A GUIDE TO INCOTERMS®

Understand how Incoterms® allocates responsibility, cost and risk across international shipments.

What are Incoterms®?

Incoterms®, short for International Commercial Terms, are pre-defined rules developed by the International Chamber of Commerce (ICC), providing a globally recognised legal and commercial standard for cargo in transit. 

Incoterms® are used in international sales contracts to clearly define the responsibilities of buyers and sellers, reducing confusion in cross-border trade. When applied to a transaction, both parties gain clarity of their respective obligations.

Key points to confirm upfront:

  • Costs: Which party pays for transport, handling and related charges at each stage

  • Responsibilities: Who manages export formalities, carriage and delivery activities

  • Risk: When responsibility for the cargo transfers from seller to buyer, and where insurance applies
     

Clear alignment helps prevent delays, disputes and unexpected costs during the international movement of goods.

There are 11 sets of Incoterms®:

  • Seven apply to any mode of transport

  • Four apply specifically to sea and inland waterway transport
     

The Incoterms® rules currently in force are Incoterms® 2020, published by the ICC in 2019.

Infographic comparing Incoterms responsibilities, showing seller and buyer allocation of costs and risks across shipping stages from origin to destination for terms including EXW, FCA, CPT, CIP, DAP, DPU, DDP, FAS, FOB, CFR, and CIF, with seller in dark blue and buyer in green.

Comparison of seller and buyer obligations across every Incoterms® rule, from origin to destination.

 

Incoterms® for Each Purpose

Rules for Any Mode or Modes of Transport

  • EXW (Ex Works)
    The seller makes the goods available at their premises. The buyer assumes responsibility for loading, export formalities, transport and risk from that point onward.

  • FCA (Free Carrier)
    The seller delivers the goods to a carrier or agreed location, usually including loading and export clearance. Risk transfers to the buyer at handover.

  • CPT (Carriage Paid To)
    The seller arranges and pays for transport to the named destination. Risk transfers to the buyer once the goods are handed to the carrier.

  • CIP (Carriage and Insurance Paid To)
    The seller pays for transport and insurance to the named destination. Risk transfers to the buyer once the goods are handed to the carrier.

  • DAP (Delivered at Place)
    The seller delivers the goods ready for unloading at the agreed destination, ready for unloading, while the buyer is responsible for import clearance and duties. 

  • DPU (Delivered at Place Unloaded)
    The seller delivers and unloads the goods at the agreed destination, taking responsibility for transport, risk and unloading.

  • DDP (Delivered Duty Paid)
    The seller assumes maximum responsibility, delivering goods to the buyer’s location and managing transport, import clearance, duties and taxes. The buyer is responsible for unloading.

 

Rules for Sea and Inland Waterway Transport

  • FAS (Free Alongside Ship)
    The seller places the goods alongside the vessel at the named port of shipment. Risk transfers to the buyer before loading onto the vessel.

  • FOB (Free on Board)
    The seller loads the goods onto the vessel at the port of shipment. Risk transfers to the buyer once loading is complete.

  • CFR (Cost and Freight)
    The seller pays for sea transport to the destination port, but risk transfers to the buyer once the goods are loaded on board the vessel.

  • CIF (Cost, Insurance and Freight)
    The seller pays for sea transport and insurance to the destination port, but risk transfers to the buyer once the goods are loaded on board the vessel.

 

Disclaimer

This content is provided for general information purposes only. DP World is not party to sales contracts between buyers and sellers. Where uncertainty exists regarding the application of Incoterms® in a specific transaction, independent legal advice should be sought.

The Incoterms® rules are protected by copyright owned by the International Chamber of Commerce (ICC). For the full official wording and the latest version, visit the International Chamber of Commerce (ICC) website.