Who pays, who is at risk, and where it changes hands. The 11 trade terms on your quotes, sales contracts and letters of credit, in plain English. Pick the right one and you avoid surprise charges, insurance gaps and cargo stuck at the port.
Under CFR, CIF, CPT and CIP the seller pays the freight to destination, but the risk passes to the buyer at origin. If cargo is damaged in transit, it is the buyer’s loss, so the buyer should check what insurance covers it.
Term finder
Which Incoterm fits your shipment?
Answer three or four questions and see where to start. Then open the term to check the detail.
Your starting point
FCA
Free Carrier
The seller clears the goods for export and hands them to the carrier the buyer chose. The buyer pays the freight and carries the risk from that handover.
Clauses (A) and (C) are the Institute Cargo Clauses: (A) is all-risks cover, (C) is the minimum. Under CIP and CIF the seller insures for at least 110% of the contract price.
All 11 terms
Every Incoterm, one at a time
The first bar shows how far the seller pays. The second shows where the risk passes to the buyer. Then: who does what, when to use it and what to watch.
Any modeSea only
EXW
EXW: Ex Works
+ named place of deliveryAny mode of transport
The seller makes the goods available for collection, usually at its own premises. From there everything is the buyer’s job, including loading and export clearance.
The journeySellerBuyer
Seller’s premisesSeller
Origin port or terminalOrigin
Main carriageCarriage
Destination port or terminalDestination
Buyer’s placeBuyer
Who pays
Buyer
Seller pays up to here: goods ready, not loaded
Who carries the risk
Buyer
Risk passes here: at the pickup point, before loading
Export clearance Buyer
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Packs the goods and has them ready at the named place
Tells the buyer when and where to collect
Helps with export paperwork if asked, at the buyer’s cost
BThe buyer
Loads the goods onto the collecting truck
Clears the goods for export
Arranges and pays for all transport
Clears the goods for import and pays duty and taxes
Best for
Domestic sales, where the goods are not being exported.
Watch out
A buyer abroad may struggle to clear the goods for export. The seller does not have to load; if it helps, agree first who carries that risk. For exports, FCA is usually the better fit.
The seller hands the goods, cleared for export, to the carrier the buyer has chosen, at the named place.
The journeySellerBuyer
Seller’s premisesSeller
Origin port or terminalOrigin
Main carriageCarriage
Destination port or terminalDestination
Buyer’s placeBuyer
Who pays
SellerBuyer
Seller pays up to the named place
Who carries the risk
SellerBuyer
Risk passes here: when handed to the buyer’s carrier
Export clearance Seller
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Packs the goods and clears them for export
Loads the buyer’s truck, if the named place is the seller’s premises
Or delivers to the named terminal, ready for unloading
BThe buyer
Chooses the carrier and pays the main freight
Insures the goods if it wants cover
Clears the goods for import and pays duty and taxes
Arranges delivery at destination
Best for
Containers and air freight when the buyer controls the freight.
Watch out
The named place decides who loads and where the risk passes, so name it exactly. If a bank needs an on-board bill of lading, agree that in the contract.
Write it like this
FCA Port Newark Container Terminal, NJ Incoterms® 2020
CPT
CPT: Carriage Paid To
+ named place of destinationAny mode of transport
The seller pays the freight to the named destination, but the risk passes to the buyer early: when the goods are handed to the first carrier.
The journeySellerBuyerSeller, if the named place is that far
Seller’s premisesSeller
Origin port or terminalOrigin
Main carriageCarriage
Destination port or terminalDestination
Buyer’s placeBuyer
Who pays
Seller
Seller pays the freight to the named destination (port, airport or door)
Who carries the risk
SellerBuyer
Risk passes here: when handed to the first carrier
Export clearance Seller
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Clears the goods for export
Books and pays the carriage to the named destination
Hands the goods to the first carrier
BThe buyer
Carries the risk during the main transport
Insures the goods if it wants cover
Clears the goods for import and pays duty and taxes
Pays for unloading, unless the freight already includes it
Best for
Containers and air freight when the seller arranges the freight.
