The Digital Wealth Makers foreign trade guide
What are Incoterms? The Complete Guide
Incoterms are eleven standard rules from the International Chamber of Commerce (ICC) defining who bears freight, insurance, clearance and risk in every international deal. This guide explains all eleven simply, with examples.
- 11 official rules
- 2020 edition
- 7 for any transport
- 4 sea-only
International Chamber of Commerce
Trade
EXWFCACPTCIPDAPDPUDDPFASFOBCFRCIF
Common language
In the 1920s, traders understood the same term differently across countries; 'delivery at port' meant on board in one country and in a warehouse in another. The ICC published the first standard in 1936 and revises it every five years.
Today, any contract citing 'Incoterms 2020' means the same thing in all 200+ countries.
What exactly do Incoterms define?
Cost allocation
Risk transfer point
Document & clearance duties
The Digital Wealth Makers foreign trade guide
What exactly do Incoterms define?
Cost allocation
Who pays for main carriage, insurance and port charges?
Risk transfer point
If cargo is damaged in transit, whose loss is it?
Document & clearance duties
Who prepares export declarations, permits and paperwork?
The Digital Wealth Makers foreign trade guide
Seven rules for any transport mode
From least (EXW) to most (DDP) seller obligation; usable for sea, air, road and rail.
EXW
Ex Works
Seller only hands over at the factory; everything else is on the buyer.
FCA
Free Carrier
Seller delivers to the nominated carrier and clears export.
CPT
Carriage Paid To
Seller pays main carriage; risk passes at the first carrier.
CIP
Carriage & Insurance Paid
Like CPT plus fuller cargo insurance (ICC A) bought by the seller.
DAP
Delivered At Place
Seller delivers at destination (unloaded); import clearance is the buyer's.
DPU
Delivered At Place Unloaded
Like DAP plus unloading at destination; the only rule covering unloading.
DDP
Delivered Duty Paid
Maximum seller duty: carriage, insurance and even destination import clearance.
The Digital Wealth Makers foreign trade guide
Four sea-freight rules
Ships only; for air or truck use the general rules.
FAS
Free Alongside Ship
Seller places goods alongside the vessel; loading is the buyer's.
FOB
Free On Board
Loading on board is the seller's; risk passes from that moment. The most used sea rule.
CFR
Cost and Freight
Sea freight to destination is the seller's; insurance and transit risk are the buyer's.
CIF
Cost, Insurance & Freight
Like CFR plus basic insurance (ICC C) bought by the seller; risk still passes at origin.
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Which rule should you choose?
Four questions that simplify your choice.
01What transport mode?
Air, road or rail? Use the seven general rules. Sea? All eleven are available.
02Who should manage shipping?
Experienced buyer with logistics → EXW or FCA. Reliable seller → DAP or DDP.
03Who buys insurance?
For full cover and control, insure yourself and avoid CIP/CIF, which carry minimal cover.
04Destination import clearance?
If the seller has no office in the destination country, DDP is risky; DAP or DPU is safer.
Key numbers
- official Incoterms rules
- 0
- rules for any transport
- 0
- sea-only rules
- 0
- first edition year
- 0
official Incoterms rules
rules for any transport
sea-only rules
first edition year
Frequently asked questions
What's the difference between Incoterms and 'this-co-terms'?
'Incoterms' and its Persian pronunciation refer to the same eleven official ICC rules.
Which Incoterm is common for imports from China?
FOB and CIF for sea containers and FCA for air are the most common; always cite the edition year.
Are Incoterms a contract?
No; Incoterms are only part of the contract (delivery and costs). Price, quality and payment must be written separately.
What is the oldest Incoterms edition?
The 1936 edition. Today 2020 is current, and 2010 still appears in some contracts.
Not sure which rule fits your shipment?
In the marketplace logistics consulting section, experts will review your goods, origin and destination for free and recommend the right rule.