Educational guide · Incoterms 2020
Incoterms 2020 Explained — The 11 International Commercial Terms
Incoterms 2020 are the International Chamber of Commerce (ICC) rules that set out who bears the costs, who carries the risk and who handles the formalities in an international sale of goods. Below we explain the 11 terms, with a comparison table, examples and common mistakes — educational, with no prices or tariffs.
What are Incoterms 2020?
Incoterms 2020 (International Commercial Terms) are a set of 11 standardised rules published by the International Chamber of Commerce (ICC) and used in international sale-of-goods contracts. They define, point by point, the obligations of the seller and the buyer regarding delivery.
Key point: Incoterms allocate cost, risk and delivery responsibilities — they do NOT govern payment, transfer of ownership or the carrier's liability (that is covered separately, for example by the CMR Convention).
How are costs, risks and responsibilities divided?
Each Incoterm moves three things along the transport chain, from seller to buyer:
- Cost — who pays for each stage (loading, main carriage, unloading, customs). Who bears the cost, not how much — amounts are not the subject of Incoterms.
- Risk — the exact moment the risk of loss or damage to the goods passes from seller to buyer (the "risk transfer").
- Responsibilities — who handles the export formalities, the import formalities and, where applicable, the insurance.
Rule of thumb: terms starting with E and F leave most of the responsibility with the buyer; those starting with C and D shift more and more responsibility to the seller, and DDP represents the seller's maximum obligation.
Terms for any mode of transport (7)
Can be used for road, rail, air, sea or multimodal transport.
EXW – Ex Works
The seller makes the goods available at their premises. From that point, the buyer bears all costs and risks — loading, transport, export and import. Minimum obligation for the seller.
FCA – Free Carrier
The seller hands the goods, cleared for export, to the carrier nominated by the buyer (at the seller's premises or an agreed place). Risk transfers on hand-over. Recommended for containers instead of FOB.
CPT – Carriage Paid To
The seller contracts and bears the carriage to the agreed destination, but risk transfers to the buyer earlier — when the goods are handed to the first carrier.
CIP – Carriage and Insurance Paid To
Like CPT, but the seller also arranges insurance for the goods. In Incoterms 2020, CIP requires an extended level of cover. Risk transfers at the first carrier.
DAP – Delivered at Place
The seller delivers the goods at the agreed destination, ready for unloading (but not unloaded). Risk transfers at the destination. Import falls to the buyer.
DPU – Delivered at Place Unloaded
The seller delivers and unloads the goods at the agreed destination. It is the only Incoterm requiring the seller to unload. Risk transfers after unloading.
DDP – Delivered Duty Paid
The seller delivers the goods at the destination, cleared for import, with import formalities and duties borne by the seller. The maximum obligation for the seller.
Terms for sea and inland waterway transport (4)
Used only when the goods are handed over alongside or on board the vessel — not for containers or road transport.
FAS – Free Alongside Ship
The seller delivers the goods alongside the vessel at the agreed port of loading. Risk transfers at that moment. Export falls to the seller, import to the buyer.
FOB – Free on Board
The seller delivers the goods on board the vessel nominated by the buyer. Risk transfers when the goods are on board. Not used for containers (FCA is recommended).
CFR – Cost and Freight
The seller bears the sea carriage to the port of destination, but risk transfers earlier — when the goods are on board the vessel at the port of loading.
CIF – Cost, Insurance and Freight
Like CFR, but the seller also arranges insurance (basic level of cover in Incoterms 2020). Risk transfers on board the vessel.
Comparison table — the 11 Incoterms 2020 terms
| Term |
Mode of transport |
Risk transfer |
Export formalities |
Import formalities |
| EXW | Any mode | At seller's premises | Buyer | Buyer |
| FCA | Any mode | On hand-over to carrier | Seller | Buyer |
| CPT | Any mode | At first carrier | Seller | Buyer |
| CIP | Any mode | At first carrier | Seller | Buyer |
| DAP | Any mode | At destination (not unloaded) | Seller | Buyer |
| DPU | Any mode | At destination (after unloading) | Seller | Buyer |
| DDP | Any mode | At destination | Seller | Seller |
| FAS | Sea | Alongside ship (loading port) | Seller | Buyer |
| FOB | Sea | On board the vessel | Seller | Buyer |
| CFR | Sea | On board the vessel | Seller | Buyer |
| CIF | Sea | On board the vessel | Seller | Buyer |
Under CIP and CIF, insurance is arranged by the seller. The table shows responsibilities, not costs — Incoterms do not set amounts.
