Guide · Trade terms

Incoterms 2020 explained: all 11 rules, who pays what and where risk passes

Lashed & Secured editorial team · Updated October 2026 · Source: International Chamber of Commerce (ICC), Incoterms® 2020

Incoterms® rules are three-letter trade terms in a sales contract, such as FCA Felixstowe. They set out who arranges and pays for each stage of the journey, who handles customs, and exactly where the risk of loss or damage passes from seller to buyer. Here's how all 11 work in plain English.

Still current: Incoterms 2020. As of October 2026, ICC is working on Incoterms 2030. National ICC committees are collecting comments in 2026, the drafting group is due to produce drafts in 2027, and ICC is aiming to publish the new rules in late 2029, ready for use in 2030. Until then, Incoterms 2020 is the current edition. Contracts that say "Incoterms 2010" still work if both parties agree to it, so always state the edition.

How to write an Incoterm in a contract

Use the rule, then a precise named place, then the edition. For example: FCA Unit 4, Trafford Park, Manchester M17 1AB, Incoterms® 2020. A vague place, such as "FOB UK" or "DAP Germany", causes many of the disputes.

Incoterms don't cover the price, payment terms, when ownership (title) transfers, or what happens if the contract is broken. Those belong in the sales contract itself.

Who does what: the responsibility chart

Seller Buyer No obligation under the rule On a phone, swipe the table sideways. The rule names stay pinned.

Rule	Export packing	Loading at origin	Export customs	Main carriage	Cargo insurance	Unloading at destination	Import customs & duties	Delivery to final place	Risk passes to buyer
Any mode of transport
EXWEx Works	Seller	Buyer	Buyer	Buyer	Buyernot required	Buyer	Buyer	Buyer	At seller's premises, goods made available (not loaded)
FCAFree Carrier	Seller	Seller	Seller	Buyer	Buyernot required	Buyer	Buyer	Buyer	Handed to buyer's carrier at the named place
CPTCarriage Paid To	Seller	Seller	Seller	Seller	Buyernot required	Buyerunless in freight	Buyer	Sellerto the named place	Handed to the first carrier at origin
CIPCarriage & Insurance Paid To	Seller	Seller	Seller	Seller	Sellermust insure	Buyerunless in freight	Buyer	Sellerto the named place	Handed to the first carrier at origin
DAPDelivered at Place	Seller	Seller	Seller	Seller	Sellernot required	Buyer	Buyer	Seller	At named destination, ready for unloading
DPUDelivered at Place Unloaded	Seller	Seller	Seller	Seller	Sellernot required	Seller	Buyer	Seller	At named destination, once unloaded
DDPDelivered Duty Paid	Seller	Seller	Seller	Seller	Sellernot required	Buyer	Seller	Seller	At named destination, import-cleared, ready for unloading
Sea and inland waterway only
FASFree Alongside Ship	Seller	Seller	Seller	Buyer	Buyernot required	Buyer	Buyer	Buyer	Alongside the ship at the port of shipment
FOBFree on Board	Seller	Seller	Seller	Buyer	Buyernot required	Buyer	Buyer	Buyer	On board the ship at the port of shipment
CFRCost and Freight	Seller	Seller	Seller	Seller	Buyernot required	Buyerunless in freight	Buyer	Buyer	On board the ship at the port of shipment
CIFCost, Insurance & Freight	Seller	Seller	Seller	Seller	Sellermust insure	Buyerunless in freight	Buyer	Buyer	On board the ship at the port of shipment

"Loading at origin" means loading onto the collecting vehicle at the seller's premises. Under FCA, the seller only loads if the named place is its own premises. "Unless in freight" means the buyer pays to unload unless the seller's contract of carriage includes it, for example in terminal handling charges. Export packing is the seller's job under every rule, unless the trade normally ships the goods unpacked.

Two groups of rules

Any mode (7 rules): EXW, FCA, CPT, CIP, DAP, DPU and DDP. Use them for road, rail, air, containers and multimodal journeys.
Sea and inland waterway only (4 rules): FAS, FOB, CFR and CIF. Use them only when the goods really are handed over at the ship's side or on board, for example bulk, breakbulk and heavy-lift cargo.

With the four "C" rules (CPT, CIP, CFR and CIF), the seller pays the freight to the destination, but the risk passes to the buyer back at origin. That's the most common misunderstanding about Incoterms.

The 11 rules one by one

EXW Ex Works any mode

Seller: Packs the goods and makes them available at its premises (or another named place). Doesn't load them and doesn't clear them for export.
Buyer: Does everything else: loading, export clearance, all transport, insurance, import clearance and duties.
Risk passes: When the goods are placed at the buyer's disposal at the named place, before loading.
Insurance: Not required by the rule. The buyer carries most of the transit risk, so the buyer should insure.
Good for: Domestic sales, or a buyer with its own trucks and export set-up.
Watch out: The minimum for the seller, but awkward for exports. The buyer usually can't act as the exporter in the seller's country, and if the seller's forklift loads the truck, the seller does it at the buyer's risk. FCA is usually the better choice.

