Incoterms® 2020 Study Guide
A clear overview of international commercial terms for buyers and sellers.
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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