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Incoterms 2020 — A Practical Cheat Sheet

By the Conveyco Team6 min read

Incoterms are the most-debated, most-misused acronyms in international shipping. The 2020 update tightened the language and dropped some confusion from the previous version. Here's what each one actually means in practice.

What Incoterms are

Incoterms (International Commercial Terms) are an 11-term shorthand maintained by the International Chamber of Commerce that tells the seller and buyer of an international shipment:

  • Where the handoff happens — the named place where the seller's responsibility ends and the buyer's begins
  • Who pays for what — origin transport, ocean or air freight, destination delivery, customs clearance
  • Who carries the risk — at what point liability for damage or loss shifts

They're updated every 10 years. The current version is Incoterms 2020, which replaced 2010. Most shipping documents now reference the 2020 set, but you'll occasionally see 2010 referenced — they're mostly the same with a few practical refinements.

The 11 terms in 2020

Organized by where the handoff happens, earliest to latest in the shipment journey:

  1. EXW (Ex Works) — seller leaves cargo at their factory or warehouse; buyer handles everything from there
  2. FCA (Free Carrier) — seller delivers to a named carrier or place agreed by both parties
  3. CPT (Carriage Paid To) — seller arranges and pays for transport to the named destination, but risk transfers earlier
  4. CIP (Carriage and Insurance Paid To) — same as CPT, but seller also pays for insurance
  5. DAP (Delivered At Place) — seller delivers to the buyer's specified destination, ready for unloading; buyer handles import customs
  6. DPU (Delivered At Place Unloaded) — seller delivers and unloads at the destination; buyer still handles import customs. New in 2020 — replaces the old DAT term.
  7. DDP (Delivered Duty Paid) — seller handles everything, including import customs and duties at destination
  8. FAS (Free Alongside Ship) — seller delivers alongside the vessel at the port of shipment (sea and inland waterway only)
  9. FOB (Free On Board) — seller delivers on board the vessel (sea and inland waterway only)
  10. CFR (Cost and Freight) — seller pays freight to destination port, but risk transfers when cargo crosses the ship's rail at origin (sea and inland waterway only)
  11. CIF (Cost, Insurance and Freight) — same as CFR plus seller pays insurance (sea and inland waterway only)

Two categories you need to know

Multimodal — any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU, DDP

Use these for air freight, road, rail, containerized ocean, or any mix of modes.

Sea and inland-waterway only: FAS, FOB, CFR, CIF

These last four were originally designed for bulk cargo (oil, grain, ore) — situations where loading or unloading the ship itself is the risk-transfer moment. Using them for containerized cargo is technically possible but creates ambiguity (when exactly does a sealed container "cross the ship's rail"?). For container shipments, the International Chamber of Commerce explicitly recommends FCA over FOB, and CPT or CIP over CFR or CIF.

The four you'll see most often

In practice, 80%+ of shipments use one of these four:

FOB (Free On Board). Despite the official guidance to prefer FCA for containers, FOB is still by far the most common Incoterm used. Sellers like it because risk transfers cleanly at the port of shipment. Common for FCL container exports from Asia.

CIF (Cost, Insurance and Freight). Common for shipments where the buyer wants a single all-in landed cost. Seller arranges everything to the destination port including cargo insurance. Common for distributors who want a simple per-unit landed price.

EXW (Ex Works). Cheapest Incoterm for the seller, most work for the buyer. The buyer handles export customs, freight booking, ocean transport, import customs, and delivery. Common with experienced importers who have their own freight forwarder relationships and want maximum routing control.

DDP (Delivered Duty Paid). Most expensive for the seller, easiest for the buyer. Seller delivers door-to-door including import duties and taxes. Common for e-commerce and small B2B exports where the buyer wants zero hassle.

Common mistakes

Confusing CFR or CIF with delivery to the buyer's door. Under CFR or CIF, the seller's obligation ends at the destination port — not the buyer's warehouse. The buyer still has to clear customs, pay duty, and arrange final inland transport.

Using FOB for air shipments. FOB is sea-and-waterway only. For air, use FCA.

Assuming "Delivered" means "Delivered to my door." It depends which "D" term. DAP and DDP go to the named place, but DPU specifically requires unloading. Read the term carefully.

Skipping the "named place" specification. Every Incoterm has to be followed by a named location: "FOB Shanghai," "DDP Minneapolis MN." Just saying "FOB" or "DDP" is incomplete and creates legal ambiguity.

Forgetting that Incoterms don't transfer title. Title (legal ownership) is separate from risk transfer. Your sales contract governs when title passes; the Incoterm governs when risk and cost responsibility move. They can be the same moment, or not.

How Incoterms affect insurance, freight cost, and customs

  • Insurance. Under CIP and CIF, the seller must provide insurance. For CIP 2020, the minimum coverage is the "All Risks" Institute Cargo Clauses Class A; for CIF, it's the basic Class C unless parties agree to upgrade. Other terms put insurance responsibility on the buyer, or leave it unspecified — in which case both parties should clarify in the sales contract.
  • Freight cost. Walks up the chain from EXW (buyer pays everything) to DDP (seller pays everything). The Incoterm tells you who's writing the check to the carrier.
  • Customs. Import customs is the buyer's responsibility under everything except DDP, which puts it on the seller.

If you're not sure which to use

Pick the Incoterm from your commercial invoice if it's already specified. If you're drafting the invoice, ask:

  • Who's more experienced with international freight? Make them responsible for more of the journey.
  • Where does the buyer want to take delivery — at their door (DAP, DDP) or at the port (CIF, CFR)?
  • Is the buyer doing their own customs clearance? If yes, anything but DDP.
  • Is this a containerized shipment? Prefer FCA, CPT, or CIP over the sea-only equivalents.

If you're still unsure, request a quote and tell us about your transaction — we'll help you pick a term that fits the actual operational reality.