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Incoterms® 2020 Study Guide

A clear overview of international commercial terms for buyers and sellers.

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Any Mode of Transport

• EXW - Ex Works
• FCA - Free Carrier
• CPT - Carriage Paid To
• CIP - Carriage and Insurance Paid To
• DAP - Delivered at Place
• DPU - Delivered at Place Unloaded
• DDP - Delivered Duty Paid

Sea & Waterway Transport

• FAS - Free Alongside Ship
• FOB - Free On Board
• CFR - Cost and Freight
• CIF - Cost, Insurance and Freight

Key Comparisons

• Term Differences

For Any Mode(s) of Transport

EXW - Ex Works

This term places the minimum responsibility on the seller. The seller's only obligation is to make the goods available at their own premises (e.g., factory or warehouse). The buyer is responsible for all subsequent costs and risks, including loading the goods and arranging all transport and customs procedures.

Risk Transfer: At the seller's premises, before loading.

FCA - Free Carrier

The seller delivers the goods to a carrier or another person nominated by the buyer at the seller’s premises or another named place. The seller is responsible for export customs clearance. Risk transfers to the buyer once the goods are delivered to the nominated carrier.

Risk Transfer: When the goods are delivered to the first carrier.

CPT - Carriage Paid To

The seller delivers the goods to a carrier they nominate and pays the freight costs to transport the goods to the specified destination. However, the risk of loss or damage transfers from the seller to the buyer when the goods are delivered to the first carrier, not at the destination.

Risk Transfer: When the goods are delivered to the first carrier (even though seller pays for main carriage).

CIP - Carriage and Insurance Paid To

Similar to CPT, but with the additional obligation that the seller must also purchase maximum insurance cover for the buyer's risk of loss or damage during transit. Risk transfers to the buyer when the goods are delivered to the first carrier.

Risk Transfer: When the goods are delivered to the first carrier.

DAP - Delivered at Place

The seller is responsible for arranging carriage and delivering the goods, ready for unloading, at the named destination. The seller bears all risks involved in bringing the goods to the destination. The buyer is responsible for import customs clearance and paying any import duties and taxes.

Risk Transfer: At the named destination, ready for unloading.

DPU - Delivered at Place Unloaded

This is a new term for 2020, replacing DAT (Delivered at Terminal). The seller is responsible for delivering the goods to the destination and unloading them. The seller bears all risks until after the goods are unloaded. The buyer is responsible for import customs clearance.

Risk Transfer: At the destination, after the goods are unloaded.

DDP - Delivered Duty Paid

This term places the maximum responsibility on the seller. The seller is responsible for everything, including arranging transport, clearing the goods for import, and paying all applicable duties and taxes. The goods are delivered to the buyer's named destination, ready for unloading.

Risk Transfer: At the named destination, cleared for import.

For Sea and Inland Waterway Transport

FAS - Free Alongside Ship

The seller's responsibility ends once the goods are placed alongside the buyer's nominated vessel at the named port of shipment. From that point on, the buyer bears all costs and risks of loss or damage.

Risk Transfer: When goods are alongside the vessel at the port of origin.

FOB - Free On Board

The seller is responsible for all costs and risks until the goods are loaded on board the vessel nominated by the buyer at the named port of shipment. Once the goods are on board, the risk transfers to the buyer.

Risk Transfer: When goods are on board the vessel at the port of origin.

CFR - Cost and Freight

The seller must pay the costs and freight to bring the goods to the named port of destination. However, the risk transfers to the buyer once the goods are on board the vessel at the port of shipment.

Risk Transfer: When goods are on board the vessel at the port of origin.

CIF - Cost, Insurance and Freight

Similar to CFR, but with the additional obligation that the seller must also purchase minimum insurance cover for the buyer's risk of loss or damage during transit. Risk still transfers to the buyer once the goods are on board the vessel.

Risk Transfer: When goods are on board the vessel at the port of origin.

Key Comparisons

Difference between DAP and DDP?

The key difference is responsibility for import duties and taxes. Under DAP (Delivered at Place), the buyer handles these costs. Under DDP (Delivered Duty Paid), the seller is responsible for them.

Difference between CFR and CIF?

