Incoterms 2020: the rules and the transfer of risk
Incoterms are the trade terms published by the International Chamber of Commerce (ICC) that define where the goods are delivered, when risk passes and who pays which costs between seller and buyer. This guide covers the 11 Incoterms 2020 rules and how to use them correctly for road freight.
What Incoterms do — and don’t — cover
An Incoterms rule is written into the sales contract as, for example, “FCA Istanbul Incoterms® 2020”. The rule always comes with a named place, which fixes where delivery and the transfer of risk happen. The current version is Incoterms 2020, in force since 1 January 2020.
Incoterms allocate: the place of delivery, the transfer of risk, carriage and insurance costs, and who handles export and import customs clearance.
The 11 rules at a glance
In Incoterms 2020, 7 rules apply to any mode of transport (including road) and 4 rules only to sea and inland waterway transport.
| Rule | Delivery / transfer of risk | Main carriage paid by | Export / import clearance |
|---|---|---|---|
| EXW — Ex Works | At the seller’s premises, goods placed at the buyer’s disposal (not loaded) | Buyer | Buyer / buyer |
| FCA — Free Carrier | Handed to the buyer’s carrier at the named place (loaded, if at the seller’s premises) | Buyer | Seller / buyer |
| CPT — Carriage Paid To | When handed to the first carrier | Seller (to destination) | Seller / buyer |
| CIP — Carriage and Insurance Paid To | When handed to the first carrier; seller buys all-risks (ICC A) cover | Seller | Seller / buyer |
| DAP — Delivered at Place | At destination, on the arriving vehicle, ready for unloading | Seller | Seller / buyer |
| DPU — Delivered at Place Unloaded | At destination, unloaded | Seller | Seller / buyer |
| DDP — Delivered Duty Paid | At destination, ready for unloading, import duties paid | Seller | Seller / seller |
| Rule | Delivery / transfer of risk | Main carriage paid by | Export / import clearance |
|---|---|---|---|
| FAS — Free Alongside Ship | Alongside the vessel at the port of shipment | Buyer | Seller / buyer |
| FOB — Free On Board | On board the vessel at the port of shipment | Buyer | Seller / buyer |
| CFR — Cost and Freight | On board the vessel at the port of shipment | Seller (to destination port) | Seller / buyer |
| CIF — Cost, Insurance and Freight | On board at the port of shipment; seller buys minimum (ICC C) cover | Seller | Seller / buyer |
Which rule for road freight?
Road exports mostly use EXW, FCA, CPT, DAP and DDP. A practical way to choose:
- The buyer sends its own truck: FCA (seller’s warehouse). The seller loads and clears the goods for export; risk passes on loading. Under EXW even loading is the buyer’s job and the seller need not clear for export — often a problem in international sales.
- The seller pays the freight but wants risk to pass early: CPT, or CIP with insurance. Freight is the seller’s, transit risk the buyer’s.
- The seller delivers to the buyer’s door: DAP (buyer unloads) or DPU (seller unloads).
- The seller also pays import duties: DDP. The seller must be able to clear goods in the buyer’s country, which is often impractical.
What changed in Incoterms 2020
- DAT replaced by DPU: the place of unloading can now be any place, not only a terminal.
- Higher insurance under CIP: the seller must now provide all-risks ICC (A) cover; CIF keeps minimum ICC (C) cover.
- On-board bill of lading under FCA: the parties can agree that the buyer’s carrier issues an on-board bill of lading to the seller (useful with letters of credit).
- Own means of transport: under FCA, DAP, DPU and DDP the parties may carry the goods with their own vehicles instead of a third-party carrier.
- Security-related costs and the allocation of costs are listed explicitly in each rule.
Incoterms and transport documents
The chosen rule goes on the invoice and in the sales contract, and the terms of delivery in the customs declaration follow it. Who pays the freight should be reflected in box 17 of the CMR (“to be paid by”): under DAP, for example, carriage charges fall on the sender; under EXW and FCA usually on the buyer. Consistency between invoice and CMR matters at customs and in disputes.
With CMRyaz you can prepare the commercial invoice and the CMR from the same data, so terms of delivery and parties stay consistent across both.
Frequently asked questions
Can FOB be used for truck transport?
FOB is for sea and inland waterway transport only. For road freight use FCA, under which risk passes when the goods are handed to the buyer’s carrier at the named place.
What is the difference between EXW and FCA?
Under EXW the seller only makes the goods available; loading and export clearance are the buyer’s. Under FCA the seller (at its own premises) loads the goods onto the buyer’s vehicle and clears them for export.
What is the difference between DAP and DDP?
In both, the seller delivers to the destination. Under DAP import clearance and duties are the buyer’s; under DDP they are the seller’s.
Do Incoterms decide when ownership passes?
No. Incoterms only cover delivery, transfer of risk, costs and customs duties. Ownership and payment depend on the sales contract.