Incoterms 2020: EXW, FOB, CIF

Quick Reference

Incoterms are three-letter codes that define who pays for what and who bears the risk when goods move from seller to buyer. The 2020 edition includes 11 rules published by the International Chamber of Commerce (ICC).

Incoterms Latest Edition 2020

Overview

Incoterms chart of responsibility

Category	Terms	Transport Mode
E - Departure	EXW	Any
F - Main carriage unpaid	FCA, FAS, FOB	FCA: Any / FAS, FOB: Sea only
C - Main carriage paid	CPT, CIP, CFR, CIF	CPT, CIP: Any / CFR, CIF: Sea only
D - Arrival	DAP, DPU, DDP	Any

Key Changes in 2020 Edition

Change	Details
DAT → DPU	”Delivered at Terminal” renamed to “Delivered at Place Unloaded” (delivery can be anywhere, not just terminals)
CIP insurance	Increased to Institute Cargo Clauses (A)-all risks coverage
CIF insurance	Unchanged-minimum coverage (C clauses)
FCA B/L option	Buyer can request carrier to issue on-board B/L to seller

Incoterms define who pays for what and who bears the risk when goods move from seller to buyer. The critical distinction is that cost responsibility and risk transfer are separate; in C-terms, the seller pays for transport but risk transfers at origin, meaning the buyer bears risk during transit even though the seller arranged shipping.

C-Incoterms (Main Carriage Paid)

In C-terms, the seller pays for transport to destination but risk transfers at origin. This is counterintuitive-the buyer bears the risk during transit even though the seller arranged and paid for shipping.

Term	Mode	Seller Pays For	Risk Transfers When
CFR	Sea only	Freight to destination port	Goods loaded on vessel
CIF	Sea only	Freight + insurance to destination port	Goods loaded on vessel
CPT	Any	Carriage to named destination	Goods handed to first carrier
CIP	Any	Carriage + insurance to named destination	Goods handed to first carrier

CFR (Cost and Freight)

Sea/inland waterway only. Seller arranges and pays freight to destination port. Risk transfers when goods are loaded onto the vessel. No insurance required-buyer should arrange separately if needed.

CIF (Cost, Insurance, and Freight)

Sea/inland waterway only. Same as CFR, plus seller must provide marine insurance (minimum 110% of contract value, Institute Cargo Clauses C). Best for bulk/non-containerized cargo. For containers, consider CIP instead.

Field Note

Under CIF, the seller only needs to provide minimum (C clauses) insurance - this doesn’t cover many risks including theft, pilferage, or damage from improper stowage. For high-value piping materials, always request (A clauses) coverage or arrange your own supplementary policy.

CPT (Carriage Paid To)

Any transport mode. Seller pays carriage to named destination. Risk transfers at first carrier handover. No insurance required-buyer should arrange if desired.

CIP (Carriage and Insurance Paid To)

Any transport mode. Same as CPT, plus seller must provide insurance covering Institute Cargo Clauses (A)-all risks at 110% contract value. This is the higher insurance standard compared to CIF.

C-Term Comparisons

Comparison	Key Difference
CIF vs. CFR	CIF includes insurance, CFR does not
CIP vs. CPT	CIP includes insurance (A clauses), CPT does not
CIF/CFR vs. FOB	CIF/CFR: seller arranges freight. FOB: buyer arranges freight and has more control

When to Use Which

• FOB: Buyer has better freight rates or wants shipping control
• CFR: Seller has logistics advantage, buyer handles own insurance
• CIF: Buyer wants seller to handle freight and insurance
• CIP: Multimodal transport requiring insurance (higher coverage than CIF)

Pro Tip

For piping materials (heavy and bulky), FOB is often best for buyers - you control freight forwarding and can consolidate shipments from multiple suppliers. Sellers quoting CIF often inflate freight costs or use slow carriers. Get competitive freight quotes yourself.

D-Incoterms (Arrival)

In D-terms, the seller assumes maximum responsibility-delivering goods to destination with all risks and costs until arrival.

Term	Seller Delivers To	Seller Pays Import Duties?	Seller Unloads?
DAP	Named place (any location)	No	No
DPU	Named place (any location)	No	Yes
DDP	Named place (any location)	Yes	No

DAP (Delivered at Place)

Any transport mode. Seller delivers to named destination, ready for unloading. Buyer handles import clearance, duties, and unloading. Most flexible D-term-delivery location can be warehouse, factory, or construction site.

