Incoterms 2020 Explained: All 11 Terms, Who Pays What (With Chart)
EXW, FOB, CIF, DAP, DDP and the other Incoterms in plain English — who pays freight, insurance and duty, and where risk moves from seller to buyer.
Updated October 24, 2026 · 9 min read
What Incoterms are
Incoterms® are standard trade terms published by the International Chamber of Commerce (ICC). A three-letter code in your purchase order — FOB Shanghai, DAP Chicago — tells buyer and seller exactly who arranges and pays for each part of the journey, and the point where risk of loss moves from seller to buyer. The current version is Incoterms 2020; always write the version and a precise named place, e.g. “FCA Shenzhen warehouse, Incoterms 2020”.
All 11 Incoterms in one chart
| Term | Risk passes to buyer | Main freight paid by | Import duty paid by |
|---|---|---|---|
| EXW Ex Works | Seller’s premises, goods made available | Buyer | Buyer |
| FCA Free Carrier | Handed to buyer’s carrier at named place | Buyer (main carriage) | Buyer |
| CPT Carriage Paid To | Handed to first carrier | Seller (to destination) | Buyer |
| CIP Carriage and Insurance Paid To | Handed to first carrier | Seller + all-risk insurance | Buyer |
| DAP Delivered at Place | Arrival at named place, ready to unload | Seller | Buyer |
| DPU Delivered at Place Unloaded | Unloaded at named place | Seller (incl. unloading) | Buyer |
| DDP Delivered Duty Paid | Arrival at named place, ready to unload | Seller | Seller |
| FAS Free Alongside Ship | Alongside the vessel at origin port | Buyer | Buyer |
| FOB Free on Board | Loaded on board the vessel at origin port | Buyer | Buyer |
| CFR Cost and Freight | Loaded on board at origin port | Seller (to destination port) | Buyer |
| CIF Cost, Insurance and Freight | Loaded on board at origin port | Seller + minimum insurance | Buyer |
Rules for any mode of transport
EXW — Ex Works. The seller only makes goods available at its premises. The buyer loads, exports, ships and imports. It looks cheap but leaves the buyer handling export formalities in the seller’s country, which is often impractical. FCA is usually a better choice.
FCA — Free Carrier. The seller clears the goods for export and hands them to the buyer’s carrier at a named place (its warehouse or a terminal). It is the modern, container-friendly replacement for FOB.
CPT and CIP — Carriage (and Insurance) Paid To. The seller pays freight to the destination, but risk passes when the goods are handed to the first carrier. Under CIP the seller must also buy insurance — in Incoterms 2020 at the higher “all risks” level (Institute Cargo Clauses A).
DAP, DPU and DDP — Delivered. The seller carries the risk until the goods arrive. DPU adds unloading. DDP adds import clearance and duty — the seller acts as importer, which requires it to be able to clear customs in the buyer’s country.
Rules for sea and inland waterway
FAS (goods alongside the ship), FOB (loaded on board), CFR (seller also pays ocean freight) and CIF (plus minimum insurance, ICC C). Under CFR and CIF the seller pays freight to the destination port but the risk passes once goods are on board at origin — if the ship is delayed or cargo is damaged at sea, the buyer is the one who claims.
Which Incoterm should you use?
- First-time importer who wants control of cost: FOB (ocean) or FCA (air, truck, containers), with your own freight forwarder and customs broker.
- You want a door-delivered price: DAP — but remember you still pay U.S. duty and need a customs broker.
- Selling to consumers abroad: DDP gives the smoothest experience, but only if you can act as importer of record in that country.
- Use our landed cost calculator to compare FOB and DAP offers on a like-for-like basis.
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Frequently asked questions
What is the most common Incoterm for imports from China?
FOB (Free on Board) is the most common for ocean imports: the supplier gets goods loaded on the vessel at the Chinese port, and the buyer pays ocean freight, insurance, U.S. customs and delivery. Many importers prefer FOB because they control the freight forwarder and the cost.
Who pays import 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 duty on the seller.
Is FOB only for ocean freight?
Yes. FOB, FAS, CFR and CIF are meant for sea and inland waterway transport. For containers handed to a carrier at a terminal, or for air and truck, FCA is the correct equivalent.
Do Incoterms decide when ownership passes?
No. Incoterms define delivery, risk and costs. Transfer of ownership (title) and payment terms belong in the sales contract.
Related guides
- How to Import Goods into the U.S.: A Step-by-Step Guide for First-Time Importers
- Customs Broker vs Freight Forwarder: What’s the Difference and Do You Need Both?
- How to Verify a Customs Broker or Freight Forwarder Before You Hire One
This guide is general information, not legal advice. Rules and rates change — confirm requirements with CBP, FMCSA or the FMC before you ship.