The Definitive Guide to Incoterms® 2020
An encyclopedic resource from Vibrant Shipping to help you master the rules of global trade. Navigate your international shipments with clarity and confidence.
Knowledge is Transparency
At Vibrant Shipping, we believe a successful partnership is built on trust. True transparency in logistics isn't just about tracking a package; it's about empowering you with the knowledge to make informed decisions. We provide detailed resources like this Incoterms guide because an educated client is our best partner.
By helping you understand the complexities of global trade, we can work together to eliminate surprises, avoid hidden costs, and build a supply chain that is both efficient and predictable. This is our commitment to you: clarity at every step.
What Exactly Are Incoterms®?
Incoterms® (International Commercial Terms) are a set of globally recognized rules published by the International Chamber of Commerce (ICC). They are the world's essential terms of trade for the sale of goods.
They define the specific responsibilities of sellers and buyers for the delivery of goods under a sales contract. They clarify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.
What Incoterms® Define:
- Obligations: Who does what? (e.g., who arranges carriage or insurance).
- Risk: Where and when does the risk transfer from the seller to the buyer?
- Costs: Which party is responsible for which costs? (e.g., transport, packaging, loading, unloading, customs duties).
What they DON'T Define:
- The price payable or the payment method.
- When the legal title/ownership of goods passes.
- The precise details of the goods being sold.
The 11 Incoterms® 2020 Rules Explained
Rules for Any Mode(s) of Transport
EXW
Ex Works
The seller's minimum obligation. They simply make goods available at their own premises (e.g., factory or warehouse).
Risk Transfer: At the seller's premises.
Best For: Buyers with complete control over logistics.
FCA
Free Carrier
The seller delivers the goods, cleared for export, to the buyer's nominated carrier at a specific place.
Risk Transfer: When the carrier collects the goods.
Best For: A flexible rule for containerized freight where the buyer controls the main journey.
CPT
Carriage Paid To
The seller delivers the goods to their nominated carrier and pays for carriage to the named destination.
Risk Transfer: When goods are handed to the first carrier at origin.
Best For: Situations where the seller arranges transport but does not bear risk during transit.
CIP
Carriage and Insurance Paid To
Same as CPT, but the seller also pays for comprehensive cargo insurance for the buyer's risk.
Risk Transfer: When goods are handed to the first carrier at origin.
Best For: Buyers wanting the seller to handle transport and high-level insurance.
DAP
Delivered at Place
The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport, ready for unloading.
Risk Transfer: At the named destination, just before unloading.
Best For: Door-to-door shipments where the buyer handles import clearance.
DPU
Delivered at Place Unloaded
The seller delivers the goods and unloads them at the named place of destination. This is the only rule requiring the seller to unload.
Risk Transfer: Once goods are unloaded at the destination.
Best For: When the seller has the capability to unload safely at the destination.
DDP
Delivered Duty Paid
The seller's maximum obligation. They deliver the goods to the destination, cleared for import, with all duties and taxes paid.
Risk Transfer: At the named destination, ready for unloading.
Best For: Buyers wanting a complete, landed cost with zero logistics responsibility.
Rules for Sea and Inland Waterway Transport
FAS
Free Alongside Ship
The seller delivers when the goods are placed alongside the vessel (e.g., on a quay or barge) nominated by the buyer.
Risk Transfer: When goods are alongside the ship at the origin port.
Best For: Bulk cargo, such as grain or oil, not in containers.
FOB
Free On Board
The seller delivers the goods, cleared for export, and loads them on board the vessel nominated by the buyer.
Risk Transfer: Once goods are on board the vessel.
Best For: A traditional and popular term for non-containerized sea freight.
CFR
Cost and Freight
The seller pays for the cost and freight to bring the goods to the port of destination. Risk transfers earlier.
Risk Transfer: Once goods are on board the vessel at origin.
Best For: Bulk or non-containerized sea freight where the seller arranges transport.
CIF
Cost, Insurance and Freight
Same as CFR, but the seller also pays for minimum-level marine insurance cover for the buyer's risk.
Risk Transfer: Once goods are on board the vessel at origin.
Best For: Similar to CFR, providing a baseline of insurance coverage.
Still Have Questions?
Choosing the right Incoterm is a critical decision that impacts your costs and liabilities. Let our experts provide a free consultation to determine the best option for your specific shipment.
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