Practical examples
- "FCA Alba Iulia": the seller hands the goods, cleared for export, to a carrier in Alba Iulia; from there the buyer bears the risk and arranges the main carriage.
- "DAP Berlin": the seller brings the goods to Berlin, ready for unloading; the buyer handles unloading and the import formalities.
- "DDP Paris": the seller delivers in Paris, with import cleared and duties paid — the buyer receives the goods at the door.
Common mistakes
- Using FOB/CFR/CIF for containers. These sea terms assume hand-over on board the vessel; for containers, FCA, CPT or CIP are recommended.
- Confusing Incoterms with payment terms. Incoterms do not govern payment or ownership, but delivery, risk and responsibilities.
- Underestimating DDP. Under DDP, the seller also takes on the import formalities and duties in the buyer's country — a complex obligation, depending on the jurisdiction.
- Omitting the exact place. Each term must be accompanied by a precise place (e.g. "FCA + address"), otherwise the risk transfer becomes unclear.
The choice and concrete application depend on the route, the goods and the contract clauses. We present these aspects educationally and do not provide legal advice.
Incoterms 2020 vs the CMR Convention
Incoterms govern the seller–buyer relationship: who bears the cost, risk and delivery responsibilities. The CMR Convention governs the relationship with the road carrier: its liability for the goods during transport. They are different frameworks that apply in parallel.
For details on the carrier's liability, see the CMR Convention guide.
Frequently asked questions
What is the difference between Incoterms and the CMR Convention?
Incoterms are ICC commercial rules that split costs, risks and responsibilities between seller and buyer. The CMR Convention is an international treaty governing the road carrier's liability for the goods. Incoterms concern the seller–buyer relationship; the CMR Convention concerns the relationship with the carrier. They are different concepts.
Who pays for transport under DDP?
Under DDP (Delivered Duty Paid), the seller bears responsibility for transport to the destination, plus import formalities and duties. It is the maximum obligation for the seller. We do not state amounts; the concrete allocation depends on the contract.
Who arranges transport under FCA?
Under FCA (Free Carrier), the buyer arranges the main carriage, while the seller hands the goods, cleared for export, to the carrier nominated by the buyer. Risk transfers when the goods are handed over to the carrier.
What is the difference between FOB and FCA?
FOB is exclusively for sea and inland waterway transport, and risk transfers when the goods are on board the vessel. FCA is for any mode of transport, and risk transfers when the goods are handed to the carrier. For containers, FCA is recommended rather than FOB.
Can I use FOB for road transport?
No. FOB is a term exclusively for sea and inland waterway transport. For road, air or multimodal transport, the any-mode terms are used, for example FCA, CPT or DAP.
Who pays for insurance under CIF and CIP?
Under CIF and CIP, the seller arranges insurance for the buyer's benefit during transport. In Incoterms 2020, CIP requires an extended level of cover, while CIF requires a basic level. We do not state costs; the details depend on the policy and the contract.
Who pays customs duties under DDP?
Under DDP, the seller bears the import formalities and duties, including customs, unlike the other terms where import formalities fall to the buyer.
Do Incoterms also apply within the EU?
Yes. Incoterms can also be used for intra-community deliveries within the EU, even though there are no customs formalities between member states. The rules allocate cost, risk and delivery responsibilities between the parties regardless of route.
Which Incoterm is recommended for importers?
It depends on the degree of control wanted. An importer wanting control over transport often prefers FCA or FOB; one wanting door delivery with minimal effort prefers DAP or DDP. There is no universally suitable term — the choice depends on the route, the goods and the contract.
Which Incoterm is most advantageous for exporters?
It depends on the objectives. An exporter wanting minimal responsibility prefers EXW or FCA; one offering a full service to destination uses DAP, DPU or DDP. There is no universally best term — it depends on the negotiation and the circumstances.
How do I request an international transport quote?
You can contact us by phone at +40 786 222 055 or by e-mail at office@max-speed.eu for an international road transport quote tailored to the agreed Incoterm. Dispatch available 24/7.
Do you need international transport?
We arrange international road transport tailored to the agreed Incoterm. Phone: +40 786 222 055 · E-mail: office@max-speed.eu · Dispatch 24/7