DPU (Delivered at Place Unloaded)

Any transport mode. Same as DAP, but seller must also unload the goods. This is the only Incoterm requiring seller to unload. Consider unloading equipment needs when using this term.

DDP (Delivered Duty Paid)

Any transport mode. Maximum seller obligation-seller handles everything including import clearance, duties, and taxes. Buyer only unloads. Sellers need thorough knowledge of destination country’s import regulations.

DDP Risk for Sellers

DDP places significant burden on sellers who may not be familiar with destination country customs procedures. Consider having a local agent or customs broker.

Common Mistake

Accepting EXW terms for international orders without understanding the implications. As buyer, you’ll need to handle export clearance in a foreign country - without a local agent, you may face delays, fines, or even cargo seizure. Use FCA instead when possible.

Obsolete D-Terms

Old Term	Removed In	Replaced By
DAT (Delivered at Terminal)	2020	DPU
DAF (Delivered at Frontier)	2010	DAP or DPU
DES (Delivered Ex Ship)	2010	DAP or DPU
DEQ (Delivered Ex Quay)	2010	DPU

E-Incoterms (Departure)

EXW (Ex Works)

Any transport mode. Minimum seller obligation-seller only makes goods available at their premises. Buyer handles everything else: loading, export clearance, transport, import clearance.

Responsibility	EXW	FOB (comparison)
Loading at seller’s	Buyer	Seller
Export clearance	Buyer	Seller
Transport to port	Buyer	Seller
Loading on vessel	Buyer	Seller
Sea freight	Buyer	Buyer
Import clearance	Buyer	Buyer

EXW Limitations

EXW creates problems for international buyers who must handle export formalities in a foreign country. Consider FCA instead if the buyer cannot easily arrange export clearance.

F-Incoterms (Main Carriage Unpaid)

In F-terms, the buyer arranges and pays for main carriage. The seller delivers to a carrier or vessel, then buyer takes over.

Term	Mode	Seller Delivers To	Risk Transfers When
FCA	Any	Carrier at named place	Goods handed to carrier
FAS	Sea only	Alongside vessel at port	Goods placed alongside ship
FOB	Sea only	On board vessel at port	Goods loaded on vessel

FCA (Free Carrier)

Any transport mode. Seller delivers goods (export cleared) to buyer’s carrier at named location. If at seller’s premises, seller loads; if elsewhere, seller is not responsible for unloading.

2020 update: Buyer can instruct carrier to issue on-board B/L to seller-important for Letter of Credit transactions.

FAS (Free Alongside Ship)

Sea/inland waterway only. Seller delivers goods alongside the vessel at port. Buyer arranges loading onto ship and all onward transport. Best for bulk cargo (oil, grain, coal) where buyer controls loading.

FOB (Free On Board)

Sea/inland waterway only. Seller loads goods onto the vessel at port. Risk transfers when goods are on board. The most commonly used sea freight term-buyer controls freight from loading port.

Summary: All Incoterms 2020

Incoterm	Seller’s Main Obligations	Buyer’s Main Obligations
EXW	Make goods available at premises	All transport, export/import clearance
FCA	Deliver to carrier, export clearance	Main carriage, import clearance
FAS	Deliver alongside ship, export clearance	Loading, main carriage, import clearance
FOB	Load on vessel, export clearance	Main carriage, import clearance
CFR	Freight to port, export clearance	Unloading, import clearance (risk from loading)
CIF	Freight + insurance to port, export clearance	Unloading, import clearance (risk from loading)
CPT	Carriage to destination, export clearance	Import clearance (risk from first carrier)
CIP	Carriage + insurance to destination, export clearance	Import clearance (risk from first carrier)
DAP	All costs/risks to destination (except import)	Unloading, import clearance, duties
DPU	All costs/risks including unloading	Import clearance, duties
DDP	All costs/risks including import duties	Unloading only

The International Chamber of Commerce (ICC)

The ICC publishes Incoterms and other key trade standards. Established 1919, it’s the world’s largest business organization with 45+ million members in 100+ countries.

Key ICC publications for trade:

Publication	Purpose
Incoterms®	Delivery terms for sales contracts
UCP 600	Rules for Letters of Credit
URDG 758	Rules for demand guarantees
ICC Arbitration	International dispute resolution