Incoterms® 2020: The Eleven Rules, Compared
A three-letter code can decide who pays the freight, who carries the risk, and who faces customs at the border.
These codes are the Incoterms® 2020 rules, published by the International Chamber of Commerce (ICC) to define key responsibilities between buyers and sellers in contracts for the sale of goods.
The selected rule sets out how costs, delivery, risk, and export/import formalities are allocated between the parties, subject to applicable law.
This guide compares all 11 rules, the combinations buyers most often confuse, and how the choice can affect which party handles import or export formalities, as well as whether an Importer of Record or Exporter of Record structure may be required.
What Are Incoterms®?
Incoterms® are eleven three-letter trade terms published by the International Chamber of Commerce that define, within a contract for the sale of goods, who arranges transport, who bears risk at each stage, which costs each party pays, and who handles export and import customs formalities.
First introduced by the ICC in 1936 and revised periodically, the rules are contractual rather than statutory. They apply when incorporated into a sale contract and can be used in both domestic and international trade. One of the most important distinctions is between cost and risk: under CPT, CIP, CFR, and CIF, the seller may continue paying for carriage after risk has already transferred to the buyer.
Is There an Incoterms® 2025?
There is no Incoterms 2025. Incoterms® 2020 remains the current edition and entered into force on January 1, 2020. The ICC identifies Incoterms® 2020 as its most recent version.
Earlier editions remain applicable when the parties expressly specify them. For example, a contract stating Incoterms® 2010 is governed by that edition rather than automatically moving to Incoterms® 2020.
1936:First publication by the International Chamber of Commerce
1953–2010:Successive revisions reflecting changes in international trade and transport practice
2020 (current):DAT became DPU, FCA was revised to address an on-board bill of lading scenario, and CIP and CIF received different default insurance levels
The Eleven Incoterms® 2020 Rules
The 11 rules are divided into two groups. Seven apply to any mode or combination of transport: EXW, FCA, CPT, CIP, DAP, DPU, and DDP. Four apply to sea and inland waterway transport: FAS, FOB, CFR, and CIF.
Rule | Risk passes to buyer at | Export / Import clearance |
|---|---|---|
EXW — Ex Works | When goods are placed at the buyer's disposal at the named place, ready for loading | Buyer / Buyer |
FCA — Free Carrier | At the agreed delivery point. At the seller's premises, after loading onto the buyer's collecting vehicle; elsewhere, after arrival at the named place, ready for unloading and at the carrier's disposal | Seller / Buyer |
CPT — Carriage Paid To | When goods are handed to the carrier contracted by the seller | Seller / Buyer |
CIP — Carriage and Insurance Paid To | When goods are handed to the carrier contracted by the seller | Seller / Buyer |
DAP — Delivered at Place | At the named destination, ready for unloading | Seller / Buyer |
DPU — Delivered at Place Unloaded | At the named destination, after unloading | Seller / Buyer |
DDP — Delivered Duty Paid | At the named destination, cleared for import and ready for unloading | Seller / Buyer |
FAS — Free Alongside Ship | When goods are placed alongside the vessel at the named port | Seller / Buyer |
FOB — Free on Board | When goods are on board the vessel at the named port | Seller / Buyer |
CFR — Cost and Freight | When goods are on board the vessel at the named port | Seller / Buyer |
CIF — Cost, Insurance and Freight | When goods are on board the vessel at the named port | Seller / Buyer |
A practical shortlist includes EXW, FCA, FOB, CIF, DAP, and DDP, but the appropriate choice depends on the shipment, transport mode, commercial arrangement, and each party's ability to perform the assigned obligations.
For containerized cargo, FCA is generally more appropriate than FOB when the goods are handed to a carrier at a container terminal before vessel loading, because FCA can transfer delivery and risk at that earlier point. ICC specifically revised FCA to address certain sea-transport documentation needs, while FOB remains a sea/inland-waterway rule.