FCA Free Carrier any mode

Seller: Clears the goods for export and hands them to the buyer's carrier at the named place. If that's the seller's premises, the seller loads the vehicle. If it's somewhere else (such as the forwarder's warehouse or a container depot), the seller delivers there on its own truck, ready for unloading.
Buyer: Arranges and pays for the main carriage, insurance, import clearance and duties.
Risk passes: When the goods are handed to the buyer's carrier at the named place.
Insurance: Not required by the rule. The buyer carries most of the transit risk, so the buyer should insure.
Good for: Containers, air freight, groupage and road. It's the go-to rule for most exports.
Watch out: Name the place precisely. Since 2020, the parties can agree that the buyer's carrier issues an on-board bill of lading to the seller, which helps with letters of credit.

CPT Carriage Paid To any mode

Seller: Clears the goods for export, books and pays for carriage to the named destination, and hands the goods to the first carrier.
Buyer: Pays for import clearance and duties, and for unloading unless it's included in the seller's freight contract.
Risk passes: At origin, when the goods are handed to the first carrier, even though the seller pays the freight to destination.
Insurance: Not required by the rule. The buyer carries most of the transit risk, so the buyer should insure.
Good for: Containers and air freight where the seller has good freight rates.
Watch out: There are two critical points. The seller pays to the destination, but the buyer carries the risk from origin. Name both places, for example: CPT Port of Durban, handed over at Felixstowe.

CIP Carriage & Insurance Paid To any mode

Seller: Everything under CPT, plus cargo insurance for the buyer's benefit.
Buyer: Same as CPT: import clearance and duties, and unloading unless it's in the freight.
Risk passes: At origin, when the goods are handed to the first carrier.
Insurance: The seller must insure to Institute Cargo Clauses (A), which is all risks, for at least 110% of the contract value. That's a higher level than under CIF.
Good for: Higher-value manufactured goods in containers or by air.
Watch out: Check that the policy covers the whole route, including the on-carriage to the named place.

DAP Delivered at Place any mode

Seller: Clears the goods for export and delivers them to the named destination on the arriving vehicle, ready for unloading. Pays all transport up to that point.
Buyer: Unloads the goods, clears them for import and pays duties and VAT.
Risk passes: At the named destination, on the arriving vehicle, before unloading.
Insurance: Not required by the rule. The seller carries the transit risk, so the seller should insure.
Good for: Door deliveries where the buyer has its own crane or forklift, or will hire one.
Watch out: Agree who pays for waiting time and demurrage if the buyer isn't ready to unload or import-clear.

DPU Delivered at Place Unloaded any mode

Seller: Everything under DAP, plus unloading at the named place. This is the only Incoterms rule where the seller has to unload at destination.
Buyer: Clears the goods for import and pays duties and VAT.
Risk passes: At the named destination, once the goods are unloaded.
Insurance: Not required by the rule. The seller carries the transit risk, so the seller should insure.
Good for: Project sites and laydown areas where the seller or its forwarder brings the crane. (DPU replaced DAT in 2020.)
Watch out: The seller must be able to unload at that place. Check access, ground bearing pressure, crane permits and site rules before agreeing to it.

DDP Delivered Duty Paid any mode

Seller: Does everything up to the named destination: export clearance, transport, import clearance, and payment of duties and import VAT. Delivers the goods ready for unloading.
Buyer: Unloads the goods.
Risk passes: At the named destination, cleared for import, before unloading.
Insurance: Not required by the rule. The seller carries the transit risk, so the seller should insure.
Good for: Sellers that are set up to import into the buyer's country.
Watch out: The maximum for the seller. A UK seller selling DDP into the EU or the US may need to be the importer of record and register for VAT there. If that's not possible, use DAP.

FAS Free Alongside Ship sea and inland waterway only

Seller: Clears the goods for export and places them alongside the buyer's ship (on the quay or a barge) at the named port of shipment.
Buyer: Pays for loading onto the ship, ocean freight, insurance, import clearance and duties.
Risk passes: When the goods are alongside the ship.
Insurance: Not required by the rule. The buyer carries most of the transit risk, so the buyer should insure.
Good for: Bulk cargo, and heavy-lift or breakbulk pieces delivered to the quay under the ship's hook.
Watch out: It doesn't suit containers, because they go into the terminal days before the ship arrives.

FOB Free on Board sea and inland waterway only

Seller: Clears the goods for export and loads them on board the ship nominated by the buyer at the named port of shipment.
Buyer: Pays for ocean freight, insurance, import clearance, duties and everything at destination.
Risk passes: When the goods are on board the ship.
Insurance: Not required by the rule. The buyer carries most of the transit risk, so the buyer should insure.
Good for: Bulk, breakbulk and heavy-lift cargo that is actually lifted on board at the seller's cost.
Watch out: It's the most misused rule for containers, so see the notes below. Spell out who pays for lashing, securing and stowage on board, because the rule doesn't say.

