Incoterms are standard delivery terms published by the International Chamber of Commerce. The current edition is Incoterms 2020. Each term answers three questions: who arranges transport, who pays for it, and at what point risk passes from seller to buyer. Incoterms do not cover price, payment or ownership; those belong in the contract.
Terms for any mode of transport
- EXW (Ex Works): the buyer collects from the seller’s premises and handles everything after that, including export clearance. Simple for the seller, demanding for the buyer.
- FCA (Free Carrier): the seller clears goods for export and hands them to the buyer’s carrier at an agreed place. Often a better choice than EXW for containerised cargo.
- CPT and CIP (Carriage Paid To / Carriage and Insurance Paid To): the seller pays freight to the destination, but risk passes when goods are handed to the first carrier. CIP adds insurance by the seller.
- DAP (Delivered at Place): the seller delivers to the named destination, ready for unloading. The buyer handles import clearance and duties.
- DPU (Delivered at Place Unloaded): as DAP, but the seller also unloads.
- DDP (Delivered Duty Paid): the seller delivers cleared for import with duties paid. The most demanding term for the seller, and difficult where the seller cannot act as importer.
Terms for sea and inland waterway
- FAS (Free Alongside Ship): goods are placed alongside the vessel at the port of loading.
- FOB (Free on Board): the seller loads the goods on board the buyer’s nominated vessel. Common for bulk cargo.
- CFR (Cost and Freight): the seller pays freight to the destination port; risk passes once goods are on board at origin.
- CIF (Cost, Insurance and Freight): as CFR, plus insurance arranged by the seller, usually at minimum cover unless agreed otherwise.
How to choose
Pick the term that matches who is best placed to control the freight. If you have a forwarder with good rates on the route, buy FOB or FCA. If the supplier ships regularly to your port, CFR or CIF can be simpler. For containers, FCA, CPT and CIP usually fit better than FOB, CFR and CIF, because the container is handed over at a terminal before it is loaded.
Always name the place
A term without a place is incomplete. Write “FOB Mundra, Incoterms 2020” or “DAP Nairobi warehouse, Incoterms 2020”. The place is where the obligations change hands.
If you are unsure which term suits a trade, mention it when you start a trade and TP4 can talk it through.
General information, not legal, tax or financial advice. Updated October 2026.