What Incoterms do (and do not) cover
An Incoterm defines delivery: who books transport, who pays freight and insurance, who handles export and import clearance, and the point where risk transfers. It does not cover payment terms, ownership of the goods or the price. Always state the rule, the place and the edition, for example “FCA Milan warehouse, Incoterms® 2020”.
Rules for any mode of transport
| Rule | Seller delivers / risk passes | Main costs on the buyer |
|---|---|---|
| EXW – Ex Works | Goods made available at the seller’s premises | Loading, export clearance, all transport, import |
| FCA – Free Carrier | Handed to the buyer’s carrier at an agreed place, export cleared | Main transport, insurance, import |
| CPT – Carriage Paid To | Handed to the first carrier; seller pays freight to destination | Risk in transit, import |
| CIP – Carriage and Insurance Paid To | As CPT, plus seller insures (ICC A cover) | Import clearance and duties |
| DAP – Delivered at Place | Ready for unloading at the named destination | Unloading, import clearance and duties |
| DPU – Delivered at Place Unloaded | Unloaded at the named destination | Import clearance and duties |
| DDP – Delivered Duty Paid | Delivered, import cleared, duties paid | Unloading only |
Rules for sea and inland waterway only
| Rule | Seller delivers / risk passes | Main costs on the buyer |
|---|---|---|
| FAS – Free Alongside Ship | Alongside the vessel at the port of loading | Loading, sea freight, import |
| FOB – Free On Board | On board the vessel at the port of loading | Sea freight, insurance, import |
| CFR – Cost and Freight | On board; seller pays sea freight to destination port | Risk at sea, insurance, import |
| CIF – Cost, Insurance and Freight | As CFR, plus seller insures (minimum ICC C cover) | Destination charges, import |
Common pitfalls
- FOB, CFR and CIF are designed for goods loaded on board a ship. For containers handed over at a terminal, FCA, CPT or CIP fit better.
- EXW leaves export clearance to the buyer, which can be hard for a foreign buyer. FCA is often the safer alternative.
- DDP makes the seller responsible for import duties and VAT in the buyer’s country: check that you can register and pay there.
- The named place must be precise: “DAP Rome” is vague, “DAP Via …, Rome warehouse” is not.
How Incoterms affect your freight quote
The Incoterm decides which legs your forwarder must quote. Under FOB Shanghai, an Italian buyer pays sea freight from Shanghai plus destination charges and import costs; under DAP Milan the Chinese seller pays the transport to Milan and the buyer handles import clearance. Match your Cargo.it search to the part of the journey you actually pay for.
Frequently asked questions
What is the difference between FOB and CIF?
Under both, risk passes when goods are on board at the port of loading. Under CIF the seller also pays sea freight and minimum insurance to the destination port; under FOB the buyer pays them.
Which Incoterm is best for importing from China?
Many importers buy FOB (or FCA for containers) to control the main freight and insurance with their own forwarder. EXW gives the most control but leaves Chinese export formalities to you.
Are Incoterms 2010 still valid?
Parties may still agree to an older edition, but the contract must say so. Incoterms® 2020 is the edition normally used today.