Watch out
Two places matter: where the goods are handed over (risk) and the destination (freight). Name both. The seller does not have to insure.
Write it like this
CPT Jeddah Islamic Port, Saudi Arabia Incoterms® 2020
CIP
CIP: Carriage and Insurance Paid To
+ named place of destinationAny mode of transport
The same as CPT, plus one thing: the seller must insure the goods for the buyer, with all-risks cover.
The journeySellerBuyerSeller, if the named place is that far
Seller’s premisesSeller
Origin port or terminalOrigin
Main carriageCarriage
Destination port or terminalDestination
Buyer’s placeBuyer
Who pays
Seller
Seller pays the freight to the named destination (port, airport or door)
Who carries the risk
SellerBuyer
Risk passes here: when handed to the first carrier
Export clearance Seller
Import duty and taxes Buyer
Insurance Seller, all risks
SThe seller
Clears the goods for export
Books and pays the carriage to the named destination
Buys all-risks cargo insurance for at least 110% of the contract value
BThe buyer
Carries the risk during the main transport
Claims on the seller’s insurance if something goes wrong
Clears the goods for import and pays duty and taxes
Pays for unloading, unless the freight already includes it
Best for
Containers and air freight when the seller also arranges the insurance.
Watch out
The seller pays for the insurance, but the risk in transit is still the buyer’s. The two sides can agree a lower level of cover in writing.
Write it like this
CIP King Khalid International Airport, Riyadh Incoterms® 2020
DAP
DAP: Delivered at Place
+ named place of destinationAny mode of transport
The seller delivers the goods to the named place at destination, on the arriving vehicle, ready for unloading.
The journeySellerBuyer
Seller’s premisesSeller
Origin port or terminalOrigin
Main carriageCarriage
Destination port or terminalDestination
Buyer’s placeBuyer
Who pays
Seller
Seller pays up to here: arrived, not unloaded
Who carries the risk
Seller
Risk passes here: at destination, ready for unloading
Export clearance Seller
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Clears the goods for export
Arranges and pays for all transport to the named place
Carries the risk until the goods arrive there
BThe buyer
Unloads the goods
Clears the goods for import and pays duty and taxes
Best for
Door deliveries where the buyer handles its own import clearance.
Watch out
If import clearance is delayed, the storage and other costs that follow fall on the buyer. The seller carries the risk in transit but is not obliged to insure.
Write it like this
DAP Buyer’s warehouse, Dammam, Saudi Arabia Incoterms® 2020
DPU
DPU: Delivered at Place Unloaded
+ named place of destinationAny mode of transport
The seller delivers the goods to the named place at destination and unloads them. It is the only rule where the seller unloads.
The journeySellerBuyer
Seller’s premisesSeller
Origin port or terminalOrigin
Main carriageCarriage
Destination port or terminalDestination
Buyer’s placeBuyer
Who pays
Seller
Seller pays up to here: unloaded
Who carries the risk
Seller
Risk passes here: at destination, once unloaded
Export clearance Seller
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Clears the goods for export
Arranges and pays for all transport to the named place
Unloads the goods there
Carries the risk until they are unloaded
BThe buyer
Clears the goods for import and pays duty and taxes
Takes the goods on from the named place
Best for
Deliveries to a terminal, warehouse or site where the seller can arrange the unloading.
Watch out
Be sure the seller can actually unload at the named place. If not, DAP is the better choice. DPU replaced DAT in the 2020 rules.
Write it like this
DPU Sohar Port and Freezone, Oman Incoterms® 2020
DDP
DDP: Delivered Duty Paid
+ named place of destinationAny mode of transport
The seller does almost everything: transport to the named place, import clearance, duty and taxes. The buyer only unloads.
