In international logistics, clarity is key – and that’s exactly what Incoterms® are designed to deliver. Published by the International Chamber of Commerce(ICC), Incoterms® (short for International Commercial Terms) define the responsibilities of buyers and sellers in global trade contracts.

The current edition, Incoterms® 2020, includes 11 terms grouped into two categories based on the mode of transport. Each term outlines who is responsible for:
– Transport costs
– Insurance
– Customs clearance
– Risk transfer point

Let’s walkthrough them.

A. Incoterms® for Any Mode of Transport (7 terms)

EXW – ExWorks (named place of delivery)
The seller makes the goods available at their premises. The buyer bears all risks and costs from that point onward.

FCA – Free Carrier (named place of delivery)
The seller delivers goods to a carrier or another party chosen by the buyer. Risk transfers when the goods are handed over.

CPT – Carriage Paid To (named destination)
The seller pays for transport to the agreed destination. Risk transfers when the goods are handed to the first carrier.

CIP – Carriage and Insurance Paid To (named destination)
Like CPT, but the seller must also provide insurance with broader coverage(Institute Cargo Clauses A). Risk still transfers at the first carrier.

DAP – Delivered at Place (named destination)
Seller delivers the goods ready for unloading at the agreed destination. The buyer handles unloading and import formalities.

DPU – Delivered at Place Unloaded (named destination)
The only Incoterm requiring the seller to unload the goods. Replaced DAT in the 2020 update.

DDP – Delivered Duty Paid (named destination)
The seller assumes full responsibility – including duties, taxes, and delivery. Maximum obligation for the seller.

B. Incoterms® for Sea and Inland Waterway Transport Only (4 terms)

FAS – Free Alongside Ship (named port of shipment)
The seller places the goods next to the vessel. The buyer handles loading, sea freight, and insurance.

FOB – Free On Board (named port of shipment)
The seller loads goods onto the vessel. Risk transfers when goods pass the ship’s rail.

CFR – Cost and Freight (named port of destination)
The seller covers sea transport but not insurance. Risk transfers once the goods are loaded onto the vessel.

CIF –Cost, Insurance and Freight (named port of destination)
Same as CFR, but the seller must also provide minimum insurance (Clause C). Risk still passes at loading.

Key Updates in Incoterms® 2020

– DAT replaced by DPU – clarifies delivery is not limited to terminals
– Higher insurance requirement for CIP – now requires Clause A coverage
– FCA update – allows on-board Bill of Lading issuance, supporting L/C compliance
– Security obligations clarified – better reflects today’s regulatory environment

Why Incoterms® Matter to You

Understanding and choosing the correct Incoterm:
– Helps avoid disputes and confusion over delivery responsibilities
– Minimizes financial exposure during international transactions
– Ensures contract and shipping document alignment
– Improves cost control and risk management

At Moorhouse Logistics, our team is always ready to help you select the most appropriate Incoterm for your shipment – ensuring clarity, compliance, and confidence at every step of your trade process.

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