the export documents. If you are deliberately using Incoterms® 2010 or earlier, say so explicitly, because a bare term such as “FOB Savannah” does not tell anyone which revision governs. The ICC recommends the 2020 rules.
Incoterms do not decide your export filing
This catches exporters often. The terms of sale do not determine whether a shipment is a standard or a routed export transaction under the Census Bureau’s Foreign Trade Regulations. That distinction turns on who arranges the movement, not on the Incoterm:
- Standard export transaction: the U.S. Principal Party in Interest arranges for the goods to move out of the United States.
- Routed export transaction: the Foreign Principal Party in Interest selects a U.S. forwarder or agent to move the goods, regardless of the terms of sale.
Getting this wrong changes who is responsible for the Electronic Export Information filing. It is worth confirming before the shipment moves, not after.
Where to find the official rules
The Incoterms® rules are published by the International Chamber of Commerce and are protected by copyright. The summary on this page is a plain-language orientation, not the official or complete definition of any term, and it is not legal advice. For the authoritative text, see the ICC Incoterms® rules. The U.S. International Trade Administration also publishes a short overview at trade.gov.
Not sure which term fits your shipment?
Choosing a term is a commercial decision, but it has direct consequences for clearance, cost allocation, and who is exposed if cargo is damaged or delayed. We work through this with clients every day, and we are happy to look at a specific lane or contract with you.