Incoterms 2020 is a set of international rules that explains who is responsible for what during the delivery of cargo between countries. It determines who pays for transportation, customs procedures, or insurance, as well as when the risks are transferred from the seller to the buyer. Thanks to simple three-letter abbreviations, this system makes it easier for companies to negotiate, avoid misunderstandings, and build transparent relationships in international trade.
| Groups | Abbreviation | Meaning | Who is responsible for costs and risks |
|---|---|---|---|
| Group E (Shipment) | EXW (Ex Works) | Shipment to the buyer takes place at the seller’s factory or warehouse. | The buyer takes full responsibility from the moment they pick up the cargo. |
| Group F (Main carriage paid by the buyer) | FCA (Free Carrier) | The seller delivers the cargo to the carrier at the factory, warehouse or port. | From the moment of receipt, the buyer pays and bears all responsibility. |
| FAS (Free Alongside Ship) | The seller delivers the cargo to the port and places it alongside the ship. | The buyer then takes care of everything else. | |
| FOB (Free on Board) | The seller ships the cargo on board the vessel. | From this point on, the costs and risks are transferred to the buyer. | |
| Group C (Main carriage paid by the seller) | CFR (Cost and Freight) | Shipment occurs when the cargo is loaded onto the vessel, and the seller pays for transportation (freight). | Risks are transferred to the buyer at the port of departure when the cargo is already on board the vessel. Customs, completion of import customs formalities, delivery from the port of destination are the buyer’s responsibility. |
| CPT (Carriage Paid To) | The seller transfers the cargo to the carrier and pays for delivery to the destination. | Risks are transferred to the buyer at the moment the cargo is transferred to the carrier. Unloading, transit customs and import customs formalities, and delivery from the destination. | |
| CIP (Carriage and Insurance Paid To) | Shipment took place upon transfer of cargo to the carrier. The seller insures the cargo. | Transfer of risks to the buyer when the cargo is handed to the first carrier. | |
| CIF (Cost, Insurance and Freight) | Shipment occurs once the cargo is loaded onto the vessel. The seller insures the cargo. | The transfer of risk occurs when the cargo is loaded onto the vessel. | |
| Group D (Delivery) | DAP (Delivered at Place) | Delivery occurs when the cargo has arrived at the buyer’s vehicle and is ready for unloading. | Transfer of risks at the destination. The buyer pays for unloading, customs clearance, and taxes. |
| DPU (Delivered at Place Unloaded) | Delivery occurs once the cargo is unloaded from the arriving vehicle and placed at the buyer’s disposal. | The buyer is responsible for unloading and customs formalities. | |
| DDP (Delivered Duty Paid) | Delivery occurs when the cargo has cleared customs for import and is ready for unloading. | Unloading only. |
Group “E”: EXW Delivery Terms
EXW (Ex Works) is the simplest delivery term: the seller simply provides the cargo to the buyer at their warehouse or another agreed location, and from that moment on, all costs, risks, and organizational issues (customs clearance, transportation, insurance) are transferred to the buyer. This gives the buyer complete control over shipping and logistics, but requires attention to export duties and documentation. The seller bears almost no responsibility, even for loading the cargo, and only assists to the extent that is convenient or necessary for reporting purposes.
Group “F”
FCA Delivery Terms
FCA (Free Carrier) means that the seller takes care of all the responsibilities of preparing the cargo for export: draws up documents, goes through customs formalities and pays export duties. He transfers the cargo to the carrier, after which all risks and costs are transferred to the buyer. This term is suitable for any mode of transport, including multimodal transport, and gives the buyer confidence that the cargo will be professionally prepared for shipment and that control over logistics begins at the specified point of transfer.
FAS Delivery Terms
FAS (Free Alongside Ship) is a delivery term for sea and river transport, according to which the seller delivers the cargo to the agreed port of shipment alongside the vessel. After that, all risks and costs are transferred to the buyer: they are responsible for loading onto the vessel, transportation and further carriage. The seller must complete export customs formalities for export and prepare the necessary permits, but is not responsible for import procedures. FAS is only suitable for water transport, and if the cargo are transferred at a terminal or in containers, it is more convenient to use FCA. It is important to specify the port of shipment and understand that the costs of unloading at the port of arrival are borne by the buyer.
FOB Delivery Terms
FOB (Free on Board) is a delivery term for sea and river transport, where the seller loads the cargo directly onto the vessel at the port of shipment. Once the cargo is on the vessel, all risks are transferred to the buyer. From that moment on, the buyer is responsible for the safety of the cargo and payment for transportation to the destination. The seller, apart from loading and export customs clearance for export, no longer bears any costs. FOB is only suitable for water transport – for land delivery, it is better to choose FCA terms.
Group “C”
CFR Delivery Terms
CFR (Cost and Freight) is a delivery term for sea transport, where the seller pays for freight and delivers the cargo to the port of destination, but the risk of damage or loss is transferred to the buyer at the moment of transfer of the cargo to the shipping line. The seller is responsible for loading the vessel and export clearance, while the buyer is responsible for receiving and unloading at the port. Therefore, even if the freight is paid, it is better to insure the cargo additionally. CFR is convenient to use for deliveries without complex logistics, but for containers at terminals, CPT is the better solution.
