A practical guide to the 11 Incoterms® rules used in international trade — including EXW, FOB, CIF, DAP and DDP.
VIEW ALL 11 INCOTERMS11 international trade terms
EXW · FCA · CPT · CIP · DAP · DPU · DDPIncoterms® are internationally recognized trade rules published by the International Chamber of Commerce (ICC). They help buyers and sellers understand who is responsible for transportation, costs, customs procedures and risk during delivery.
Incoterms do not determine the price of the goods or replace a sales contract. Instead, they clarify how delivery responsibilities are divided between the buyer and seller.
Which party arranges transportation, export procedures, import procedures and shipping documents?
Which transportation, customs, loading, unloading and delivery costs belong to the buyer or seller?
At what point during delivery does the risk of loss or damage transfer from the seller to the buyer?
These terms can be used for road, rail, air, sea, courier or multimodal transportation.
These terms are intended specifically for goods transported by sea or inland waterway.
The summaries below are designed to give importers a practical understanding of each term.
The seller makes the goods available at an agreed location, commonly the factory or warehouse. The buyer generally arranges pickup, export transportation, main freight, import clearance and final delivery.
The seller completes export formalities and delivers the goods to the buyer's nominated carrier at the agreed place. The buyer normally arranges the main international carriage.
The seller arranges and pays carriage to the agreed destination, but risk transfers earlier when the goods are delivered to the first carrier.
The seller arranges transportation and insurance to the named destination. Risk still transfers when the goods are handed to the carrier rather than when they reach destination.
The seller arranges transportation to the named destination. The buyer normally handles import clearance, duties and taxes and is responsible for unloading.
The seller transports the goods to the agreed destination and unloads them. The buyer generally handles import clearance and applicable duties and taxes.
The seller arranges transportation to destination and is responsible for export and import clearance and applicable duties and taxes under the agreed DDP transaction.
Used for sea or inland waterway transport. The seller delivers the goods alongside the vessel at the named port. The buyer arranges loading and main carriage.
Used for sea or inland waterway transport. The seller completes export procedures and delivers the goods on board the vessel. The buyer arranges the main ocean freight.
The seller pays the ocean freight to the named destination port, but risk transfers to the buyer once the goods are loaded on board at the origin port.
The seller pays freight and provides the required insurance to the named destination port. Risk transfers when the goods are loaded on board at origin.
| TERM | MAIN FREIGHT | INSURANCE REQUIRED FROM SELLER | IMPORT CLEARANCE |
|---|---|---|---|
| EXW | Buyer | No | Buyer |
| FCA | Buyer | No | Buyer |
| CPT | Seller | No | Buyer |
| CIP | Seller | Yes | Buyer |
| DAP | Seller | No | Buyer |
| DPU | Seller | No | Buyer |
| DDP | Seller | No | Seller |
| FAS | Buyer | No | Buyer |
| FOB | Buyer | No | Buyer |
| CFR | Seller | No | Buyer |
| CIF | Seller | Yes | Buyer |
Importers buying from Chinese suppliers commonly encounter EXW, FOB, CIF and DDP quotations.
Useful when you want your freight forwarder to control pickup and the full transportation process.
A very common sourcing term where the buyer's forwarder manages the international freight after loading.
Freight and insurance are included to the named port, while destination import procedures remain with the buyer.
Designed for buyers who want more of the transportation and import process handled within one shipping arrangement.
Incoterms® 2020 remains the current ICC standard. Several important changes were introduced compared with the previous 2010 edition.
Delivered at Terminal (DAT) was renamed Delivered at Place Unloaded (DPU), making clear that the named destination does not have to be a terminal.
FCA now allows the parties to agree that the buyer instructs the carrier to issue an on-board Bill of Lading to the seller after loading.
CIP now uses a higher default level of insurance coverage than CIF, unless the parties agree otherwise.
FCA, DAP, DPU and DDP can accommodate situations where transportation is arranged using a party's own means of transport.
Security-related transportation and clearance obligations are addressed more clearly throughout the rules.
The named place or port is an important part of an Incoterms® rule because it can determine where delivery, cost responsibility or risk transfer takes place.
When agreeing a term with your supplier, identify the place or port as precisely as possible.
FOB is extremely common in China sourcing, but it is not automatically the best rule for every containerized shipment.
FOB is intended for sea or inland waterway transport. Delivery and risk transfer occur when the goods are actually placed on board the vessel at the named port of shipment.
DELIVERY POINT ON BOARD THE VESSELFCA can be more appropriate when containerized cargo is delivered to the carrier at a terminal before the goods are loaded on board the vessel.
DELIVERY POINT AGREED CARRIER / NAMED PLACEIf your supplier hands the container to the carrier at a container terminal before vessel loading, consider whether FCA better reflects the actual delivery arrangement instead of automatically using FOB.
Both rules require the seller to arrange insurance, but Incoterms® 2020 sets different default insurance standards for CIP and CIF.
CIP generally requires insurance equivalent to Institute Cargo Clauses (A) or similar broad coverage, unless otherwise agreed.
ANY MODE OF TRANSPORTCIF generally requires insurance equivalent to Institute Cargo Clauses (C) or similar minimum coverage, unless otherwise agreed.
SEA / INLAND WATERWAY ONLYPaying for transportation or insurance to the destination does not necessarily mean the seller keeps the transport risk until the cargo arrives there. Always check the separate risk-transfer point of the selected Incoterm.
The three-letter term is only useful when both parties understand exactly what it means for their transaction.
Container-terminal delivery may make FCA more appropriate depending on the actual arrangement.
Writing only “FOB” or “DDP” can leave an important delivery point undefined.
The party paying the main freight is not always the party carrying the transportation risk for the entire journey.
Under CIF, the seller pays freight and insurance to the destination port, but risk transfers when the goods are on board at origin.
Importer registration, product regulations, taxes and local customs rules can affect whether a DDP structure is practical.
EXW places significant responsibility on the buyer. FCA can sometimes be more practical for international transactions where the seller can handle export clearance.
If your supplier gives you an EXW, FOB, CIF or other quotation, send us the Incoterm, cargo details and destination. We can help you understand the logistics portion of the shipment and prepare a freight quote.
ASK CHENGYU SHIPThis page is a general educational summary and is not the official text of the ICC Incoterms® 2020 rules or legal advice. The exact named place, contract wording and circumstances of each transaction matter. Parties should refer to the official ICC rules when incorporating an Incoterm into a contract.
Send us your Incoterm, cargo information and destination and we'll help you plan the shipping solution.
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