The journeySellerBuyer
Seller’s premisesSeller
Origin port or terminalOrigin
Main carriageCarriage
Destination port or terminalDestination
Buyer’s placeBuyer
Who pays
Seller
Seller pays up to here: arrived, duty paid, not unloaded
Who carries the risk
Seller
Risk passes here: at destination, ready for unloading
Export clearance Seller
Import duty and taxes Seller
Insurance Nobody has to
SThe seller
Clears the goods for export and for import
Pays duty and taxes at destination
Arranges and pays for all transport to the named place
Carries the risk until the goods arrive there
BThe buyer
Unloads the goods
Helps with import documents if asked
Best for
Buyers who want one landed price to the door, with nothing left to arrange.
Watch out
The seller pays duty and import taxes and may not be able to recover the tax. If the seller cannot clear goods for import in the buyer’s country, use DAP or DPU.
+ named port of shipmentSea and inland waterway only
The seller places the goods alongside the vessel, on the quay or a barge, at the named port. From there they are the buyer’s.
The journeySellerBuyer
Seller’s premisesSeller
Origin portOrigin
Ocean voyageCarriage
Destination portDestination
Buyer’s placeBuyer
Who pays
SellerBuyer
Seller pays up to here: alongside the vessel
Who carries the risk
SellerBuyer
Risk passes here: alongside the vessel
Export clearance Seller
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Clears the goods for export
Delivers the goods alongside the vessel the buyer has named
BThe buyer
Books the vessel and pays for loading and ocean freight
Insures the goods if it wants cover
Clears the goods for import and pays duty and taxes
Best for
Bulk, break bulk and heavy cargo delivered to the quay.
Watch out
Not for containers: they are handed over at a terminal, not alongside the ship. Use FCA instead.
Write it like this
FAS Port of Houston, TX Incoterms® 2020
FOB
FOB: Free On Board
+ named port of shipmentSea and inland waterway only
The seller loads the goods on board the vessel the buyer has chosen, at the named port. The risk passes once they are on board.
The journeySellerBuyer
Seller’s premisesSeller
Origin portOrigin
Ocean voyageCarriage
Destination portDestination
Buyer’s placeBuyer
Who pays
SellerBuyer
Seller pays up to here: loaded on board
Who carries the risk
SellerBuyer
Risk passes here: on board the vessel
Export clearance Seller
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Clears the goods for export
Delivers the goods to the port and loads them on board
BThe buyer
Books the vessel and pays the ocean freight
Insures the goods if it wants cover
Clears the goods for import and pays duty and taxes
Best for
Bulk, break bulk and other cargo loaded directly onto the vessel.
Watch out
With containers the seller gives up the box at the terminal but keeps the risk until it is on board. FCA fits containers better.
Write it like this
FOB Port of Savannah, GA Incoterms® 2020
CFR
CFR: Cost and Freight
+ named port of destinationSea and inland waterway only
The seller pays the ocean freight to the named port of destination, but the risk passes to the buyer once the goods are on board at the origin port.
The journeySellerBuyer
Seller’s premisesSeller
Origin portOrigin
Ocean voyageCarriage
Destination portDestination
Buyer’s placeBuyer
Who pays
SellerBuyer
Seller pays the freight to the destination port
Who carries the risk
SellerBuyer
Risk passes here: on board at the origin port
Export clearance Seller
Import duty and taxes Buyer
Insurance Nobody has to
SThe seller
Clears the goods for export
Loads the goods on board
Books and pays the ocean freight to the named port
BThe buyer
Carries the risk during the voyage
Insures the goods if it wants cover
Clears the goods for import and pays duty and taxes
Pays for unloading, unless the freight already includes it
Best for
Bulk and break bulk when the seller arranges the vessel.
Watch out
Two ports matter: the origin port (risk) and the destination port (freight). The seller does not have to insure. For containers, use CPT.
Write it like this
CFR Port of Karachi, Pakistan Incoterms® 2020
CIF
CIF: Cost, Insurance and Freight
+ named port of destinationSea and inland waterway only
The same as CFR, plus one thing: the seller must insure the goods for the buyer, with minimum cover.
