The Incoterms 2020 rules are the eleven International Chamber of Commerce terms that set where the seller’s responsibility ends and the buyer’s begins: who pays for carriage, who bears the risk, who clears customs and who insures. They do not govern transfer of ownership or payment terms — those stay in the contract.
Eleven rules, two families
Seven rules apply to any mode of transport, four only to sea and inland waterway transport. Using a maritime rule on a road shipment is one of the most common contract errors.
| Rule | Carriage | Import clearance | Risk passes |
|---|---|---|---|
| EXW | Buyer | Buyer | At the seller’s premises |
| FCA | Buyer | Buyer | On delivery to the carrier |
| CPT | Seller to the agreed place | Buyer | On delivery to the first carrier |
| CIP | Seller, insurance included | Buyer | On delivery to the first carrier |
| DAP | Seller | Buyer | On arrival, before unloading |
| DPU | Seller, unloading included | Buyer | After unloading |
| DDP | Seller | Seller | On arrival, before unloading |
| FAS / FOB | Buyer | Buyer | At the port of shipment (sea only) |
| CFR / CIF | Seller to the port of destination | Buyer | On loading (sea only) |
Three things Incoterms do not do
- They do not transfer ownership. That depends on the contract and the governing law.
- They do not set payment terms. DDP does not imply prepayment, EXW does not imply the opposite.
- They are not insurance, except CIP and CIF, which require cover from the seller at different levels.
The errors we see most
- FOB on containerised shipments. FOB assumes delivery on board; containers are handed over at the terminal. For containers the correct rule is normally FCA.
- EXW on exports. Under EXW the seller is not formally responsible for export clearance, yet in practice the declaration still has to originate with them. The rule creates more problems than it solves.
- DDP without checking the market. In many countries a non-resident cannot act as importer. Before selling DDP, check the specific market.
- A rule with no named place. An Incoterm without a precise place is incomplete: “DAP Milan” and “DAP customer’s warehouse, X street” are not the same thing.
How to choose in practice
The right question is not “which rule is best” but who can actually do what in the destination country. If the buyer has a local structure and can clear, DAP is almost always the cleanest choice. If they cannot and you can take on the import, DDP makes sense. If neither can, the structure needs rethinking before the contract, not after the shipment.
Frequently asked questions
How many Incoterms 2020 rules are there?
Eleven: seven for any mode of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and four for sea and inland waterway transport only (FAS, FOB, CFR, CIF).
What is the difference between DAP and DDP?
Under both, the seller delivers to the agreed destination. Under DDP the seller also clears the goods for import and bears duty and VAT; under DAP that falls to the buyer.
Can I use FOB for a container shipment?
It is not advisable. FOB assumes delivery on board a vessel, while containers are delivered at the terminal. FCA is normally the correct rule for containers.
Do Incoterms govern transfer of title?
No. They govern delivery, risk and the allocation of costs. Ownership and payment terms remain matters of contract.
Which rules include insurance?
CIP and CIF require the seller to provide cover, at different levels. Under the other rules insurance is a matter for the parties.
What changes between DPU and DAP?
Under DPU the seller delivers the goods unloaded at the named place; under DAP delivery happens before unloading, which stays with the buyer.
Do I have to name a place with the rule?
Yes, always and as precisely as possible. A rule without a named place is incomplete and invites disputes about exactly where risk passes.
Can Incoterms 2010 still be used?
Parties may refer to an earlier version provided they say so expressly in the contract. Absent that, it is safer to refer to the current version.
Send us the term you are about to sign and the destination market. We will tell you whether it is workable and, if not, which alternative still delivers to the customer’s door. See also foreign trade consultancy.
Incoterms® is a registered trademark of the International Chamber of Commerce. This page is informational; the binding text is the official ICC publication.