The Comparisons Buyers Actually Ask About
FOB vs CIF
Under Free on Board (FOB), the buyer arranges and pays for main carriage from the port of shipment. Under Cost, Insurance and Freight (CIF), the seller arranges and pays for the carriage and insurance required under the rule to the destination port
The risk-transfer point is the same under both rules: when the goods are on board the vessel at the port of shipment. Neither rule is inherently cheaper. Under CIF, the seller bears the carriage and insurance costs required by the rule; under FOB, the buyer arranges main carriage separately.
CIF's default insurance level is Institute Cargo Clauses (C), while CIP carries the higher default insurance requirement under Incoterms® 2020, generally aligned with Institute Cargo Clauses (A) or similar cover. Broader insurance can be agreed separately where required.
DDP vs DAP
Delivered at Place (DAP) and Delivered Duty Paid (DDP) both place delivery at the named destination, but the key difference is who handles import clearance and the associated import duties and taxes.
Under DAP, the buyer handles import clearance and applicable import charges. Under DDP, the seller is responsible for import clearance and applicable duties and taxes under the rule. Whether the seller can perform those obligations directly depends on the destination market's customs, tax, registration, and representation requirements.
This makes countervailing duty exposure and other trade remedies relevant when evaluating DDP, because the seller's import cost can extend beyond standard customs duty.
EXW vs FCA
Under Ex Works (EXW), the seller places the goods at the buyer's disposal at the named place. The seller is not responsible for loading the goods onto the collecting vehicle or for export clearance where that clearance is applicable.
Under Free Carrier (FCA), the seller handles export clearance and delivers the goods to the carrier or another party nominated by the buyer at the agreed place. When the named place is the seller's premises, delivery occurs once the goods are loaded onto the buyer's collecting vehicle. When the named place is elsewhere, delivery occurs when the goods arrive there on the seller's means of transport, are ready for unloading, and are at the carrier's disposal.
For cross-border transactions where the buyer may face difficulty handling export formalities, ICC guidance encourages traders to consider FCA rather than EXW.
How to Choose the Right Incoterm®
The rule is a commercial decision before it becomes a shipping decision. Five questions can narrow the choice:
Which party has customs standing at each border?
DDP assigns import responsibilities to the seller, while EXW places export responsibilities on the buyer. The selected rule must match what each party can legally perform.
Is the shipment containerized?
When containers are handed to a carrier before vessel loading, FCA can better match the physical handover and risk-transfer point than FOB.
Who has the better freight rates?
The party arranging main carriage controls the freight relationship and its associated commercial economics.
What insurance cover is needed?
CIP and CIF are the two Incoterms® 2020 rules under which the seller has an insurance obligation. CIP requires the higher default level, while CIF retains the minimum Clause C level.
Where must the goods be delivered?
DAP delivers the goods ready for unloading, while DPU requires the seller to unload at the named destination. DPU therefore requires the seller to arrange unloading at that location.
What Incoterms® Do Not Cover
Incoterms® allocate transport responsibilities, delivery, risk, costs, and customs formalities. They do not determine several other important parts of the sale contract.
They do not determine:
The price of the goods or payment currency.
The method or timing of payment, including letters of credit.
Transfer of title or ownership. Risk transfer and title transfer are separate matters.
Product liability, warranties, or conformity obligations.
Contract remedies, governing law, or dispute resolution.
The complete scope of sanctions, licensing, and other regulatory requirements applicable to the goods or transaction.
A rule should be written with the named place or port and the edition, such as "DAP Rotterdam Warehouse 4, Incoterms® 2020." The parties should identify the delivery point as precisely as possible because it determines where delivery and risk transfer occur under the selected rule.
Who Handles Import Clearance Under Each Incoterm?
The Incoterm allocates responsibility for the relevant customs formalities, but whether the buyer or seller can perform them depends on the destination country's customs framework.
Under DDP, the seller handles import clearance and applicable duties; under the other ten rules, import clearance generally falls to the buyer. Local customs, tax, registration, licensing, and representation requirements determine whether the responsible party has the legal standing to complete those formalities.
