Incoterms 2020: What You Need to Know

United Kingdom 13.11.25

When trading internationally, those three small letters in your contract — your Incoterms — are essential for understanding who is responsible for what.

They define who pays for transport, who handles customs, and where the risk transfers between you and your buyer or supplier. In other words, your Incoterm shapes every shipment, from paperwork and pricing to delivery and claims.

These rules are issued by the International Chamber of Commerce (ICC) and are recognised worldwide. Getting them right helps you avoid unexpected costs, delays, and disputes — and working with a logistics partner who understands their practical impact makes all the difference.

In this article, we break down what each on means and the nuances around them.

What do Incoterms do?

Each Incoterm® sets out who is responsible for the goods at each stage of the journey — covering transport, insurance, export and import clearance, and delivery.

They do not cover everything. Ownership, payment terms, or when an invoice is due are separate contractual issues. But together with your commercial terms, they create the foundation for a smooth, compliant shipment.

Your choice of Incoterm should reflect how much control and visibility you want over your supply chain, and how much risk you’re willing to take on.

Incoterms 2020 and what they mean

The current version, Incoterms® 2020, introduced clearer cost structures, better insurance standards, and replaced DAT (Delivered at Terminal) with DPU (Delivered at Place Unloaded).

Here’s how they work in practice:

EXW – Ex Works Incoterm

The seller makes the goods available for collection, and the buyer arranges everything. This means the loading, transport, export and import customs, and insurance are all for the buyer.

It gives complete control to the buyer, but also full responsibility.

The EXW Incoterm is ideal for experienced importers with strong logistics control, and is suitable for any mode of transport.

F-level Incoterms – where the buyer controls the main carriage

Under these terms, the buyer arranges the main transport leg. The seller’s job ends once the goods reach the buyer’s nominated carrier or location. The exact handover point must be clearly stated, as that’s when responsibility shifts.

The F-level Incoterms are as follows:

FCA – Free Carrier

Seller delivers to the buyer’s carrier at an agreed place; risk transfers once delivered. Suitable for any mode.

FAS – Free Alongside Ship

Seller delivers goods alongside the vessel at the named port; buyer takes over from there. Sea and inland waterways only.

FOB – Free On Board

Seller loads goods onto the vessel; risk transfers once on board. Sea and inland waterways only (though often used in container shipping, FCA is generally better suited for containers).

C-level terms – where the seller arranges the transport

Here, the seller contracts and pays for main carriage, but risk usually transfers earlier – at the point of delivery to the carrier. Understanding this split is vital when managing insurance and liability.

The C-level Incoterms are as follows:

CPT – Carriage Paid To

Seller pays for carriage to the named destination but risk transfers at handover to the first carrier. Suitable for any mode.

CIP – Carriage and Insurance Paid To

Same as CPT, but the seller also provides insurance cover. Suitable for any mode of transport.

CFR – Cost and Freight

Seller pays freight to the destination port, but risk transfers once goods are loaded on board. Sea and inland waterways only.

CIF – Cost, Insurance and Freight

Same as CFR but includes insurance to the port of destination. Sea and inland waterways only.

D-level Incoterms – where the seller delivers to the destination

The seller takes on most of the journey, contracting and paying for transport to the destination. The difference between the D-terms is where responsibility ends.

The D-level Incoterms are as follows:

DAP – Delivered At Place

Seller delivers ready for unloading at the named destination; buyer handles unloading and import clearance.

DPU – Delivered at Place Unloaded

Seller delivers and also arranges unloading. (Replaced the old DAT term in 2020.)

DDP – Delivered Duty Paid

Seller handles everything – transport, import customs clearance, duties, and VAT – until goods arrive ready for unloading.

All D-terms are suitable for any mode of transport.

Beware that cost and risk do not always transfer at the same time

Your costs transfer as follows:

Ex-Works (EXW): All costs from collecting at the Seller’s premises
Free Carrier (FCA): costs from the nominated collection point
Free Alongside Ship (FAS): costs from arrival at the Port of Origin
Free On-Board (FOB): costs from onboard the vessel at the Port of Origin
Cost and Freight (CFR): costs from arrival at the Port of Destination
Cost, Insurance, and Freight (CIF): costs from arrival at the Port of Destination
Carriage Paid To (CPT): costs from arrival at the nominated destination
Cost and Insurance Paid To (CIP): costs from arrival at the nominated destination
Delivered at Place (DAP): costs from arrival at the nominated destination
Delivered at Place Unloaded (DPU): costs from unloading at the nominated destination
Delivered Duty Paid (DDP): costs from arrival at the nominated destination

However, the transfer of risk is:

Ex-Works (EXW): at the seller’s premises.
Free Carrier (FCA): at the nominated collection point.
Free Alongside Ship (FAS): alongside the vessel at the Port of Origin.
Free On-Board (FOB): once the goods are on board the vessel
Cost and Freight (CFR): once the goods are on board the vessel
Cost, Insurance, and Freight (CIF): once the goods are on board the vessel
Carriage Paid To (CPT): when the goods are collected by the first carrier
Cost and Insurance Paid To (CIP): when the goods are collected by the first carrier
Delivered at Place (DAP): from arrival at the nominated destination, before unloading
Delivered at Place Unloaded (DPU): from after the goods are unloaded.
Delivered Duty Paid (DDP): from arrival at the nominated destination, before unloading

As you can see, the transfer of risk for the C-level Incoterms – CFR, CIF, CPT, and CIP – is much earlier than the transfer of costs. Therefore, additional marine insurance or due diligence on the insurance your Seller provides with the CIF/CIP Incoterms is essential.

Your Incoterm choice matters

Choosing the right Incoterm means striking the right balance between commercial costs, compliance, and risk management.

It affects your total landed cost, your cash flow, your control over carriers, and your customer experience.

For example:

Picking the EXW Incoterm could leave you paying unexpected export handling fees.
Using the FOB Incoterm for container freight can cause confusion over who’s responsible before the container is loaded.
Agreeing to the DDP Incoterm makes you liable for VAT and duty, which can create large exposure with a sudden FX or duty rate change.

A clear understanding of your obligations protects your margin and keeps your supply chain moving.

Get your Incoterm right with Cory Brothers

At Cory Brothers, we go beyond simply arranging transport. We help you use Incoterms strategically so you can be efficient, compliant, and cost-effective with your trade.

Our teams advise on: