The Incoterms® 2020 rules, developed by the International Chamber of Commerce (ICC), help sellers and buyers allocate obligations when supplying goods. They address transport arrangements, costs and the point at which the risk of loss or damage passes. The selected rule should identify a specific place and edition: exchanging the letters FCA or DAP alone does not provide a clear contractual arrangement. ICC: Incoterms® 2020.
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A practical review before purchasing starts with three separate questions: who arranges carriage, when the buyer assumes risk, and who handles customs formalities. The answers should match the route, quotation and capabilities of the parties. Pay particular attention to offers promising an “all-inclusive” delivery without explaining what the price includes.
The Incoterms rules do not determine ownership transfer, payment arrangements or the consequences of every contractual breach. Those matters remain subject to the contract and applicable law. Advance payment, shipment and risk transfer can therefore occur on different dates. Specify requirements for the goods, timing, documents, acceptance and dispute resolution separately. ICC: introduction to the rules.
Consider a machine purchase: the buyer pays a deposit, the goods are handed to a carrier, and the balance falls due after testing. A payment record cannot establish the parties’ entire position. Review the delivery term, ownership clause and acceptance provisions together. Legal support for international trade addresses the wider contractual arrangement.
This table shows the usual risk-transfer point when both parties fulfil their obligations. It does not list exceptions arising, for example, from a buyer’s failure to act on time. “Main carriage” means the principal transport leg after the goods are handed over at origin. Check terminal charges and additional operations against the contract and the selected rule.
| Rule | Suitable transport | Where the seller delivers the goods and transfers risk | Who arranges main carriage |
|---|---|---|---|
| EXW | Any mode, including multimodal | At the agreed place, with the goods available to the buyer but not loaded on the collecting vehicle | Buyer |
| FCA | Any mode, including multimodal | At the seller’s premises: after loading on the buyer’s vehicle. Elsewhere: on the seller’s arriving vehicle, ready for unloading and available to the buyer’s nominated carrier or other person | Buyer |
| CPT | Any mode, including multimodal | On handover to the carrier; ordinarily the first carrier in a chain unless a different delivery point is agreed | Seller, to the named destination |
| CIP | Any mode, including multimodal | On handover to the carrier; ordinarily the first carrier in a chain unless a different delivery point is agreed. Insurance does not postpone risk transfer until arrival | Seller, to the named destination |
| DAP | Any mode, including multimodal | At the named destination, available to the buyer on the arriving vehicle, ready for unloading | Seller |
| DPU | Any mode, including multimodal | At the named destination, unloaded and available to the buyer | Seller |
| DDP | Any mode, including multimodal | At the named destination, import-cleared and available to the buyer on the arriving vehicle, ready for unloading | Seller |
| FAS | Sea or inland waterway | Alongside the buyer-nominated vessel at the shipment port | Buyer |
| FOB | Sea or inland waterway | On board the buyer-nominated vessel at the shipment port | Buyer |
| CFR | Sea or inland waterway | On board the vessel at the shipment port | Seller, to the named destination port |
| CIF | Sea or inland waterway | On board the vessel at the shipment port; insurance does not change this point | Seller, to the named destination port |
This independently prepared table draws on ICC Academy explanations of EXW/FCA, CPT/CIP, DAP/DPU, DDP/EXW, FAS/FOB and CFR/CIF.
CPT, CIP, CFR and CIF involve two distinct points: delivery, where risk ordinarily transfers, and the destination to which the seller pays for carriage. Under these C-rules, risk passes at origin even though the destination appears in the delivery term. ICC Academy: C-rules and D-rules.
In a hypothetical purchase, the parties agree CIP to the buyer’s warehouse and identify the factory as the place of handover to the first carrier. The carrier accepts the goods at the factory, then an accident occurs. The buyer will need the handover record, insurance document and accident records, not just an invoice showing prepaid freight. Knowing who paid for the truck does not, by itself, establish who bore the risk.
Record two separate entries for each purchase: “risk-transfer point” and “end of seller-paid carriage”. If staff enter the same address in both merely because it follows CIP, review the contract again. The logistics service is the relevant route for discussing transport legs.
Under EXW, the seller need not load the collecting vehicle or perform export clearance. FCA places export formalities with the seller; loading is also the seller’s obligation when delivery occurs at its premises. ICC Academy highlights the practical export difficulties that can arise with EXW in cross-border trade. ICC Academy: EXW and DDP.
For example, a factory quotes EXW but actually loads the pallets and clears them for export. Ask for a term reflecting those operations and an identified handover point. Compare quotations on the same scope of work: a lower EXW price excluding loading and collection does not establish a cheaper overall purchase.
FOB requires delivery on board a vessel. If the seller hands a container over at a terminal before vessel loading, FCA will usually fit the operation better. A sea leg does not, by itself, make FOB appropriate for the transaction. ICC Academy: FCA and FOB.
Suppose a terminal accepts the container on Monday and the vessel loads on Friday. Before signing, establish which document records delivery and how obligations are allocated between those events. A port name without a specific terminal leaves too much uncertainty for the people handling the shipment.
Under DAP, the buyer handles import clearance and its associated payments; under DDP, those obligations fall to the seller. Both rules provide for goods ready for unloading at destination; unloading by the seller is not their standard requirement. Check in advance whether the seller can fulfil the import formalities. ICC Academy: DAP and DDP.
Unloading charges may already be included in the carriage contract paid for by the seller. Check separately who performs unloading, who bears its risk and whom the carrier invoices. ICC Academy: DDP and EXW.
If a supplier promises DDP, request the actual arrangement: who submits the declaration, who makes the payments, and which documents the buyer receives. The three letters do not prove that the arrangement is workable. Planning customs clearance requires reviewing the participants, goods and route; the customs-post map helps locate customs offices.
CIF is for sea and inland waterway transport; CIP works with any mode, including multimodal carriage. CIF’s default insurance level corresponds to Institute Cargo Clauses (C), while CIP requires the broader Clauses (A), or comparable cover; parties can agree changes. In both cases, the seller insures the buyer’s risk, which passes before arrival. ICC Academy: CIF and CIP.
For expensive equipment, compare policies for handling damage, packaging restrictions, exclusions and claims procedures. Seeing CIP in a quotation does not replace reading the policy. If the journey ends at a warehouse, check that the insurance period covers the final leg and the agreed handling operations.
Identify the rule, the precise place or port, and the edition. For C-rules, also agree the carrier-handover point or shipment port: the named destination does not identify the risk-transfer point. Specifying a point within a site reduces disagreement about where the vehicle must go. ICC Academy: delivery location and risk transfer.
A working template is FCA — precise seller’s warehouse address and specified loading area — Incoterms® 2020. Replace the words describing the address and loading area with actual details before signing. For CIP, record both the agreed carrier-handover point and destination. Cross-check the contract, specification and transport order so that one participant is not working to the factory address while another expects a terminal.
A contract annex can gather the required documents, responsible contacts, readiness-notice deadline and procedure for route changes. These are operational details of your shipment: an abbreviation cannot reconstruct them after a problem occurs.
CIF and CIP expressly require the seller to arrange cargo insurance. With other rules, decide separately how to insure the shipment; the absence of that obligation does not remove risk. Cargo insurance is also different from protection against a buyer’s failure to pay. ICC Academy: practical use of the rules.
Before shipment, request the policy or certificate and check the cargo, route, insurance period, amount, exclusions and claims procedure. The cargo insurance service is relevant when preparing that enquiry. Assign someone to obtain records if damage occurs, instead of identifying a responsible person only after unloading.
The Incoterms rules allocate obligations between the parties; they do not set statutory duty rates or replace customs-valuation rules. The letters CIF or DDP cannot establish a classification code or calculate customs payments. ICC specifically identifies tariff imposition and trade prohibitions as matters outside the rules. ICC: matters not covered by Incoterms.
Separate the goods price, freight, insurance and other expenses in the supporting documents. Then refer to the guides on customs value and payments and TN VED classification. This makes an enquiry more specific and helps reveal missing evidence.
When buying branded goods outside the official distribution channel, keep delivery terms separate from the legal basis for import. Neither FCA nor DDP establishes authenticity or permission to import without the right holder's consent. Check the parallel-import conditions separately, then agree who obtains and supplies the supporting documents.
Senateks’ practical recommendation is to compare supplier offers against one consistent list of operations. Ask suppliers to mark included costs explicitly and provide the route. This provides a sounder basis for comparison than looking at the totals of two quotations with different delivery terms.
A working aid for contract discussions, not a new version of the Incoterms® rules.
| Point to agree | Where to record it | Responsibility/open question |
|---|---|---|
| Chosen rule, edition and named place | Contract/quotation | Specify the exact address or point |
| Handover of goods | Identify the supporting document | Who hands over and receives the goods? |
| Paid transport segment | Carrier's quotation/contract | Where does it start and end? |
| Loading and unloading | List of included work | Who arranges and pays for it? |
| Insurance, if provided | Policy/coverage terms | Route, risks and exclusions |
| Unresolved work | List of questions | Who will clarify it, and by which stage? |
Do not assume that the point of risk transfer and the end of the paid transport segment are the same without checking the chosen rule and contract.
Specify the exact address, the operations to be performed there, cost allocation and the applicable rule and edition. Otherwise, different participants may assume that “delivery” includes different tasks.
No. FOB is a sea and inland waterway rule. For an air route, choose an appropriate rule from the any-mode group. ICC: groups of rules.
With DPU, the seller delivers after unloading; with DAP, the goods are ready to be unloaded. Before choosing DPU, check the equipment and ability to perform the work at the agreed place. ICC Academy: DPU and DAP.
Start by establishing when damage occurred and where risk transferred, then examine the carriage contract and insurance policy. The delivery term alone does not determine the complete recovery procedure against a carrier or insurer.
Before requesting transport, check the handover location, the paid transport segment and the work included at departure and arrival. For a route and transport discussion, prepare the supplier's quotation, addresses and a list of included services. Discuss cargo insurance assistance separately when considering risk coverage.
Incoterms® is a trademark of the International Chamber of Commerce (ICC). This is an independent practical overview; the official rules are published by ICC.