Scenario | Obligation created | Practical position |
|---|---|---|
Seller sells DDP into a market where it lacks required customs standing | Seller is responsible for import clearance under the rule | A locally permitted structure, registered IOR, or other authorized arrangement may be required, depending on the market. |
Buyer buys EXW where it cannot handle origin export formalities | Buyer is responsible for export clearance under the rule | FCA may be more workable, or an appropriate exporter of record at origin may be required. |
Buyer buys DAP or FOB where it lacks destination import standing | Buyer is responsible for import clearance under the rule | A local registration or other permitted IOR structure may be required, depending on the market. |
Choose the Rule. We Provide the Standing.
The Incoterm allocates cost, risk, and customs responsibility. It does not by itself create the customs standing needed to discharge those obligations.
Tell us the Incoterm, origin market, and destination market. Our compliance team can assess whether the customs obligations assigned by the rule are workable and identify an appropriate IOR or EOR structure where required.
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Seven Incoterms® 2020 rules apply to any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU, and DDP. Four apply to sea and inland waterway transport: FAS, FOB, CFR, and CIF. Together, they allocate delivery responsibilities, costs, risk, and customs formalities between buyer and seller.
There is no Incoterms 2025. Incoterms® 2020 remains the current edition and has been in force since January 1, 2020. Earlier editions can still apply when the parties expressly specify them.
There is no single rule that fits every type of trade. FOB and CIF are established sea-trade terms, while DAP and DDP are used when sellers offer delivered solutions. EXW and FCA can be used where buyers control more of the logistics. For containerized cargo handed to a carrier before vessel loading, FCA can be more appropriate than FOB.
Neither is inherently cheaper. Under CIF, the seller arranges and pays for the carriage and insurance required under the rule. Under FOB, the buyer arranges and pays for main carriage separately. The better choice depends on freight rates, carrier relationships, insurance requirements, and which party wants control over main carriage.
The buyer pays the main carriage under FOB. The seller delivers the goods on board the vessel at the named port of shipment and handles export clearance. Once the goods are on board, the buyer assumes the risk and arranges the main carriage and import formalities.
No. Incoterms® are contractual rather than statutory. They apply when the parties incorporate them into the sale contract. Without an Incoterm, the parties need to establish delivery, cost, risk, and customs responsibilities through the contract and applicable law.
Under DDP, the seller is responsible for export clearance, main carriage, import clearance, applicable duties and taxes, and delivery to the named destination ready for unloading. The buyer generally takes delivery and unloads the goods. Whether the seller can perform the import obligations directly depends on the destination country's customs and tax requirements.
DDP assigns import clearance to the seller, while the other ten rules generally assign import clearance to the buyer. However, the responsible party must also be legally able to perform the applicable customs formalities in the destination market. Where that party lacks the required standing, an appropriate IOR structure may be required.
Harmonized System (HS) Codes: Structure, Lookup, and Accountability
Every product has a customs identity. Before a shipment can be assessed for duty, screened for trade remedies, or cleared through customs, it needs to be placed into the right classification. That classification begins with the Harmonized System (HS) code—a six-digit international framework that turns everything from network equipment and machinery to components and finished goods into a standardized customs language. Maintained by the World Customs Organization (WCO), the Harmonized System provides the foundation used across more than 200 countries and economies. But those six digits are only the beginning: individual countries extend the classification for their own tariff and statistical requirements, making the correct national classification essential to the import process. Understanding how HS codes are structured, where to find the right classification, and who is accountable for it can help importers avoid unnecessary duty costs, compliance issues, and delays at the border.
Countervailing Duties (CVDs): What They Are, How They're Calculated, and What They Cost Importers
Countervailing duties are among the most consequential and least understood trade measures shaping global supply chains in 2026. Active CVD orders on Chinese solar panels, steel, aluminum, and hundreds of other product categories add high cost to imports, and the landscape keeps shifting: the EU imposed definitive countervailing duties on Chinese electric vehicles in late 2024, and that case is still being contested at the WTO. This guide explains what countervailing duties are, how they are investigated and calculated, which sectors they hit hardest, and, crucially, who is legally responsible for paying them. That last answer shapes how every import with CVD exposure should be structured.
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