Incoterms 101: who is responsible for what

Incoterms (International Commercial Terms), published by the International Chamber of Commerce, are three-letter rules that define exactly where the seller's responsibility ends and the buyer's begins. They answer three questions for every shipment: who pays for what, who bears the risk of loss or damage at each point, and who handles which formalities (export/import clearance, carriage, insurance).

The 11 Incoterms 2020, grouped

Seven rules work for any mode of transport (road, rail, air, sea, or a combination):

• EXW — Ex Works: buyer collects from the seller's premises and does everything from there. Maximum buyer responsibility.
• FCA — Free Carrier: seller delivers, cleared for export, to a carrier named by the buyer.
• CPT — Carriage Paid To: seller pays carriage to a named destination; risk passes when goods are handed to the first carrier.
• CIP — Carriage and Insurance Paid To: like CPT but the seller also buys insurance (now at the higher 'all-risks' level under 2020).
• DAP — Delivered At Place: seller delivers, ready for unloading, at the named destination.
• DPU — Delivered at Place Unloaded: seller delivers AND unloads at the destination (the only term where the seller unloads).
• DDP — Delivered Duty Paid: seller delivers cleared for import, duties paid. Maximum seller responsibility.

Four rules are for sea and inland-waterway transport only, where cargo is handed over at a port:

• FAS — Free Alongside Ship: seller delivers alongside the vessel at the load port.
• FOB — Free On Board: seller delivers on board the vessel; risk passes once goods are on board. Very common for bulk cargo.
• CFR — Cost and Freight: seller pays cost and freight to destination; risk passes on board at origin.
• CIF — Cost, Insurance and Freight: like CFR plus insurance to destination; risk still passes on board at origin.