Incoterms 2020 Explained
The 11 international trade terms that define who pays, who's responsible, and where risk transfers, point A to point B.
What Are Incoterms?
Incoterms (International Commercial Terms) are a set of 11 standardized rules published by the International Chamber of Commerce (ICC) and updated in 2020. They define exactly who, the buyer or the seller, is responsible for transport, insurance, customs, duties, and risk at each stage of an international shipment. Agreeing on the right Incoterm up front prevents disputes, surprise costs, and delays.
The terms are grouped by how much responsibility the seller takes on, from EXW (seller does the least) to DDP (seller does the most). Four terms (FAS, FOB, CFR, CIF) apply only to sea and inland waterway transport; the other seven work for any mode.
Note: Incoterms 2020 is the current, in-force edition. The ICC revises the rules roughly once a decade, and despite searches for an “Incoterms 2026,” no newer version has been released, so contracts should continue to reference Incoterms 2020.
EXW — Ex Works · Any mode
The seller simply makes the goods available at their own premises. From that point, the buyer takes on everything, loading, export clearance, main transport, insurance, and import duties. Minimum obligation for the seller, maximum for the buyer.
FCA — Free Carrier · Any mode
The seller delivers the goods, cleared for export, to a carrier or place chosen by the buyer. Risk transfers to the buyer once the goods are handed over. A flexible, widely used term for containerized and multimodal freight.
FAS — Free Alongside Ship · Sea only
The seller delivers when the goods are placed alongside the vessel (on the quay or a barge) at the named port. The buyer assumes all cost and risk from that point, including loading onto the ship. Used for bulk and oversized cargo.
FOB — Free On Board · Sea only
The seller delivers the goods on board the vessel at the named port of shipment. Risk transfers to the buyer once the goods are loaded. One of the most common terms in international sea freight.
CFR — Cost and Freight · Sea only
The seller pays the cost and freight to bring the goods to the destination port, but risk transfers to the buyer once the goods are on board at origin. The seller pays for carriage; the buyer carries the risk during the voyage.
CIF — Cost, Insurance and Freight · Sea only
The same as CFR, but the seller also buys insurance covering the buyer's risk during the main sea voyage. The seller arranges cost, freight, and minimum insurance to the destination port.
CPT — Carriage Paid To · Any mode
The seller pays for carriage to the named destination, but risk transfers to the buyer as soon as the goods are handed to the first carrier. The seller's payment obligation reaches further than its risk obligation.
CIP — Carriage and Insurance Paid To · Any mode
Like CPT, but the seller also provides insurance covering the buyer's risk during transport, at the higher all-risks level under Incoterms 2020. Works for any mode, including multimodal shipments.
DAP — Delivered At Place · Any mode
The seller bears all costs and risks of delivering the goods to the named destination, ready for unloading. The buyer is responsible for import clearance and duties. Common for door-to-door deliveries.
DPU — Delivered At Place Unloaded · Any mode
The seller delivers and unloads the goods at the named destination, bearing all costs and risks up to that point. The only Incoterm that requires the seller to unload. The buyer handles import clearance and duties.
DDP — Delivered Duty Paid · Any mode
The seller bears all costs and risks of delivering the goods to the buyer, including import duties, taxes, and customs clearance. The buyer simply receives the goods with nothing more to pay. Maximum obligation for the seller, and where A2B Link's IOR/EOR services often come in.
Who's Responsible, At Each Stage
This matrix shows where the seller's responsibility ends and the buyer's begins for each Incoterm. Seller Buyer
| Term | Export Pkg | Loading | Export Customs | Main Carriage | Insurance | Import Customs | Duties & Tax | Delivery |
|---|
Scroll horizontally to view all stages. Insurance is only mandatory under CIF and CIP; other terms leave it optional.
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