CFR Cost and Freight sea and inland waterway only

Seller: Clears the goods for export, books and pays for sea freight to the named port of destination, and loads the goods on board.
Buyer: Pays for unloading at destination (unless it's in the freight), import clearance and duties, and arranges insurance.
Risk passes: At the port of shipment, when the goods are on board.
Insurance: Not required by the rule. The buyer carries most of the transit risk, so the buyer should insure.
Good for: Bulk and breakbulk cargo where the seller controls the vessel booking.
Watch out: Like CPT, there are two critical points: the seller pays to destination, but the buyer carries the risk from loading.

CIF Cost, Insurance & Freight sea and inland waterway only

Seller: Everything under CFR, plus marine insurance for the buyer's benefit.
Buyer: Same as CFR.
Risk passes: At the port of shipment, when the goods are on board.
Insurance: The seller must insure, but only to Institute Cargo Clauses (C), which is minimum cover, for 110% of the value. Agree ICC (A) in the contract if you need all-risks cover.
Good for: Commodities and bulk cargo.
Watch out: Containers should use CIP instead, which also gives the buyer better insurance cover.

Containerised cargo: why FOB is the wrong rule

Under FOB, risk passes when the goods are on board the ship. But a container is usually handed to the carrier at an inland depot or the port's container terminal days before it's loaded, and the seller has no control over it from then on. If the box is damaged or dropped in the terminal, it's still at the seller's risk under FOB, even though the seller can't see it, insure it properly or claim easily.

Use FCA instead of FOB for containers. Risk passes when the seller hands the container to the carrier at the named place, such as the container yard (CY), depot or the seller's own premises. That matches what actually happens.
Use CPT or CIP instead of CFR or CIF for containers, for the same reason. CIP also gives the buyer all-risks cover.
Need an on-board bill of lading for a letter of credit? FCA under Incoterms 2020 lets the parties agree that the buyer's carrier issues an on-board B/L to the seller. Put that in the contract.
Terminal handling charges (THC) aren't named in the rules. Agree in writing who pays origin and destination THC, so they aren't charged twice.

Project and heavy-lift cargo

FOB and FAS make sense for breakbulk and heavy lift, where a piece is lifted on board by the ship's gear or a floating crane in front of everyone. But "on board" isn't the same as "stowed, lashed and secured". The rules don't say who pays for lashing, securing, dunnage and stowage. Spell it out, for example: "FOB stowed, lashed and secured, Incoterms 2020, lashing and securing for seller's account". Then check that it matches the charter terms (liner terms, FIO, FILO and so on).
Use FAS when the seller delivers to the quay or a barge under the ship's hook, and the buyer's charter covers the heavy lift on board.
DPU for project sites: when the seller (or its forwarder) brings the cargo to the laydown area and lifts it off. Name the exact spot, such as "DPU Laydown Area 3, North Sea Wind Base, Hull HU9 5PQ". Agree beforehand on ground bearing pressure, crane permits, access roads, the lift plan and the method statement, and on who pays waiting time if the site isn't ready.
Use DAP when the buyer or main contractor has a crane on site and wants to control the final lift itself. Risk passes on the trailer, before unloading.
Abnormal loads: route surveys, police or escort notifications, and permits belong to whoever contracts that leg of the carriage. Make sure this is clear for the road legs at both ends.
Insurance: the 110% minimum may not cover delay in start-up (DSU) or consequential loss on a project. Most projects arrange a separate marine cargo or project policy, whatever Incoterm is used.

Quick picks

Selling a container from the UK and the buyer books the freight: FCA (your premises or the depot).
Selling a container and you book the freight: CPT, or CIP if you're also covering insurance.
Delivering to the buyer's door, with the buyer handling import: DAP, or DPU if you also unload.
Bulk, breakbulk or heavy lift going over the ship's rail: FOB, FAS, CFR or CIF, with lashing and stowage spelt out.
Selling everything to the door including duties: DDP, but only if you can legally act as importer in the buyer's country.

Sources

International Chamber of Commerce (ICC), Incoterms® 2020: the official rules, key changes, FCA on-board bill of lading, CIP and CIF insurance levels, and DAT renamed DPU (accessed October 2026).
ICC Austria, Incoterms® 2030: under development, with publication planned for late 2029, and Incoterms 2020 current until then (accessed October 2026).
ICC Germany, Incoterms® 2030 working group: national comments in 2026, drafts in 2027 and launch at the end of 2029 (accessed October 2026).

Guidance only. This is a plain-English summary, not legal advice and not the official text. The Incoterms® rules are published by ICC, and "Incoterms" is a registered trademark of the International Chamber of Commerce. For contract wording, read the official ICC publication and take advice from your freight forwarder, insurer or a trade lawyer.