Incoterms 2020: delivery terms in practice

The rules allocate tasks connected with carriage, customs and specified costs, and establish the point at which the risk of loss or damage passes. The ICC currently publishes Incoterms® 2020, with 11 rules. The rules can also be used for domestic deliveries.

They do not replace a complete sales contract. Agree the price, payment method and timing, transfer of ownership, product requirements and remedies separately. The International Trade Administration explains these limits. Choosing DAP therefore says nothing about whether the buyer pays after delivery or whether payment is secured.

Start with how the goods will actually move. A rule used for conventional sea freight may not fit a truck shipment or a container handed over before loading. This overview helps narrow the choice; it is not the complete rules. See the official ICC selection checklist.

Scroll the table sideways to compare all columns.

Under CPT and CIP, the seller pays for carriage to the agreed destination, but risk passes on delivery to the carrier, normally the first carrier. CIP also requires the seller to arrange insurance. The ICC Academy comparison of CPT and CIP explains this distinction.

Under CFR and CIF, paying freight to the destination port also does not mean the seller retains risk until arrival. Risk passes when goods are delivered on board at the shipment port. CIF adds an insurance obligation. The ICC introduction to the rules explains the difference between delivery and destination.

Consider a quotation for pallets of cosmetics with carriage paid to the buyer’s warehouse. The buyer still needs to ask who bears risk along the route and what insurance applies. A line stating “transport included” does not answer either question.

Translate each abbreviation into tasks that both parties can perform. ICC Academy examines the details in its guides to EXW and DDP and DAP and DPU.

• EXW: the seller makes goods available, generally without loading the buyer’s vehicle or clearing the goods for export. Check whether the buyer can handle those formalities and whether actual loading arrangements match the agreement.
• FCA: the seller delivers to the carrier or other nominated person and handles export clearance where applicable. At the seller’s premises, the seller also loads the buyer’s vehicle.
• DAP: the seller bears risk to the agreed destination, where goods are ready for unloading. The buyer handles unloading and import clearance.
• DPU: delivery takes place after unloading at the agreed destination. The seller must be able to arrange that unloading.
• DDP: the seller also takes on import clearance and import charges. Check that the seller can legally perform those duties in the destination country. DDP does not itself make the seller responsible for unloading.

If you hand a container to a carrier or terminal before it is loaded on the vessel, consider FCA first. With FOB, delivery takes place on board, later than the terminal handover. The ICC Academy comparison of FAS and FOB highlights this issue.

If the seller arranges the main carriage of the container, CPT or CIP may be appropriate. The agreed handover point and allocation of responsibilities determine the choice. Match the rule to the actual route instead of reusing the abbreviation from an earlier invoice.

Specify the rule, precise place or port, and edition. “FCA Poland” leaves too much open. A useful format is FCA manufacturer’s warehouse, full address and collection point, Incoterms® 2020. The ICC guidance on using the rules explains why the named place matters.

1. 01

   Map the goods’ journey

   Identify the factory, terminals, ports and receiving warehouse. Note where the goods change carriers.

2. 02

   Assign the tasks

   Agree carriage, loading, unloading, clearance and insurance. Confirm that each party can perform its obligations.

3. 03

   Separate cost from risk

   Record how far the seller pays for carriage and exactly where risk transfers. Under the C rules, these are different points.

4. 04

   Reconcile the price and documents

   Compare the sales quotation with the carrier’s quote. Clarify terminal fees, waiting charges and document requirements before confirming the order.

Expanta’s tool asks about the destination country, transport mode, carriage arrangements, risk, insurance, unloading and customs responsibilities. It suggests a rule and explains the allocation of duties. You can also enter the precise place or port.

Use the result as a starting point for a commercial discussion. It does not replace the full rule or a review of the contract and destination requirements. Expanta’s tool is not an official ICC product.