The journeySellerBuyer
Seller’s premisesSeller
Origin portOrigin
Ocean voyageCarriage
Destination portDestination
Buyer’s placeBuyer
Who pays
SellerBuyer
Seller pays the freight to the destination port
Who carries the risk
SellerBuyer
Risk passes here: on board at the origin port
Export clearance Seller
Import duty and taxes Buyer
Insurance Seller, minimum cover
SThe seller
Clears the goods for export
Loads the goods on board
Books and pays the ocean freight to the named port
Buys minimum-cover cargo insurance for at least 110% of the contract value
BThe buyer
Carries the risk during the voyage
Claims on the seller’s insurance if something goes wrong
Clears the goods for import and pays duty and taxes
Pays for unloading, unless the freight already includes it
Best for
Bulk and break bulk when the seller arranges the vessel and the insurance.
Watch out
Minimum cover is narrow: major casualties such as fire, sinking or collision. Agree wider cover in the contract if you need it. For containers, use CIP.
Write it like this
CIF Jeddah Islamic Port, Saudi Arabia Incoterms® 2020
Before you sign
Six mistakes that cost money
Each of these is easy to avoid once you know it is there.
FOB or CIF on a container
The box is handed over at the terminal, but the seller keeps the risk until it is on board. Use FCA, CPT or CIP.
No exact place
“FOB USA” says nothing. Name the port, the terminal or the street address.
No version
Write “Incoterms® 2020” after the place. Earlier versions are not the same.
Reading C terms as “seller’s risk”
On CPT, CIP, CFR and CIF the seller pays the freight, but the buyer carries the risk in transit.
Assuming the goods are insured
Only CIP and CIF oblige the seller to insure, and CIF only at minimum cover.
Forgetting destination charges
On C terms, unloading charges at destination are the seller’s only if the carriage contract says so. Agree in writing who pays them.
How to write one
Rule, named place, version.
Name the place as exactly as you can. It decides where delivery happens and where the risk passes.
Incoterms are 11 three-letter trade terms published by the International Chamber of Commerce (ICC). In a contract for the sale of goods, each one sets out who arranges and pays for transport, who clears the goods for export and import, and the point where the risk of loss or damage passes from the seller to the buyer. Incoterms 2020 is the current edition.
What is the difference between FOB and CIF?
Under FOB the seller loads the goods on board at the origin port and the buyer books and pays the ocean freight. Under CIF the seller pays the ocean freight to the destination port and buys minimum-cover insurance. In both, the risk passes to the buyer once the goods are on board at the origin port.
Which Incoterm should I use for a container shipment?
FCA, CPT or CIP. Containers are handed to the carrier at a terminal before they are loaded on the ship, and the ICC’s notes say FOB, CFR and CIF do not fit that. FCA takes the place of FOB, CPT of CFR and CIP of CIF.
Who pays for insurance under Incoterms?
Only CIP and CIF oblige the seller to insure the goods for the buyer: all-risks cover (Institute Cargo Clauses A) under CIP and minimum cover (Clauses C) under CIF, for at least 110% of the contract price. Under every other term nobody is obliged to insure, so whoever carries the risk should arrange cover.
What is the difference between DAP and DDP?
Under both, the seller delivers to the named place at destination and carries the risk until the goods arrive there, ready for unloading. Under DAP the buyer clears the goods for import and pays duty and taxes. Under DDP the seller does.
Is EXW a good choice for an export?
Usually not. Under EXW the buyer has to clear the goods for export in the seller’s country, which is hard to do from abroad. The ICC’s notes describe EXW as suitable for domestic trade and point a buyer who intends to export towards FCA.
Do Incoterms decide who owns the goods or how they are paid for?
No. Incoterms do not cover the transfer of ownership, the price, the payment terms or what happens if the contract is broken. Those belong in your sales contract.
How do I write an Incoterm in a contract?
Rule, named place, version. For example: FCA Port Newark, NJ Incoterms 2020. Name the place as exactly as you can, because it decides where delivery happens and where the risk passes.
Incoterms® is a registered trademark of the International Chamber of Commerce. This page is a plain-language summary of the Incoterms® 2020 rules and is not the official text. Your sales contract and the ICC publication govern. The place names in the examples are illustrations only. See also our freight calculators, ocean freight and air freight pages.
