Incoterms® 2020 rules define selected responsibilities between seller and buyer for delivery, allocation of specified costs and transfer of risk. They do not by themselves determine ownership, payment terms, sanctions compliance, governing law, product conformity or every transport contract obligation.
Always write the rule, named place and version
A usable contract entry is precise—for example, “FCA Seller’s Warehouse, Tehran, Iran, Incoterms® 2020” or “DAP Buyer’s Warehouse, Sofia, Bulgaria, Incoterms® 2020.” Writing only “FCA” or “DAP Europe” leaves the delivery point and cost boundary unclear.
Rules for any mode of transport
- EXW — delivery at the seller’s premises with minimal seller obligations; parties should verify who can lawfully and practically complete export formalities.
- FCA — delivery to the carrier or another person at the named place; often practical for container, road and multimodal shipments.
- CPT — seller contracts carriage to the named destination, while risk transfers earlier when goods are handed to the carrier.
- CIP — similar to CPT with specified seller-arranged insurance.
- DAP — seller delivers ready for unloading at the named destination; buyer handles import clearance unless otherwise agreed outside the rule.
- DPU — seller delivers after unloading at the named destination.
- DDP — seller carries extensive obligations including import clearance and duties; use only after confirming legal and tax feasibility.
Rules reserved for sea and inland waterways
FAS, FOB, CFR and CIF are designed for goods delivered in relation to a named port and are reserved for sea or inland-waterway transport. They should not be used for a road-only shipment. For containerised or multimodal cargo handed to a carrier before loading on a vessel, FCA, CPT or CIP is often structurally more appropriate.
Risk and cost may transfer at different points
Under CPT, CIP, CFR and CIF the seller may pay carriage to a later destination while risk transfers at an earlier delivery point. The commercial team must not assume that the party paying freight retains all transit risk.
Loading, unloading, customs and insurance
The selected rule must be read with the named place and contract. Confirm who loads, unloads, arranges export and import clearance, pays duties and taxes, provides insurance, bears detention and approves route changes. Carrier liability insurance and cargo insurance are not the same product.
Common mistakes
- Using FOB or CIF for a shipment that is entirely by road.
- Omitting the named place or port.
- Confusing delivery under Incoterms with physical arrival at the final destination.
- Assuming DDP is feasible without confirming importer-of-record, registration, tax and customs obligations.
- Using EXW where the buyer cannot practically complete export formalities in the seller’s country.
- Failing to align the sales contract, freight booking, invoice and customs instruction.
Booking checklist
State the full rule and version, exact address or port, transport mode, pickup and delivery responsibilities, customs parties, insurance requirement, documentation, unloading responsibility and treatment of delays or additional costs. Legal, tax and customs advice should be obtained for the transaction.