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Incoterms 2020, without the fog.

A trade term is a short code that decides who carries risk, who pays the freight, and how far the seller's job goes. This briefing is a reading aid. The ICC text governs.

Incoterms 2020, published by the International Chamber of Commerce, are eleven three-letter rules. They do not replace the sales contract, they do not name the carrier, and they do not move the cargo by themselves. They answer three questions: where does risk pass from seller to buyer, who pays which leg of the transport, and who handles export and import clearance.

Any mode of transport

Seven rules can be used for sea, air, road, or a mix.

RuleSeller hands overRisk passesMain freight
EXWAt the seller's premises, not loaded, not cleared for exportAt collectionBuyer
FCATo the carrier at a named placeWhen the carrier has the goodsBuyer
CPTTo the carrierWhen the carrier has the goods, even though the seller pays freightSeller
CIPTo the carrier, with insuranceWhen the carrier has the goodsSeller, plus insurance at the higher Institute Cargo Clauses (A) level
DAPAt the named destination, ready for unloadingOn arrival, before unloadingSeller
DPUAt the named place, unloadedAfter unloadingSeller
DDPAt the named destination, import-clearedOn arrival, duty paid by the sellerSeller

Sea and inland waterway only

RuleSeller hands overRisk passesMain freight
FASAlongside the shipAlongside the shipBuyer
FOBOn board the vesselOn boardBuyer
CFROn boardOn board, even though the seller pays freight to destinationSeller
CIFOn board, with minimum insuranceOn boardSeller, plus insurance at Institute Cargo Clauses (C)

The mistake that costs money

People treat CIF and CIP as "the seller takes care of everything until my warehouse." They do not. Under both, risk passes early, when the goods are with the carrier or on board. The seller pays the main freight and buys insurance, but the buyer carries the risk of loss during the voyage. CIP expects a higher level of cover than CIF. If you want the seller to carry risk until your door, you are talking about DAP, DPU, or DDP, and the price should say so.

DPU replaced the older DAT rule. Delivery happens after unloading at the named place, which can be a terminal or another agreed point.

When you request a quote from Extended Blue, name the Incoterm you intend, or tell us you want a recommendation. A price without a term is not yet a price.