Key takeaways
- Trade terms, usually Incoterms from the International Chamber of Commerce, state where the seller's delivery duty ends and the buyer's begins.
- Incoterms 2020 has eleven rules. Seven suit any mode of transport. Four suit sea and inland waterway only.
- Incoterms do not cover price, payment, transfer of title or the effect of a breach. The contract does that.
- Always name the place after the term, such as FCA Mumbai Airport, Incoterms 2020.
Free PDF and Excel: Incoterms 2020 chooser and responsibility matrix. Get it below
What trade terms are
Trade terms are standard rules that say who arranges and pays for transport, insurance and customs in a sale, where risk passes from seller to buyer, and what delivery means.
The best known set is Incoterms, published by the International Chamber of Commerce. The current version is Incoterms 2020. The terms in use outside Incoterms, such as the US "FOB shipping point", have different meanings. See FOB shipping point and FOB destination.
| Rule | Name | Mode | Risk passes at |
|---|---|---|---|
| EXW | Ex Works | Any | Seller's premises. See Ex Works |
| FCA | Free Carrier | Any | Handed to the buyer's carrier |
| CPT | Carriage Paid To | Any | Handed to first carrier |
| CIP | Carriage and Insurance Paid To | Any | Handed to first carrier |
| DAP | Delivered at Place | Any | Ready for unloading at destination |
| DPU | Delivered at Place Unloaded | Any | Unloaded at destination |
| DDP | Delivered Duty Paid | Any | At destination, duty paid. See DDP |
| FAS | Free Alongside Ship | Sea | Alongside the ship |
| FOB | Free On Board | Sea | On board the ship |
| CFR | Cost and Freight | Sea | On board the ship |
| CIF | Cost, Insurance and Freight | Sea | On board the ship |
A buyer asks for a price "FOB Chennai". The seller quotes FOB Chennai, Incoterms 2020. The seller clears the goods for export and loads them on the ship. After that, the buyer pays freight and carries the risk.
A buyer who wanted the seller to pay the sea freight should have asked for CFR or CIF. The wrong term moved a 2,400 freight cost to the wrong side.
Choosing
- Want maximum control as a buyer: EXW or FCA, with care over export clearance.
- Want the seller to deliver to your door: DAP or DDP.
- Selling containerised goods by sea: FCA, CPT or CIP are usually better than FOB or CIF, because risk passes at the terminal where the carrier takes the goods.
- Using a letter of credit: check which terms the bank accepts.
- The term and place are named.
- Incoterms 2020 is stated.
- Insurance responsibility is clear.
- Customs duties and taxes are allocated.
- Documents match the term. See shipping documents.
Last checked: 19 October 2026. Summary of ICC Incoterms 2020. Check the ICC publication for the full rules.
Free PDF and Excel
Incoterms 2020 chooser and responsibility matrix
A matrix showing who pays for transport, insurance and customs under each Incoterms 2020 rule, with a chooser.
- Eleven-rule table
- Responsibility matrix
- Chooser questions
- Excel term log
Frequently asked questions
What are trade terms?
Standard rules, such as Incoterms, that allocate transport, insurance, customs and risk between buyer and seller.
How many Incoterms are there?
Eleven in Incoterms 2020.
Do Incoterms transfer ownership?
No. Title is a matter for the contract and applicable law.
What is the difference between FOB and CIF?
Under FOB the buyer pays freight and insurance. Under CIF the seller pays them to the destination port, but risk still passes when the goods are on board.
Which Incoterm is best for containers?
FCA, CPT or CIP are usually suited to container shipments, since FOB, CFR and CIF assume the goods are loaded on board.