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Incoterms 2020 explorer: who arranges and pays what

Incoterms® 2020 are the 11 ICC rules that set out who arranges and pays for each part of a shipment and where risk passes from seller to buyer. EXW puts almost everything on the buyer; DDP puts almost everything on the seller. Choose your role and market below to see which party handles each step under every rule.

See the rules from your side

Buying by sea? FOB, or FCA for containers, lets you appoint your own forwarder, see every charge and control the insurance. Under CFR or CIF the seller's forwarder runs the shipment and you pay destination charges you did not negotiate.

Iraq: Import clearance and duties stay with the buyer under every rule except DDP, which is rarely workable for a foreign seller in Iraq. Many products need a Certificate of Conformity (COC) before shipment, so agree in the contract who arranges and pays for it.

Buyermarks the steps you are responsible for. Select a rule to see where risk passes.

  • EXWEx Works

    Export clearance
    Buyer (your responsibility)
    Main carriage
    Buyer (your responsibility)
    Cargo insurance
    Buyer (optional) (your responsibility)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are placed at the buyer's disposal at the seller's premises or another named place, not loaded on any vehicle.

    Best for: Buyers with their own agent at origin who can load the goods and handle export clearance.

    Watch out: The seller does not have to load the goods or clear them for export, and many countries only allow a local entity to act as exporter. FCA is usually the safer choice.

  • FCAFree Carrier

    Export clearance
    Seller
    Main carriage
    Buyer (your responsibility)
    Cargo insurance
    Buyer (optional) (your responsibility)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are handed to the buyer's carrier: loaded at the seller's premises, or ready for unloading at another named place.

    Best for: Container shipments where the buyer controls the freight. The ICC recommends it instead of FOB for containers.

    Watch out: Name the delivery place precisely. If a letter of credit needs an on-board bill of lading, agree the 2020 option that lets the buyer instruct the carrier to issue one.

  • FASFree Alongside Ship · sea and inland waterway only

    Export clearance
    Seller
    Main carriage
    Buyer (your responsibility)
    Cargo insurance
    Buyer (optional) (your responsibility)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are placed alongside the vessel at the named port of shipment.

    Best for: Bulk and break-bulk cargo such as steel, grain or heavy machinery loaded with the ship's gear.

    Watch out: Not suited to containers, which are handed over at the terminal well before they reach the ship's side.

  • FOBFree On Board · sea and inland waterway only

    Export clearance
    Seller
    Main carriage
    Buyer (your responsibility)
    Cargo insurance
    Buyer (optional) (your responsibility)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are on board the vessel at the named port of shipment.

    Best for: Buyers who want to choose their own forwarder and shipping line; a very common term for purchases from China.

    Watch out: For containers, risk passes only at loading, after the cargo has left the seller's control at the terminal. Agree in the contract who pays origin terminal handling charges.

  • CFRCost and Freight · sea and inland waterway only

    Export clearance
    Seller
    Main carriage
    Seller
    Cargo insurance
    Buyer (optional) (your responsibility)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are on board at the port of shipment, even though the seller pays the freight to the destination port.

    Best for: Buyers who prefer the seller to book the ship and who arrange their own cargo insurance.

    Watch out: The seller's forwarder controls the shipment, and destination charges such as terminal handling and the delivery order can be high and are paid by you. Insure from the port of loading.

  • CIFCost, Insurance and Freight · sea and inland waterway only

    Export clearance
    Seller
    Main carriage
    Seller
    Cargo insurance
    Seller (required)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are on board at the port of shipment. The seller pays freight and minimum insurance to the destination port.

    Best for: Letter-of-credit trades and buyers who want one simple price to the destination port.

    Watch out: The seller only has to buy minimum cover (Institute Cargo Clauses C, 110% of the value). Ask for wider cover or buy your own. Destination charges are still yours.

  • CPTCarriage Paid To

    Export clearance
    Seller
    Main carriage
    Seller
    Cargo insurance
    Buyer (optional) (your responsibility)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are handed to the first carrier, even though the seller pays carriage to the named destination.

    Best for: Containers and multimodal moves where the seller arranges transport to an inland point.

    Watch out: Risk passes early, at origin, while the cost passes at destination, so the buyer should insure the whole journey.

  • CIPCarriage and Insurance Paid To

    Export clearance
    Seller
    Main carriage
    Seller
    Cargo insurance
    Seller (required)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods are handed to the first carrier. The seller pays carriage and insurance to the named destination.

    Best for: Multimodal shipments where the buyer wants insurance included in the price.

    Watch out: Incoterms 2020 requires all-risks cover (Institute Cargo Clauses A) under CIP, so the premium is higher than the minimum cover required under CIF.

