Published by AMA Freight Logistics
Incoterms® (International Commercial Terms) are international rules published by the International Chamber of Commerce (ICC). They define the respective responsibilities of buyer and seller in an international transaction.
Incoterms determine in particular:
- Who organises the transport.
- Who pays for the transport costs.
- Who takes out the insurance.
- When risk transfers from seller to buyer.
- Who handles export and import customs formalities.
Important: Incoterms determine neither the transfer of ownership of the goods nor the payment terms between the parties.
The 11 Incoterms® 2020
1. EXW — Ex Works
The seller makes the goods available at their premises and packs them. The buyer organises all transport, bears all costs, handles export and import customs, and assumes all risk from pickup.
Use: direct purchases from a manufacturer.
2. FCA — Free Carrier
The seller hands over the goods to the carrier chosen by the buyer. The seller handles export clearance and delivers to the carrier. The buyer pays the main transport and import duties and taxes.
Incoterm recommended by the ICC for container exports.
3. FAS — Free Alongside Ship
Sea transport only. The seller places the goods alongside the vessel. The buyer then handles loading, sea freight, insurance and import.
4. FOB — Free On Board
Conventional sea transport only. The seller handles export formalities and loading on board the vessel. Risk transfers when the goods are loaded on the ship.
Warning: FOB is not recommended for containerised goods — use FCA instead.
5. CFR — Cost and Freight
Sea transport only. The seller pays sea freight and export. Risk transfers as soon as the goods are loaded on the ship. Insurance remains with the buyer.
6. CIF — Cost Insurance and Freight
Sea transport only. The seller pays sea transport, minimum insurance and export formalities. The buyer bears the risk from loading and pays import charges.
7. CPT — Carriage Paid To
All transport modes. The seller pays transport to the agreed destination. Risk transfers to the first carrier. Insurance remains with the buyer.
8. CIP — Carriage and Insurance Paid To
All transport modes. The seller pays transport and insurance with high coverage (ICC A). Risk transfers to the first carrier.
9. DAP — Delivered At Place
The seller organises transport to the agreed place. The buyer handles import clearance and pays duties and taxes. Unloading is at the buyer's expense.
10. DPU — Delivered at Place Unloaded
The seller transports the goods and unloads them at destination. The buyer only handles import formalities. This is the only Incoterm where the seller handles unloading.
11. DDP — Delivered Duty Paid
The seller takes on practically everything: transport, any insurance, export, import, duties and taxes, final delivery. The buyer receives the goods ready to use. DDP offers the buyer the most services.
Quick Comparison
| Incoterm | Transport | Main carriage paid by | Insurance | Export clearance | Import clearance |
|---|---|---|---|---|---|
| EXW | All | Buyer | Buyer | Buyer | Buyer |
| FCA | All | Buyer | Buyer | Seller | Buyer |
| FAS | Sea | Buyer | Buyer | Seller | Buyer |
| FOB | Sea | Buyer | Buyer | Seller | Buyer |
| CFR | Sea | Seller | Buyer | Seller | Buyer |
| CIF | Sea | Seller | Seller | Seller | Buyer |
| CPT | All | Seller | Buyer | Seller | Buyer |
| CIP | All | Seller | Seller | Seller | Buyer |
| DAP | All | Seller | By contract | Seller | Buyer |
| DPU | All | Seller | By contract | Seller | Buyer |
| DDP | All | Seller | By contract | Seller | Seller |
Which Incoterm To Choose?
- New to importing: DDP or DAP.
- Experienced importer: FCA or FOB (depending on transport mode).
- Container imports: FCA is generally preferable to FOB.
- Sea imports with insurance included: CIF.
- Multimodal transport with insurance: CIP.
Advice From AMA Freight Logistics
Before confirming an international order, always check the Incoterm negotiated with your supplier, international transport costs, clearance costs, import duties and taxes, port, airport and regulatory fees, transit lead times and insurance coverage suited to the value of the cargo.
A wrong Incoterm can lead to extra costs, delivery delays or disputes between seller and buyer.
AMA Freight Logistics supports its clients in choosing the most suitable Incoterm, organising international transport, handling customs formalities and optimising logistics costs.
