Incoterms 2020 Chart

How to read the chart

Incoterms® rules, published by the International Chamber of Commerce, are three-letter terms written into a sales contract (for example "FCA Shenzhen, Incoterms 2020") that say which party arranges and pays for each part of the journey, and where the risk of loss or damage passes from seller to buyer. There are eleven rules in the 2020 edition.

• Pays shows who bears each cost by default. "Seller*" marks destination charges that the seller pays only if they are in its contract of carriage, which is why C-rule buyers are often surprised by destination terminal charges.
• Risk with shows who carries the risk at each step. The highlighted row is the delivery point. Under the C rules, cost and risk split at different places: the seller pays the freight but the buyer carries the risk at sea.
• Insurance is only compulsory under CIF and CIP. Under every other rule neither party is obliged to insure, but the party at risk normally will.

All eleven rules at a glance

S = seller, B = buyer, C = seller if in its carriage contract, N = no obligation. The shaded cell in each column is the step after which risk passes to the buyer. The selected rule's column is outlined.

The four families

• E (EXW): the seller makes the goods available at its premises and does almost nothing else, not even loading.
• F (FCA, FAS, FOB): the seller delivers to a carrier the buyer has booked; the buyer pays main carriage.
• C (CPT, CIP, CFR, CIF): the seller books and pays main carriage, but risk passes at origin when the goods are handed to the carrier or loaded on board.
• D (DAP, DPU, DDP): the seller delivers to the destination and carries the risk all the way there.

Worked example: one container, three rules

A US importer buys a 40′ container of furniture from a factory near Ningbo and compares three offers.

• FCA factory: the supplier loads the container at its warehouse and clears export. The importer's forwarder pays the trucking to the port, origin terminal handling, ocean freight, insurance, destination charges, customs entry and duty. The importer controls the freight and carries the risk from the factory gate.
• CIF Los Angeles: the supplier pays everything to the port of Los Angeles and buys minimum (Institute Cargo Clauses C) insurance, but the risk passes as soon as the container is on board in Ningbo. The importer still pays destination terminal charges unless the supplier's freight contract included them, plus customs, duty and delivery.
• DAP warehouse: the supplier pays and carries the risk to the importer's dock; the importer unloads, clears customs and pays duty.

The CIF price looks cheapest because ocean freight is in it, but the importer has less say over the carrier, the transit time and the destination charges. That is why experienced importers often prefer FCA or FOB and their own forwarder.

Common Incoterms mistakes

• FOB or CIF for containers. Containers are handed over at a terminal days before loading, so the seller carries risk it cannot control. ICC recommends FCA and CIP for containerised cargo.
• EXW for exports. Under EXW the buyer must clear export, which a foreign buyer often cannot legally do. FCA at the seller's premises gives almost the same deal without that problem.
• DDP without checking import tax. The seller must clear import and pay duty and VAT/GST, which usually requires a local registration it may not have.
• A vague named place. "FCA China" is not enough. Name the address or terminal: the cost and risk split happens exactly there.
• Expecting Incoterms to settle title or payment. They do not transfer ownership, set the price or the payment terms, or deal with breach of contract; the sales contract does.