  • DAPDelivered At Place

    Export clearance
    Seller
    Main carriage
    Seller
    Cargo insurance
    Seller (optional)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods arrive at the named place, on the arriving vehicle and ready for unloading.

    Best for: Door deliveries where the buyer handles import clearance and pays the duties.

    Watch out: The buyer pays for unloading, import clearance, duties and taxes. Slow clearance can lead to demurrage, so agree who pays for waiting time.

  • DPUDelivered at Place Unloaded

    Export clearance
    Seller
    Main carriage
    Seller
    Cargo insurance
    Seller (optional)
    Import clearance
    Buyer (your responsibility)
    Import duties & taxes
    Buyer (your responsibility)
    Where risk passes

    When the goods have been unloaded at the named place of destination.

    Best for: Deliveries to a terminal or project site where the seller can arrange unloading.

    Watch out: The seller must be able to unload at destination; if not, use DAP. DPU replaced the old DAT rule in 2020.

  • DDPDelivered Duty Paid

    Export clearance
    Seller
    Main carriage
    Seller
    Cargo insurance
    Seller (optional)
    Import clearance
    Seller
    Import duties & taxes
    Seller
    Where risk passes

    When the goods arrive at the named place, cleared for import and ready for unloading.

    Best for: Sellers with an importing company or a registered agent in the destination country.

    Watch out: The seller pays import duties and taxes and must clear customs as importer. In Iraq, Saudi Arabia and many African markets this is rarely possible for a foreign seller, so “DDP” quotes often hide extra charges.

What do Incoterms decide, and what don't they?

Incoterms® 2020 (ICC Publication 723E) define three things: who arranges each part of the transport, who pays for it, and where the risk of loss or damage passes from seller to buyer. They do not decide when ownership passes, the price or payment terms, or what happens if one party breaks the contract. Those belong in the sales contract.

Always write the rule with a precise named place and the version, for example “FCA Ningbo CFS, Incoterms® 2020” or “DAP Basra warehouse, Incoterms® 2020”.

How are the 11 rules grouped?

  • Any mode of transport (7 rules): EXW, FCA, CPT, CIP, DAP, DPU, DDP.
  • Sea and inland waterway only (4 rules): FAS, FOB, CFR, CIF.

By first letter:

  • E (EXW): the buyer collects from the seller.
  • F (FCA, FAS, FOB): the buyer pays the main carriage.
  • C (CFR, CIF, CPT, CIP): the seller pays the main carriage, but risk passes at origin.
  • D (DAP, DPU, DDP): the seller delivers to the destination and carries the risk until then.

Which rule should an importer in Iraq, the UAE or East Africa choose?

There is no single right answer, but three patterns cover most of the importers we work with:

  1. Buying from China by sea: FOB, or FCA for containers, with your own forwarder gives you the most control over cost, routing and insurance.
  2. One price to the destination port: CFR or CIF is simple, but get the destination charges in writing before you agree.
  3. Delivery to your door: DAP to your warehouse, with you handling import clearance, avoids the hidden costs of DDP in markets where a foreign seller cannot act as importer.

Whichever rule you choose, make sure the forwarder's quote matches it. An FOB purchase needs a quote from the port of loading, not from the factory.

Which mistakes do we see most often?

  • Using FOB or CIF for containers or trucks. Risk passes on board the ship, long after the seller handed over the container. Use FCA, CPT or CIP instead.
  • Writing only “CIF Iraq”. Name the port, for example CIF Umm Qasr.
  • Assuming CIF insurance is enough. The minimum is Institute Cargo Clauses (C).
  • Agreeing DDP without checking who can be the importer of record and who recovers the VAT.
  • Forgetting that the buyer pays destination terminal charges under every C rule.

Frequently asked questions

Which Incoterm is best for importing from China?

Many importers buy FOB a Chinese port, or FCA for containers, and appoint their own forwarder. That gives them control over freight, routing and insurance. CIF is simpler but leaves the seller's forwarder in charge, and destination charges can be higher than expected.

Who pays customs duty under DAP?

The buyer. Under DAP the seller delivers to the named place, but import clearance, duties and taxes are the buyer's responsibility. Only DDP puts import duties on the seller.

Is CIF insurance enough?

Often not. CIF only requires minimum cover under Institute Cargo Clauses (C) for 110% of the invoice value. For general cargo many buyers ask for clauses (A) or buy their own cover. CIP, by contrast, requires all-risks cover under clauses (A).

Can we still use Incoterms 2010?

Yes, if the contract says so, but Incoterms 2020 is the current version. Always state the version in the contract to avoid disputes.

Do Incoterms decide when I own the goods?

No. Transfer of ownership, payment terms and remedies for breach are governed by the sales contract and the applicable law, not by Incoterms.

Next step

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