CPT Delivery Terms
CPT (Carriage Paid To) means that the seller arranges and pays for the delivery of the cargo to the agreed destination, including the contract with the carrier. However, the risk of loss or damage to the cargo passes to the buyer immediately after the cargo is handed over to the first carrier. The seller is responsible for completing all export documents and customs procedures, while the buyer bears the costs and risks at the import stage, including unloading. To avoid misunderstandings, the contract should clearly specify the places of transfer and destination, especially if several carriers or different modes of transport are used.
CIP Delivery Terms
CIP (Carriage and Insurance Paid To) means that the seller is responsible for arranging and paying for the delivery of the cargo to the agreed destination, as well as taking out insurance during transport. At the same time, the risk of damage or loss is transferred to the buyer at the moment the cargo is handed over to the first carrier. The seller provides only minimum insurance coverage of 110% of the value of the cargo, so if the buyer wants more protection, they should negotiate this separately or take out extended insurance themselves. All export formalities are carried out by the seller, while import costs and customs clearance are the responsibility of the buyer.
CIF Delivery Terms
CIF (Cost, Insurance and Freight) is a delivery term for maritime transport that is similar to CFR, but with an important additional advantage: the seller also pays for cargo insurance. The seller loads the cargo onto the vessel, arranges freight and insurance with minimum coverage to the port of destination. The risk of loss or damage is transferred to the buyer after the cargo is handed over to the shipping line, and the buyer is responsible for unloading and further expenses. If broader insurance coverage is required, the buyer negotiates it separately or takes out additional insurance. CIF is only suitable for sea and river transport; for containers at terminals, it is better to choose CIP.
Group “D”
DAP Delivery Terms
DAP (Delivered at Place) means that the seller is responsible for arranging and paying for the delivery of the cargo to the final destination agreed with the buyer. This may be a warehouse, terminal or other location, but the cargo is considered delivered when the transport arrives there and is ready for unloading. All risks and costs up to this point are borne by the seller. The buyer is responsible for import customs procedures, payment of taxes and duties, as well as the unloading process itself. This term is convenient for the buyer, as the seller takes on most of the transportation concerns, but it is important to clearly define the exact place of delivery in advance to avoid misunderstandings.
DPU Delivery Terms
DPU (Delivery at Place Unloaded) means that the seller is fully responsible for delivering the cargo to the specified point, including unloading it from the transport. It is after unloading that the risks are transferred to the buyer. The seller organizes packaging, labelling, inspection of the cargo, pays export duties, completes transit procedures, and covers all costs until the moment of transfer. The buyer is only responsible for import customs formalities and further actions after receiving the cargo. The DPU term is convenient because the place of delivery can be anywhere — not only a terminal, but also a warehouse, logistics center or other agreed point. This makes DPU a fairly flexible option, but it is important to clearly specify the place of unloading in the contract.
DDP Delivery Terms
DDP (Delivery Duty Paid) is a term under which the seller assumes maximum responsibility. They organize and pay for the transportation of cargo to the agreed location, complete all customs procedures for both export and import, and pay all duties, taxes, and fees. The cargo is considered delivered when it arrives at the specified destination and is ready for unloading. These terms are convenient for the buyer, as they receive the cargo “turnkey” without any additional hassle with customs or paying taxes. However, for the seller, this is the most responsible option, as they bear all costs and risks until the cargo is handed over.
Changes in Incoterms 2020
Previously, international deliveries often raised questions about who was responsible for the cargo at different points along the route, who paid customs duties and insurance, and how to properly complete the paperwork to avoid misunderstandings between the seller and the buyer. The new Incoterms 2020 rules have introduced important clarifications that make these processes more transparent and secure. In particular, the following changes have been made compared to Incoterms 2010:
- In Incoterms 2020, the term DAT has been replaced by DPU, which allows cargo to be delivered and unloaded at any agreed location, not just at the terminal.
- For FCA, it is now possible to agree that the buyer will transfer the bill of lading marked “loaded on board” to the seller, which facilitates the fulfillment of letter of credit conditions.
- CIP has set a minimum insurance coverage of 110% of the value of the insured cargo for greater cargo security.
- The concept of “transport security” and clear rules for completing customs documents at the border have been introduced.
- The articles of the rules have been regrouped for a more logical and easier understanding of the obligations of the parties.
- Mandatory container inspections have been introduced to ensure transport safety.
- The redistribution of costs has been clarified: the seller bears the costs to the first point of delivery according to the chosen basis, and the buyer bears the costs after receiving the cargo.
- The rules now take into account all delivery options, including the use of the seller’s own transport.
- Explanatory notes have been added for users to make it easier to understand the rules and apply them in practice.
- Provisions have been introduced to guarantee the safety of both parties during transport and document processing.
Thanks to these changes, logistics companies can now plan shipments more easily, avoid risks, and ensure that all customs and transport procedures are carried out correctly for their customers. The updated Incoterms 2020 rules allow businesses to avoid misunderstandings and build transparent partnerships.