The only difference is insurance. Under CIF (Cost, Insurance, and Freight), the seller must purchase insurance for the goods during transit for the buyer's benefit. Under CFR (Cost and Freight), the seller is not required to do so.

Difference between CPT and CIP?

The only difference is insurance. Under CIP (Carriage and Insurance Paid To), the seller must purchase insurance (to a high level of cover) for the buyer. Under CPT (Carriage Paid To), the seller is not required to do so.

Difference between FOB and CIF?

The main difference is who pays for the main carriage and insurance. Under FOB (Free On Board), the buyer arranges and pays for the main sea transport and any insurance from the port of origin. Under CIF (Cost, Insurance, and Freight), the seller arranges and pays for these items to the port of destination.

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Compound Sentences

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What is a Compound Sentence?

A **compound sentence** is a sentence with two or more independent clauses (clauses with a subject and a verb). We create them by joining the two clauses with a conjunction.

• Japanese food is commonly exported around the world and its most famous type of food is sushi.
• We have a lot of farmland, but the country still buys a lot of its food from other countries.
• The country has a high population and not much land so it has to import most of its food.

Common Conjunctions

**While** is used to join independent clauses and has a similar function to **but**.

Example: While fast food is very popular, it is not eaten by everyone.

**Since** is also used to join independent clauses and has a similar meaning to **because**.

Example: Our country does not produce much food since it is too hot here for most things to grow.

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Relative Clauses

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What are Relative Clauses?

We use **relative clauses** to describe or give extra information about an object, person, or place.

• We use **who** to describe people. People who live in urban areas now have different diets.
• We use **that** and **which** for things. The farms that we visited use new approaches to farming.
• We use **where** to describe locations and places. The area where farming takes place is now being used for industry.

Defining Relative Clauses

A **defining relative clause** gives information to explain the specific place, object, or person being described. Without this clause, the meaning of the sentence would be unclear.

Example: Products which are environmentally friendly try to limit the damage they do to the environment. (We are defining which products we are talking about.)

Non-defining Relative Clauses

A **non-defining relative clause** gives extra information about something that is already specific. This type of clause is not essential to the meaning of the sentence and is always set off by **commas (,).**

Example: The farms, which are now a group in the region of Jakarta, are responsible for many of the area's foods. (The farms are already a specific group; the clause adds extra, non-essential information.)

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Literary Terms

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1. Stanza

A **stanza** is a group of lines in a poem, separated from other groups by a blank line. It's the poetic equivalent of a paragraph, used to group together ideas or create a rhythmic structure.

Example: Robert Frost's "Stopping by Woods on a Snowy Evening."

2. Personification

**Personification** is a literary device where human qualities or actions are given to inanimate objects or abstract ideas. It's used to make descriptions more vivid and relatable.

Example: "The wind howled through the trees."

3. Metaphor

A **metaphor** is a figure of speech that directly compares two unlike things without using "like" or "as." It states that one thing is another, implying a deeper connection.

Example: "My brother is a couch potato."

4. Simile

A **simile** is a figure of speech that compares two different things using the words **"like"** or **"as"**. It's used to create a clear and imaginative comparison.

Example: "The clouds were as fluffy as cotton candy."

5. Imagery

**Imagery** is the use of descriptive language that appeals to the **five senses** (sight, sound, smell, taste, touch), creating a vivid mental picture for the reader.

Example: "The crisp, cool air bit at her cheeks, and the scent of pine and damp earth filled her nose."

6. Irony

**Irony** is a literary device where there's a contradiction between what is said and what is meant, or between what happens and what is expected to happen.

Example: A fire station burning down.

7. Hyperbole

**Hyperbole** is an intentional exaggeration used for emphasis or comic effect. It's not meant to be taken literally.

Example: "I'm so hungry I could eat a horse."

8. Climax

The **climax** is the most intense, exciting, or important point in a narrative, representing the peak of the conflict or tension. It's the turning point of the story.

Example: In "Cinderella," when the glass slipper fits her foot.

9. Protagonist

The **protagonist** is the main character in a story, often the hero or the central figure whom the reader follows. They drive the plot forward.

Example: Harry Potter is the protagonist in the Harry Potter series.

10. Plot

**Plot** is the sequence of events that make up a story, including the exposition, rising action, climax, falling action, and resolution.

Example: The sequence of events in "The Three Little Pigs."

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