Incoterms® 2020 – Basic Overview

Incoterms® 2020 (International Commercial Terms) are a set of international trade rules published by the International Chamber of Commerce (ICC). [iccwbo] They define how costs, risks and responsibilities are shared between seller and buyer in international and domestic contracts for the sale of goods. [trade]

Incoterms® are not a law, but they become binding only if the parties explicitly refer to them in their sales contract (for example: “CIP Hamburg, Incoterms® 2020”). [inn] They mainly regulate delivery, transport, insurance, customs clearance and transfer of risk, but they do not replace the sales contract or rules on transfer of ownership and payment. [icc-switzerland]

Incoterms® 2020 Rules

Since 1 January 2020 there are 11 rules divided into two groups: [iccwbo](https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/)

  • Rules for any mode of transport – EXW, FCA, CPT, CIP, DAP, DPU, DDP
  • Rules for sea and inland waterway transport only – FAS, FOB, CFR, CIF

The key idea is to clearly define the point at which the risk of loss or damage to the goods passes from seller to buyer and who pays which costs. [velotrade Graphics]  …  [Kuehne-Nagel Graphics 2020: Download PDF]

Group E – Departure

The buyer collects the goods from the seller. The buyer bears almost all costs and risks. [kuehne-nagel]

  • EXW – Ex Works (named place)

Under EXW the seller makes the goods available at their premises (factory, warehouse, etc.). [inecta] The buyer is responsible for loading, export clearance, main transport, import clearance and delivery to the final destination. [kuehne-nagel] This rule represents the minimum obligation for the seller and is generally not recommended if the buyer cannot handle export formalities in the seller’s country. [inecta]

Group F – Main Carriage Unpaid

The seller delivers the goods to a carrier chosen by the buyer. The buyer pays the main transport. [kuehne-nagel]

  • FCA – Free Carrier (named place)

The seller delivers the goods, cleared for export, to the carrier or another person nominated by the buyer at an agreed place. [inecta] Risk passes to the buyer when the goods are handed over to the carrier at that place. [kuehne-nagel]

  • FAS – Free Alongside Ship (named port of shipment)

Used only for sea and inland waterway transport. [trade] The seller delivers when the goods are placed alongside the vessel at the named port of shipment; from that moment the buyer bears all costs and risks. [trade]

  • FOB – Free On Board (named port of shipment)

Used only for sea and inland waterway transport. [trade] The seller delivers when the goods are on board the vessel at the named port of shipment; risk passes to the buyer once the goods are on board. [trade]

Group C – Main Carriage Paid

The seller arranges and pays the main transport, but risk usually passes earlier, when the goods are handed over to the first carrier or loaded on the vessel. [inn]

  • CFR – Cost and Freight (named port of destination)

Sea and inland waterway transport only. [kuehne-nagel] The seller pays the costs and freight to bring the goods to the named port of destination, but risk passes to the buyer when the goods are on board the vessel at the port of shipment. [velotrade]

  • CIF – Cost, Insurance and Freight (named port of destination)

Similar to CFR, but the seller also arranges and pays for cargo insurance with at least minimum cover under Institute Cargo Clauses (C), unless agreed otherwise. [iccwbo] Risk still passes when the goods are on board the vessel at the port of shipment. [velotrade]

  • CPT – Carriage Paid To (named place of destination)

Any mode of transport. [inecta] The seller pays the freight to the named place of destination, but risk transfers to the buyer when the goods are handed over to the first carrier. [inecta]

  • CIP – Carriage and Insurance Paid To (named place of destination)

Like CPT, but the seller must also provide cargo insurance with a higher level of cover (usually Institute Cargo Clauses (A), unless agreed otherwise). [incodocs] Risk passes to the buyer when the goods are handed over to the first carrier, even though the seller pays transport and insurance up to the named place. [incodocs]

Group D – Arrival

The seller bears most or all costs and risks up to the place of destination. [inn](https://www.inn.law/en/insights/incoterms-2020-practical-overview)

  • DAP – Delivered At Place (named place of destination)

The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport, ready for unloading at the named destination. [kuehne-nagel] The buyer is responsible for import clearance, duties and taxes. [inecta]

  • DPU – Delivered At Place Unloaded (named place of destination)

DPU (replacing DAT from Incoterms® 2010) means the seller delivers and unloads the goods at the named place of destination. [iccwbo] The buyer handles import clearance, duties and further transport, if needed. [iccwbo]

  • DDP – Delivered Duty Paid (named place of destination)

The seller bears maximum obligations: delivers the goods to the named place in the country of import, cleared for import and with all duties and taxes paid. [kuehne-nagel] The buyer only takes over the goods at the agreed place; this rule is demanding for the seller and should be used with care. [inecta]

Practical notes for users
For clarity in contracts, always mention the specific rule, place and edition, for example: “FOB Hamburg, Incoterms® 2020”. [inn] For detailed legal interpretation and full official texts, users should refer to the ICC Incoterms® 2020 publication and the ICC website. [icc-switzerland]