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Knowledge · Incoterms® 2020

Incoterms® 2020: the 11 rules, explained for buyers

Three letters in your purchase order decide who pays for transport, who clears customs, who insures the cargo and the exact point where the risk of loss passes to you. This guide explains each rule in plain language, with the responsibilities laid out stage by stage.

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11
rules in Incoterms® 2020
7
rules for any mode of transport
4
rules for sea and inland waterway
2020
in force since 1 January 2020

The basics

What Incoterms rules do, and what they do not

The Incoterms® rules are published by the International Chamber of Commerce (ICC). Each rule is a three-letter code that, once written into a sales contract, sets the delivery point and splits tasks, costs and risks between seller and buyer.

They decide

  • Where and when the seller delivers the goods
  • When the risk of loss or damage passes to the buyer
  • Who arranges and pays for each leg of transport
  • Who handles export and import clearance
  • Who must insure the cargo, under CIF and CIP

They do not decide

  • When ownership (title) of the goods passes
  • The price, payment terms or payment method
  • What happens if the contract is breached
  • The specification or quality of the goods
  • Which law governs the contract

How to write it correctly

Rule + named place + version, for example: FOB Hai Phong Port, Vietnam, Incoterms® 2020. Be as precise as possible about the place, down to the terminal or address.

Responsibility matrix

Who pays for each stage, and where the risk passes

Read each row from left to right, from the seller's factory to the buyer's door. The diamond marks the point where risk passes from seller to buyer.

  • Seller pays
  • Buyer pays
  • Depends on the contract of carriage or the named place
  • Risk passes to the buyer
  • Seller must insure
Incoterms® 01Loading at seller's premises02Pre-carriage to export terminal03Export clearance04Origin terminal and loading on board05Main carriage06Destination terminal charges07Import clearance, duties and taxes08Carriage to named destination09Unloading at destination Insurance
Any mode of transport
EXWEx Works BBBBBBBBB –
FCAFree Carrier SXSBBBBBB –
CPTCarriage Paid To SSSSSXBXB –
CIPCarriage and Insurance Paid To SSSSSXBXB ✓ ICC (A)
DAPDelivered at Place SSSSSSBSB –
DPUDelivered at Place Unloaded SSSSSSBSS –
DDPDelivered Duty Paid SSSSSSSSB –
Sea and inland waterway only
FASFree Alongside Ship SSSBBBBBB –
FOBFree On Board SSSSBBBBB –
CFRCost and Freight SSSSSXBBB –
CIFCost, Insurance and Freight SSSSSXBBB ✓ ICC (C)

The 11 rules

Each rule at a glance

Any mode of transport

Use for containers, air, road, rail and multimodal shipments.

Sea and inland waterway only

Use only when goods are loaded directly onto a vessel, typically bulk and break-bulk cargo.

What changed

Incoterms® 2020 compared with 2010

  • 01

    DAT became DPU

    Delivered at Terminal was renamed Delivered at Place Unloaded, because the place of unloading no longer has to be a terminal.

  • 02

    FCA and on-board bills of lading

    Under FCA, the parties can agree that the buyer instructs its carrier to issue an on-board bill of lading to the seller, which letters of credit often require.

  • 03

    Higher insurance under CIP

    CIP now requires all-risks cover, Institute Cargo Clauses (A). CIF keeps the minimum, Clauses (C).

  • 04

    Own means of transport

    FCA, DAP, DPU and DDP now allow the seller or buyer to carry the goods with its own vehicles instead of hiring a carrier.

  • 05

    Security costs allocated

    Each rule now states who pays for security-related requirements such as cargo screening.

  • 06

    Clearer layout

    Costs are listed in one place (A9/B9) and the articles are reordered, with delivery and risk at the top.

Choosing a rule

Which rule should you use?

  • Shipping containers?

    Prefer FCA, CPT or CIP over FOB, CFR or CIF. A container is handed to the carrier at the terminal, days before it is loaded on board, so the sea-only rules leave the seller carrying risk it cannot control.

  • Want to control freight cost and schedule?

    Buy FCA or FOB and book the main carriage yourself, or let a forwarder you trust do it.

  • New to importing, or buying small volumes?

    CIP, CPT, CIF or CFR let the seller arrange freight. DAP brings goods to your door while you keep control of import clearance.

  • Considering EXW?

    Usually FCA is better. Under EXW the buyer must clear export in Vietnam, which a foreign company often cannot do itself.

  • Considering DDP?

    Only if the seller can legally act as importer in your country and recover import VAT. Otherwise DAP is the safer choice.

  • Paying by letter of credit?

    Make sure the rule and the documents match: FCA with an on-board bill of lading, or CIF and CIP with an insurance certificate.

Common mistakes

Mistakes that cost buyers money

  1. 01

    No version

    Writing "FOB" without "Incoterms® 2020" leaves room to argue which version applies.

  2. 02

    Vague place

    "CIF Europe" or "FOB Vietnam" does not say where delivery happens. Name the port, terminal or address.

  3. 03

    Sea rules for containers

    FOB and CIF for container cargo leave a gap between handing over at the terminal and loading on board.

  4. 04

    Confusing cost and risk

    Under CFR and CIF the seller pays freight to your port, but the risk passed to you when the goods were loaded in Vietnam.

  5. 05

    Unloading costs

    Under C-terms, destination terminal charges may already be in the freight. Check the carriage contract to avoid paying twice.

Working with VICTOR

We quote on the rule that suits you

We regularly quote and ship on EXW, FCA, FOB, CFR, CIF, DAP and DDP terms from Vietnam. Tell us where your goods must arrive and how you pay, and we recommend the rule, prepare the matching documents and, if you want, handle the freight.

Ask for a quote

FAQ

Incoterms questions

Are Incoterms rules law?

No. They are contractual terms that apply only when the contract refers to them. Writing "Incoterms® 2020" in the contract makes them binding between seller and buyer.

Can we still use Incoterms 2010?

Yes, if the contract says so explicitly. The 2020 rules did not cancel older versions, but using the current version avoids confusion.

Does the rule decide when we own the goods?

No. Transfer of ownership is set by the sales contract and the law that governs it, not by the Incoterms rule.

Who chooses the Incoterms rule?

Seller and buyer agree it in the contract. The best rule depends on who can organise transport and customs best, and how payment is made.

Do Incoterms rules cover the bill of lading or invoice?

They say which party provides which documents, but not the content of the documents. That follows the contract, the letter of credit and customs rules.

This guide summarises the Incoterms® 2020 rules in plain language for planning. It is not the official text. Incoterms® and the Incoterms® 2020 logo are trademarks of the International Chamber of Commerce. For the full rules, see ICC publication No. 723E.

Start a project

We quote on the rule that suits you

We regularly quote and ship on EXW, FCA, FOB, CFR, CIF, DAP and DDP terms from Vietnam. Tell us where your goods must arrive and how you pay, and we recommend the rule, prepare the matching documents and, if you want, handle the freight.

We use your details only to reply to this request.